World Development Report 2015: Mind, Society and Behavior

by World Bank Group

Every policy relies on explicit or implicit assumptions about how people make choices. Those assumptions typically rest on an idealized model of how people think, rather than an understanding of how everyday thinking actually works. This year s World Development Report argues that a more realistic account of decision-making and behavior will make development policy more effective. The Report emphasizes what it calls the three marks of everyday thinking. In everyday thinking, people use intuition much more than careful analysis. They employ concepts and tools that prior experience in their cultural world has made familiar. And social emotions and social norms motivate much of what they do. These insights together explain the extraordinary persistence of some social practices, and rapid change in others. They also offer new targets for development policy. A richer understanding of why people save, use preventive health care, work hard, learn, and conserve energy provides a basis for innovative and inexpensive interventions. The insights reveal that poverty not only deprives people of resources but is an environment that shapes decision making, a fact that development projects across the board need to recognize. The insights show that the psychological foundations of decision making emerge at a young age and require social support. The Report applies insights from modern behavioral and social sciences to development policies for addressing poverty, finance, productivity, health, children, and climate change. It demonstrates that new policy ideas based on a richer view of decision-making can yield high economic returns. These new policy targets include: the choice architecture (for example, the default option) the scope for social rewards frames that influence whether or not a norm is activated information in the form of rules of thumb opportunities for experiences that change mental models or social norms Finally, the Report shows that small changes in context have large effects on behavior. As a result, discovering which interventions are most effective, and with which contexts and populations, inherently requires an experimental approach. Rigor is needed for testing the processes for delivering interventions, not just the products that are delivered."

Genres: Economics

216 pages, ebook

First published December 1, 2014

About the author

The World Bank Group (WBG) is a family of five international organizations that make leveraged loans to developing countries. It is the largest and most famous development bank in the world and is an observer at the United Nations Development Group. The bank is based in Washington, D.C. and provided around $61 billion in loans and assistance to "developing" and transition countries in the 2014 fiscal year. The bank's stated mission is to achieve the twin goals of ending extreme poverty and building shared prosperity. Its five organizations are the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID).

The World Bank's (the IBRD and IDA's) activities are focused on developing countries, in fields such as human development (e.g. education, health), agriculture and rural development (e.g. irrigation and rural services), environmental protection (e.g. pollution reduction, establishing and enforcing regulations), infrastructure (e.g. roads, urban regeneration, and electricity), large industrial construction projects, and governance (e.g. anti-corruption, legal institutions development). The IBRD and IDA provide loans at preferential rates to member countries, as well as grants to the poorest countries. Loans or grants for specific projects are often linked to wider policy changes in the sector or the country's economy as a whole. For example, a loan to improve coastal environmental management may be linked to development of new environmental institutions at national and local levels and the implementation of new regulations to limit pollution, or not, such as in the World Bank financed constructions of paper mills along the Rio Uruguay in 2006.

Reviews

[Laleema Senanayake · Rating 4 out of 5]

The two systems of thinking is analyzed based on existing research. Worth the read.

[Carl Scheider · Rating 5 out of 5]

Simply extraordinary. Take all of the modern research about how humans make decisions, especially economic decisions, give that to people at the World Bank, and give them 2 years, and you get a remarkable story and guide to fostering economic development around the world. People are NOT poor because they are lazy or stupid! They are the victims of our evolutionarily developed decision tools, that are not capable of good decisions in today's world, AND they are victims of their history and mental models. But now that we understand this, we can help people move forward.

Lots of concrete examples, tons of wisdom, for both developed and developing economies. If you know anything about behavioral economics, it has come into its own at the World Bank!

If you ever wondered why some peoples are poor, and how we can help, this is the toolset. And you can get a copy for free! Look around a bit!

[Nils · Rating 2 out of 5]

Alternative title: "Behavioral economics for development dummies." A reasonable tour de horizon — but no more than that — of some of the insights concerning heuristics and biases that the Kahneman revolution has introduced into economics, along with some rather unoriginal considerations of how these insights might apply to the development and measurement of developmental programs, particularly in microfinance, public health, and early childhood development programs. I suppose it might be useful to development practitioners who have paid no attention to innovations in the field of academic economics over the last two decades, but otherwise, it's pretty uninsightful.

[Pierre · Rating 3 out of 5]

Finally the dismal science is getting a grip on the obvious.