Sunday, January 11, 2015

What is missing from "Mind,Society and Behavior"?

Photo: Kim Yeul / EgyptThere is no prize for any reader who suggests that there is a “u” missing from “behavior”.

Mind, Society and Behavior is the title of World Development Report 2015, recently published by the World Bank. The title of the report is intended to capture
“the idea that paying attention to how humans think (the processes of mind) and how history and context shape thinking (the influence of society) can improve the design and implementation of development policies and interventions that target human choice and action (behaviour)".

The main point that the report seems to be making is that policy outcomes depend on psychological and social influences as well as economic incentives.

The report argues that it is important to take account of three different kinds of thinking:
  • Automatic thinking causes us to simplify problems and base decisions on associations that automatically come to mind. This means that policy outcomes can depend heavily on the framing of choices (the way information is provided) and default options.
  • Social thinking causes behaviour to be influenced by social preferences, networks, identities and norms. These influences can lead societies into self-reinforcing patterns of behaviour, which may be highly desirable (e.g. norms of loan repayment) or undesirable (e.g. a culture of corruption).
  • Thinking with mental models involves concepts, stories and views of how the world works which influence our understanding of what is possible, what is right and what governments should do. An example cited in the report is that people from disadvantaged groups can have mental models that cause them to under-estimate their own abilities.

The report draws upon a substantial amount of research which establishes the relevance of these different types of thinking to policy issues. I am probably more familiar than most readers would be with the underlying research in psychology, behavioural economic and institutional economics that is referred to in this report. However, it was interesting to see how the authors were able to draw on an impressive array of relevant research related to poverty, child development, household finance, productivity, health and climate change.

Anyone with an interest in economic development is likely to find the overview of the report interesting and easy to read. I read the whole report, but it took a long time because I kept finding more interesting things to do. The report seems to have been prepared by bureaucrats to be read by bureaucrats. As I was reading, I could not help thinking that while psychology and sociology do influence behaviour, we should not overlook the importance of pecuniary incentives. I find this kind of report easier to read when I am being paid.

I found the tone of the report to be slightly irritating, but I suppose it is difficult not to appear to have superior wisdom when discussing biases in decision-making of ordinary people. The tone in the rest of the report is balanced somewhat by a chapter which discusses the biases of development professionals in the World Bank. The chapter notes, among other things, that predictions by development professionals grossly understated the extent to which poor people in selected developing countries perceive themselves to be in control of their own lives and grossly overstated the extent to which these people perceive themselves to be helpless in dealing with life’s problems.

There is a major omission in this report, in my view. Any discussion of the influence of cognitive bias in decision-making on economic development should take into account the influence of bias in the mental models on economic development policies. There is no discussion of the deficiencies mental models that led to trade protectionism, widespread public ownership of business enterprises in many countries or the over-emphasis on the role of savings and capital investment in economic development. And there is no discussion of institutional arrangements for policy development that might help prevent biased views of how the economic growth process works from continuing to have a huge adverse impact on government policies in many parts of the world.

This report makes a useful contribution, but it could have been a lot better.

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