Ramesh Singh Summary: Growth, Development & Happiness- 2 | Indian Economy for UPSC CSE PDF Download
Insights into Human Behaviour
According to the World Bank's World Development Report 2015 on Mind, Society, and Behaviour, integrating insights from behavioral economics into development policies enhances their effectiveness. The report emphasizes that incorporating behavioral considerations into policy decisions can lead to significant advancements in promoting development and societal well-being. The report cites examples from India in healthcare and education:
Open defecation in selected villages dropped by 11% after combining a Community-Led Total Sanitation (CLTS) program with the traditional approach of providing subsidies for toilet construction and information on disease transmission.
Changing the frequency of meetings between microfinance clients and their repayment groups from monthly to weekly resulted in a threefold reduction in the likelihood of loan defaults.
Research revealed that boys from backward classes were equally proficient at solving puzzles as boys from upper castes when caste identity was concealed. However, when caste was disclosed before puzzle-solving sessions in mixed-caste groups, a significant 'caste gap' emerged, with boys from backward classes underperforming by 23%.
The report recommends addressing stereotypes, as they can contribute to measured ability differences, perpetuating the stereotype and leading to exclusion in a vicious cycle. Breaking this cycle could significantly improve the well-being of marginalized individuals.
Social Norms, Culture and Development
Economic development is influenced not only by fiscal, monetary, and taxation policies but also by human psychology, culture, and norms.
There has been resistance in economics and sociology to emphasize these aspects, possibly due to concerns about yielding ground to other disciplines.
The World Development Report (WDR) of 2015 focuses on the behavioral and social foundations of development, received positive reception.
Traditional government documents often overlook the role of social norms and culture in promoting development and economic efficiency.
Growing literature highlights how certain social norms and cultural practices are vital for economic efficiency and growth.
Broken Windows Theory
Societies known for honesty and trustworthiness tend to perform better, attracting business and trade without the need for third-party enforcement.
Lack of recognition for these "social" factors is attributed to an incomplete understanding of how economies-friendly social qualities are acquired.
Behavioral economics provides insights into the formation of customs and behavior, showing that cleaner environments lead to increased honesty and reduced corruption.
The Broken Windows Theory in sociology suggests that controlling low-level, anti-social behavior deters larger criminal behavior.
Awareness that collective qualities like honesty and trustworthiness benefit the entire society prompts individuals to adopt these qualities, addressing the free-rider problem.
In economics, there's a growing body of literature arguing that pro-social behavior, including altruism and trustworthiness, is innate and essential for efficient economies.
Human beings exhibit a natural ability to forego personal gains for the sake of others or due to commitments, supported by recent studies possibly rooted in evolutionary traits.
Values and Economics
Research in psychology and evolutionary biology indicates that morality, altruism, and other-regarding values are inherent in the human mind, influenced by the social environment.
The recognition of the significant impact of these human and moral qualities on economic development was a relatively late development in economics.
Recent research suggests that having a few "good" individuals in society can lead to dynamics contributing to an overall better society.
Evidence shows that social norms and habits initially perceived as ingrained in a society can change over short periods, allowing countries to foster social norms conducive to a vibrant economy.
When discussing a nation's economic progress, the focus is typically on the government, but it is crucial to recognize the significant role played by civil society, firms, farmers, and ordinary citizens.
Electoral Politics
Social norms and collective beliefs significantly influence the behavior of these agents, impacting a nation's overall performance.
Attributes such as honesty, punctuality, and attitudes towards corruption are heavily influenced by norms and social beliefs, often becoming habitual.
In a democracy like India, government actions depend to a great extent on the thoughts and beliefs of ordinary people, reflecting the essence of electoral politics.
Traditional economic discussions often overlooked these non-economic facets, assuming they did not matter, but it is now understood that individuals are not entirely self-serving.
While self-interest is a major driver of economic growth, honesty, integrity, and trustworthiness are essential elements that bind society.
Although economists once treated these social norms, preferences, and customs as unalterable, it is now acknowledged that these qualities in people can change.
Honesty and integrity can be nurtured, and aversion to corruption can be strengthened.
Nudges and Public Policy
Behavioral economics insights facilitate nudging people toward desirable behavior.
Nudge has proven successful in India, employed in public policy for initiatives like Swachh Bharat Mission (SBM) and Beti Bachao Beti Padhao (BBBP) campaigns.
The concept can be extended to higher goals, transitioning from BBBP to BADLAV (Beti Aapki Dhan Lakshmi Aur Vijay Lakshmi), evolving from Swachh Bharat to Sundar Bharat.
Nudges can also be applied in areas such as 'Give it up' (LPG subsidy) to encourage individuals to 'Think about the Subsidy' and combat tax evasion through nudges toward tax compliance.
Three key policy actions for effective nudges:
- Leverage the influence of social and religious norms as positive influencers, using friends and neighbors as role models to modify behavior.
- Recognize individuals' inclination towards the 'default' option in their actions, making changing the default a powerful policy tool.
- Implement policies involving reminders and repeated reinforcements to facilitate sustained changes in behavior.
To enhance nudge effectiveness in public policy, it is crucial to relate economic principles to common individuals' experiences.
This connection can be established by using relatable examples encountered in daily life, such as a plate of food, making policy actions more understandable and impactful for the general population.
Covid-19 and Development
The world has witnessed various alternative economic and development models, including the Washington Consensus, Santiago Consensus, and Beijing Consensus.
The concept of progress has evolved from a purely monetary idea to encompass happiness, but these transformations are deemed insufficient.
The ongoing COVID-19 pandemic has exposed global unpreparedness and sparked a crucial debate about the need for a new economic approach to development.
Corona Virus
The sustainability issue, debated since the early 1960s, now includes a new dimension—the local dimension of development.
Experts advocate for a local approach, emphasizing ethics to save the environment and foster happiness, with a proposition to establish a local economic model.
The pandemic has prompted mass-scale questions globally, such as the essential needs of life, the concept of "enough," conspicuous consumption, and the earth's capacity to sustain human demands.
Ideologies like 'minimalism' impacting economies, as seen in Japan since 2002, reveal a global inclination to consume less.
The contemporary economic model emphasizes perpetual enhancement in demand through accelerated consumption.
The COVID-19 pandemic forces humanity to reassess the development model it takes pride in, leading scholars to propose alternative economic models.
Many predict irreversible changes globally, prompting serious introspection, including India facing its own set of challenges.
The Atmanirbhar Bharat Abhiyan in India is seen by some as an attempt to explore an alternative economic model.
Questions arise about whether this campaign has the coordinates to redefine India's relationship with nature and the meaning of development.
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Oct 31, 2024 Last updated |
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