Development Economics and Development Policy Are Due For A Redesign, Says World Bank Report

Washington, D.C. - Development policies based on new insights into how people actually think and make decisions will help governments and civil society achieve development goals more effectively. A richer and more accurate understanding of human behavior can make it easier to tackle such difficult development challenges as increasing productivity, breaking the cycle of poverty from one generation to the next, and acting on climate change, finds a new World Bank report. World Development Report 2015: Mind, Society, and Behavior, examines early, exciting work that suggests ways of diagnosing and solving the psychological and social factors that influence development. The new approaches are complements to a host of other standard economic tools. People do not always make deliberative, independent decisions based on careful self-interested calculations, the report finds. Rather, they tend to think quickly and to use mental shortcuts and shared mindsets. By factoring this in, governments and other actors can design programs that make it easier for individuals to cooperate in the pursuit of shared goals. For instance, in an experiment in Colombia involving a modified cash transfer program, part of the funds for beneficiaries were automatically saved and then given as a lump sum at the time when researchers knew decisions about school enrollment for the next year were typically made. This adjustment, designed to encourage people to focus on schooling decisions, increased enrollments for the following year. \"Understanding how people make choices doesn\'t help just those who sell bars of soap or new cars – it also can help us in the field of development become more effective in delivering programs to the poor and vulnerable,\" said World Bank Group President Jim Yong Kim. \"In the case of Ebola, for instance, we must tackle stigma, inaccurate understanding of disease transmission, mistaken panic, and other biases and misconceptions. Having a deeper understanding of how people think can ensure that we improve our responses now and in the future, whether in tackling an epidemic or in taking on a global challenge like climate action.\"