Economy

‘Nudging’ towards positive change

Anand Kalyanaraman | | Updated on: Jul 04, 2019

The Economic Survey has advocated use of the behavioural economics concept of ‘nudge’ to encourage desirable social and economic change in the country. The Survey recommends that the proposal to set up a behavioural economics unit in the NITIAayog must be immediately activated.

Desirable behaviour

The ‘Nudge theory’ got international spotlight in 2017 when Richard Thaler bagged the Economics Nobel that year for his work on behavioural economics. The ‘nudge theory’ is based on the premise that human beings, being not-so-rational, often need encouragement or intervention — a nudge — to get going and do what’s best for themselves or for the country or society at large. It says that people, rather than being forced, can be encouraged and influenced to pursue or desist from certain actions through nudges. Thaler’s and Cass Sunstein’s 2008 book Nudge: Improving Decisions about Health, Wealth and Happiness had a wide impact with some governments even setting up ‘nudge units’ in their countries.

Public policy examples of ‘nudge’ abroad include automatic enrolment of employees into pension schemes in the US. By making the optimal choice the default option, such nudges are said to improve public participation in such programmes. Nudges are not mandates. So, while there is encouragement, there is no compulsion to comply and people have the freedom to choose other options. The ‘Nudge Theory’ has its naysayers too. Critics say that it can be used to manipulate behaviours to help the powers-that-be.

India context

The Economic Survey explains how behavioural economics and ‘nudge’ were used successfully in the Swachh Bharat Mission and the Beti Bachao Beti Padhao campaigns. For instance, the use of local ‘swachhagrahis’ as footsoldiers of the Swachh Bharat Mission and the ‘Selfie with Daughter’ initiative in the Beti Bachao Beti Padhao campaign drew upon the psychology of human behaviour to nudge towards positive change. It drew attention to positive influencers, including friends or neighbours, that represent role models with whom people could identify. The Economic Survey has laid out an ambitious agenda for social and economic change using behavioural economics concepts and nudge. For instance, it has recommended a relabelling of Beti Bachao Beti Padhao to BADLAV ( Beti Aapki Dhan Lakshmi Aur Vijay Lakshmi ) to improve gender equations in the country, drawing upon mythological role models, and social and cultural norms in the country. Other recommendations include a move from Swachh Bharat to Sundar Bharat, and from the “Give it up” campaign for the LPG subsidy to a “Think about the Subsidy” campaign. The Survey also recommends that tax compliance in the country can be encouraged through a campaign that honours honest tax payers.

Published on July 04, 2019
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