NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, December 8, 2014

As though it heard the Christmas wishes of policy nerds everywhere, the World Bank Group made behavioral economics the theme of its 2015 World Development report.

The field, popularized by books like Nudge, aims to show how small policy tweaks can inspire people to make big changes. It’s what gave us strategies like having people opt out of donating their organs, rather than in, or labeling garbage cans as “landfill” rather than “trash.” All we need to be better, the Nudgists would say, is better choice architecture.

The whole report is, shall we say, a bit more lively than your average global-development tome. It features illustrations such as this one, which shows how people make decisions based on the actions of others:

The “Health” chapter features one particularly interesting finding. Policymakers are often trying to get more people to take up preventative health measures in order to save money and lives down the road. Usually these services are cheap and plentiful, so it’s frustrating when people choose not to, say, get a flu shot or an annual OB-GYN exam.

But in looking at six different preventative health interventions across three countries, the authors homed in on one important factor that influences whether people will take steps to protect their health: price. Specifically, whether the service is free, or nearly free, seems to make all the difference.