The Bright Continent

A recent report in the Boston Review discusses the application of behavioral economics to development schemes. Across regions and interventions, researchers tried to find out how to incentivize (or, to borrow from Cass Sunstein and Richard Thaler, “nudge”) individuals into choosing behaviors (hand-washing, sending children to school, having protected sex) that are known to produce better outcomes. The terrain:

All over the world, the poor weigh economic factors and make decisions about whether and how to invest in education and health. But their decisions are not always optimal for them or for society. Sometimes the poor do not invest because they are cash constrained, lack information, or there is insufficient incentive because much of the benefit of a product accrues to others. Often, like Americans who put off retirement savings, the poor procrastinate or don’t save enough for important lump-sum investments, such as school fees or uniforms. And just as nurses in one Swiss improved their hygiene practices when sanitizer was made more readily available, so convenience matters to the poor. Across a range of programs, small incentives can help alleviate procrastination.

In general, behavioral economists are susceptible to a critique of paternalism (check out this 2008 piece in The New Republic, for which I checked facts, on the nudgers in Barack Obama’s economic circle). Nudgers rebut that this is a matter of countering individual inertia by designing “default” options that are optimal.

This may be fine for the printing of tax forms in the United States, but the idea of telling people what’s good for them is perhaps least welcome in development circles. So what do you do?

You can pay people:

In Malawi, where different magnitudes of conditional cash transfers were tried, the smallest incentive was sufficient to achieve the average effect. An evaluation in Kenya found that providing a free school uniform could increase attendance of young children by 6.4 percentage points. There is evidence that covering the cost of school uniforms for adolescent girls not only reduces dropout rates, but also reduces rates of teen pregnancy. Conditional cash transfers can be used to get larger sums of money into the hands of the poor, but if the goal is simply to get children in school, providing smaller transfers to more people in the poorest countries may be the most effective use of resources.

You can make them pay:

Studies of demand for non-acute care as a function of price show nothing to suggest that the act of paying for something makes a person more likely to use it. Nor is it the case that those who most need a product are more likely to pay for it: those who purchase mosquito nets are no more likely to be sick at the time of purchase; families with small children, who are most likely to die from diarrhea, are no more likely to buy chlorine. But are those more likely to hang mosquito nets or remember to add chlorine to their water also the ones more likely to pay for it, thus helping avoid waste? There is some evidence in the case of chlorine but none in the case of mosquito nets.

But essentially we are a long way from understanding how to do this well. I like this report because it’s even-handed about what does and does not work. And it offers a smooth rebuttal to binary arguments about agency in developing world ecosystems:

Another program inspired by our increasing knowledge of consumer behavior sought to provide clean drinking water to households that collect water from contaminated sources. Despite widespread social marketing, few households buy chlorine for home treatment. This is due in large part to the price, which reflects not just the minimal cost of the chlorine itself, but also the larger costs of packaging and distribution.

A new approach places chlorine dispensers at communal water sources. Using larger, community-level containers substantially reduces packaging costs, making it easier for governments or donors to provide the chlorine for free. The dispensers deliver the right quantity for the standard water-collection container, so the dispenser is convenient to use. The dispenser itself provides a visual reminder of the need to treat water, and combining the steps of water collection and treatment builds good habits. The public placement of the dispenser is designed to facilitate peer pressure and social-norm formation around chlorine use.

Whereas less than 10 percent of people treated their water under the social-marketing approach, most people did so in communities with a chlorine dispenser. Moreover, in contrast to cases in which prevention campaigns generate an initial burst of enthusiasm that wanes over time, most people continued to treat their water two and a half years after the evaluation, perhaps because of the peer-pressure mechanism that was built into the design.