Application of behavioural economics can play key role in success of public policies and programmes: Economic Survey

Economic Survey recommends setting up of a Behavioural Economics Unit in Niti Aayog, proposes ‘Behavioural Economics Audit’ of every programme

The Economic Survey 2018-19 was tabled in Parliament today by the Union Minister of Finance and Corporate Affairs, Smt Nirmala Sitharaman. It has given a unique prescription to improve efficacy of public policy and programmes. It discusses in detail how application of ‘behavioural economics’ can prove to be a valuable instrument of change in a country like India where social and religious norms play a dominant role in influencing behaviour. This is based on the premise that decisions made by real people deviate from the impractical robots theorized in classical economics. “Drawing on the psychology of human behaviour, behavioural economics provides insights to ‘nudge’ people towards desirable behavior”, says the Economic Survey.

Quoting the success of popular Government Schemes in recent times like Beti Bachao, Beti Padhao (BBBP) and Swatchh Bharat Mission (SBM), the Economic Survey says that these schemes have successfully applied behavioural insights to enhance policy impact. For example, ‘#SelfieWithDaughter’ on social media became a worldwide hit and the celebration of the girl child quickly became the norm to which more and more people wanted to conform. Similarly, use of socially and culturally identifiable names for various recent schemes like Namami Gange, Ujjawala, Poshan Abhiyan among others have helped to build the affinity of the people for the scheme.

The community based approach to sanitation in SBM with the help of Swachhagrahis whose similarity with Satyagrahis, helped to reinforce the message. The gender empowerment component of SBM helped to become a complement the Beti Bachao, Beti Padhao scheme. According to the Economic Survey, the key principles of behavioural economics are ‘emphasizing the beneficial social norm’, ‘changing the default option’ and ‘repeated reinforcements’.

The Economic Survey opines that while several Indian programmes have applied the principles of behavioural economics, there is still ample scope for leveraging these insights to enhance the efficacy of programmes in India. Accordingly, the Economic Survey recommends setting up of a behavioural economic unit in the NITI Aayog. It also strongly recommends that every programme must go through a ‘behavioural economics audit’ before its implementation.

Behavioural economics: recommend establishing a dedicated unit and mandatory behavioural economics audit for public programmes. To institutionalise behavioural insights, the Economic Survey recommends creation of a Behavioural Economics Unit and mandates a behavioural economics audit of every programme prior to implementation, so that programme design, testing, and rollout systematically account for social norms, default options, repeated reinforcements and other context-specific behavioural diagnostics to improve policy efficacy.