Eldar Shafir discusses the importance of understanding psychology when forming good policy and how our limited mental bandwidth can affect our ability to make positive decisions.
It seems appropriate in these days of crises of governance and politics that there should be a growing interest in policy thinking and research. We need multidisciplinary efforts to develop guidelines, laws, regulatory measures, funding priorities, evaluation metrics, and interventions that can bring about favourable societal outcomes and help improve human welfare.
Our task is to devise thoughtful, ethical and effective ways to promote greater well-being, safety, satisfaction, happiness, health, and hope, and reduce misery, fear, and pain. However the promotion of hope versus fear, of wealth versus misery, of satisfaction versus pain is heavily dependent on behavioural factors – on knowing what motivates and incentivises people, what makes them act as opposed to procrastinate, pay attention or get distracted, obey or disobey the law, act or fail to act on their intentions, empathise with or fail to appreciate the fate of others. As the economist John Maurice Clark pointed out nearly a century ago, when the outcomes you try to achieve depend on how people behave, you better understand how people behave. If the policy-maker does not bother to understand psychology, he will not thereby avoid psychology: “Rather he will force himself to make his own, and it will be bad psychology” (1918).
Bad psychology comes in many forms. A naïve understanding of incentives, for example, might suggest that paying people a small amount rather than nothing to perform a societally desirable act can only increase instances of that act; instead, it turns out that the loss of the ‘psychic’ benefit of ‘good citizenship’, brought about by the monetary remuneration, can, in fact, lower observed rates of pro-social behaviour (Miller and Prentice, 2013). In police stations, lineups (where suspects are observed concurrently) seem comparable to show-ups (where the suspects are seen one at a time), but we now know that the former leads to more false identifications than the latter (Gonzalez et al. 1993).
Having workers opt-out of, rather than opt-in to, retirement savings, looks like a minor nuance, except that the former generates many more happy and well-fed retirees. A main contribution of the behavioural agenda in recent years has been a rich portrayal of the many ways in which our intuitive understanding of everyday behaviours can be misguided. Now what is needed is an empirical investigation of our underlying assumptions and a deeper understanding of how behavioural insight might prove most effective for better policy making.
One aspect of our mental life that has profound implications is ‘construal’, the simple fact that we need to form mental representations, in our heads, of the external world. Although obvious, this has the oft-neglected implication that behaviour is directed not towards the world as it is, but towards our particular and often idiosyncratic representation of it. You might offer me a benefit that is objectively quite generous, but which I may find demeaning. You may make the streets objectively safer, but I might perceive them as more menacing. Commercial flights may be much safer than driving, yet I’ll continue to drive carelessly and maintain my fear of flying.
From risk communication and public health announcements to the design of financial services, diets, and roads, policy-makers need to worry not only about the objective facts but about how they may be construed and might most effectively be conveyed. And then there is our limited bandwidth. Everyone understands, of course, that our cognitive capacity is limited, but our cognitive limitations are much more severe than most of us recognise. When we talk on a (hands free) cell phone while driving our reaction times and ability to detect peripheral objects are comparable to those when we are legally drunk (Strayer et al. 2006). When we are busy maintaining seven items in working memory, we are less likely to notice things around us, or to pay attention to what we eat (Shiv and Fedorikhin 1999). Of course, construal and cognitive limitations often interact. When we focus on the gun in someone’s hand we are less likely to remember their face; this can lead to misidentification and to false convictions, under conditions that give us false confidence in our recall and our judgment (Loftus et al. 1987; Steblay 1992).
This brings us to a third fundamental feature of human behaviour, namely, the importance of context. Human behaviour tends to be heavily context dependent. One of the major discoveries of modern behavioural research is the impressive power that the situation exerts, along with a persistent tendency on our part to underestimate it. In several well-known studies (Darley and Batson 1973; Milgram 1974), minor contextual features were found to override people’s professed intentions and deeply held beliefs. To the extent that minor contextual features are sufficient to overcome education, personality, and intention, policy-makers have at their disposal a powerful set of tools – an ability to influence behaviour that they underappreciate, carelessly misuse (and sometimes abuse) and could employ better.
Some of the work that colleagues and I have conducted recently on the psychology that emerges in conditions of scarcity employs the fundamental elements of construal, cognitive limitations and context (Mullainathan and Shafir 2013). Conditions of scarcity, we have argued, create persistent challenges. In contexts of economic fragility, many events – shifting working hours, a sick child, an eviction notice – can generate threat and instability and create challenges that consume mental resources and lead to distraction and miscalculation.
Certain government benefits carry the burden of stigma and, although they could help, tend to be avoided; other programmes are overly complicated and, without professional help, lead to error and to costly penalties. And yet, while people under scarcity struggle with multiple issues that they see as threatening, demeaning and overwhelming, to others they often appear as less capable and insufficiently motivated. Consequently, instead of respect for their persistent struggles those under scarcity tend to be dismissed and disrespected, and instead of conditions designed to provide extra support (automatic banking instruments, affordable loans, trusted lawyers etc.), their attempts to succeed are often sabotaged by inadequate services and unreliable regulation, and by low-ball players intent on taking advantage of those in precarious conditions (Baradaran 2015; Fiske 2011; Harris 2016). A behaviourally-informed perspective instead would suggest an approach focused on programmes that are easy to manage and highly forgiving, programmes that foster stability and give people the financial and mental steadiness needed to build more robust economic lives.
Of course, there are other aspects to human behaviour that we would do well to consider. People are moved by various types of nonpecuniary incentives, social motivations, implicit attitudes, salient identities, fairness concerns, loss aversion, and other proclivities and tendencies that, “rational” or not, can have profound implications for a policy’s success or failure (Shafir 2012). But as we explore these further, we would do well to recognise the importance of construal, context, and cognitive limitations – what people perceive, their situation, and what they are able to do – to an ever evolving agenda of behaviourally informed policy design and implementation.
This article first appeared in the report Remaking Public Policy in the 21st Century.