Behavioral Design: A New Approach to Development Policy

Successful development programs rely on people to behave and choose in certain ways, and behavioral economics helps us understand why people behave and choose as they do. Approaching problems in development using behavioral economics thus leads to better diagnosis, which in turn leads to better-designed solutions. This paper sketches how to use behavioral insights to design development programs and policies. It distills the key insights of behavioral economics into a simple framework about the constraints under which people make decisions. It then shows how this framework leads to a set of behavioral design principles whose use can improve the reach and effectiveness of a variety of development programs.

The last two decades have been exciting ones for development policy. Scientific advances in evaluation—often equated with randomized control trials—have sparked enthusiasm and
optimism about tackling the persistent problems of poverty. Policymakers now feel better equipped to judge whether their policies work and whether there are more effective alternatives. In theory – and increasingly, in practice – funding can be based on solid evidence. All is not settled, of course. Debates continue on how these evaluations fit into the bigger picture. But few would dispute that the conversation has changed. “Does it work?” is a question everyone asks.

This question leads to a new challenge. After many evaluations, we find that while some interventions work (surprisingly well), many others do not. What can we learn from the successes and the failures? And more importantly, how do we go about creating more interventions that work? If we are putting science and dollars into carefully evaluating programs, should we also not put science and rigor into designing programs? All this leads to a new question: “How do we design programs so that they work?”

This question can also be answered with rigor. We think a science of design is beginning to emerge. For obvious reasons, behavioral economics plays a key role in it. Many interventions stumble because people do not behave the way we expect. Programs are not taken up, resources are not spent the way we anticipated and so on. Behavioral economics provides a better way to understanding human behavior. Better understanding leads to better diagnosis, which in turn leads to better-designed solutions.

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