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Global Influence of The “Nudge” Theory

On October 9th, 2017 Richard Thaler, a US economist made news for winning the Nobel Prize for his significant contribution in the field of behavioural economics. For the majority of his career, Thaler has been subject to antagonism for using psychology in the formulation of economic theories. Many economists disapprove of taking a psychological perspective and see it as straying away from the main subject matter of market forces. Majority of economic theories depend on the rationality of human behaviour. Thaler explained how a lot of times economic decisions depend on perception and cognitive bias. He especially stood out from the crowd for being a major contributor to the “ Nudge ” theory.

Nudge Theory: What is it?

The “nudge” theory, as the word itself means, implies that people or public behaviour can be influenced by just a trigger and be tweaked. Nudge theory came into the public eye in 2008 when the book Nudge: Improving Decisions about Health, Wealth, and Happiness was published. In it, Thaler cites a simple example explaining his theory, of a school cafeteria struggling to persuade children to eat healthy food. The answer lies in simply placing the healthier food items like carrots at an eye level, above the fried food items.
Subsequently, nudge principles have been used to increase organ donations in Spain, tackle health problems of obesity, increase tax returns, encourage people to invest in a pension plan in the UK and to shift smokers onto e-cigarettes. It has also led to the formation of UK’s Behavioural Insights Team (BIT) or “nudge unit” which works on public policies.
Richard Thaler, US economist, Nobel Prize, Behavioural economics, Nudge Theory

Thaler has devoted his career to studying practical and more realistic problems by using the economic probe. People have the inability to control their impulses. Thaler has worked on developing ways in which these impulses can be directed to make better choices or “change the choice architecture” of their decisions. This implies people can be influenced to save money for their future and retirement, thus, impacting their entire life and leading to more satisfaction.

Behavioural economics is an area of study which is grounded and has more practical uses. Nudge theory has been used both by policymakers across the globe and can also be used by us, on an individual level, to exercise self-control and bring changes in our lives. It can be applied to something as simple as completing a piece of writing or making lifestyle changes.Prime Minister of India Narendra Modi

How it affects us as Indians?

In India, since the advent of the BJP government and Mr Narendra Modi taking office, a lot of policy changes have taken place. In 2016, the NITI Aayog reportedly tied up with the  Bill & Melinda Gates Foundation to set up a “nudge unit” in India to use behavioural science to implement policies and follow in the footsteps of UK. Their aim was to nudge people in engaging with the government’s vision with regard to policies like Swachh Bharat Abhiyan, Digital India and Aadhaar.

Richard Thaler doesn’t encourage coercion and maintains that an option of opting out should always be available. Unlike the nudge theory’s principles of a subtle policy shift, the policy changes of demonetization and GST have been radical. These have been criticised for the way they were implemented, thus leading to their failure. Nudge theory highly depends on the way the choices are framed and eventually they should be beneficial for the individual.Swachch Bharat Abhiyan

In India, Swachh Bharat Abhiyan, an initiative to make India cleaner and instil a sense of cleanliness in the minds of the citizens, hasn’t led to the desired results. Just by simply constructing toilets and penalizing citizens won’t lead to a cleaner India.

A behavioural change is required to make people see the benefit of being hygienic and keeping their surroundings clean. A change of mindset is required.

Some states in India have carried out a social experiment which led to a drop of 11% in open defecation, as reported by the World Bank. The villagers were provided subsidies for constructing toilet and educated about the diseases associated with open defecation.

India is a country in which people’s perceptions and behaviour are highly influenced by social norms, religion, and culture. Giving undue importance to technology as a means to bring change and radical policy changes isn’t the way to go. Indian policymakers should use behavioural science for policy formulations and in this regard, nudging could be the answer.

राज्‍यों से जुड़ी हर खबर और देश-दुनिया की ताजा खबरें पढ़ने के लिए नार्थ इंडिया स्टेट्समैन से जुड़े। साथ ही लेटेस्‍ट हि‍न्‍दी खबर से जुड़ी जानकारी के लि‍ये हमारा ऐप को डाउनलोड करें।

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