What manner of mythical beast is ‘civic sense’?
I know it’s easy to be cynical, but in fact, behavioural economists have established that policy initiatives that appeal to people’s sense of a ‘greater common good’ and to their ‘civic sense’ actually have better chances of success.
How does that apply to the demonetisation experience?
Six months after demonetisation, commentators are still puzzled at how a nation of a billion-plus people whose lives revolve around cash stoically put up with the inconveniences of seeing 86 per cent of the notes in circulation withdrawn overnight.
In his foreword to a recently published book on demonetisation, former RBI Governor YV Reddy wonders that “people at large did not revolt” but “went through not just inconvenience, but pain.” Their patience, he writes, “was beyond belief.”
How do you explain that?
It’s possible that people believed that a ‘greater common good’ was being served by the note ban. That’s why I say that an appeal to people’s ‘civic sense’ works. There are many studies in the area of behavioural economics that account for such counter-intuitive behaviour. For instance, people don’t need financial incentives to “do the right thing” and, in fact, sometimes such ‘rewards’ backfire; similarly, imposing a penalty doesn’t disincentivise bad behaviour.
Tell me more.
In their 1997 research study, ‘The Cost of Price Incentives’, Bruno Frey and Felix Oberholzer-Gee at the Institute for Empirical Economic Research, University of Zurich, established that while a sense of ‘civic duty’ may cause people to respond for the greater common good, a financial incentive may actually backfire.
That sounds crazy.
But it’s true. When the Swiss government planned to build a facility to store nuclear waste, roughly half of the respondents to a survey said that despite the risk, they would be agreeable to having the facility in their community — out of a sense of “civic duty”. But when the survey was reframed with the offer of several thousand dollars for living near a nuclear-waste facility, only 25 per cent extended their support.
Interesting.
And there are other examples. In the UK, the Behavioural Insights Team, which helps the Government redesign public services by harnessing learnings from behavioural science, was able to get delinquent taxpayers to pay up their taxes by writing to them and pointing out that nine out of ten people in the UK pay their taxes on time, and that they hadn’t. Evidently, being reminded of the “social norm” appeals to one’s civic duty: drawing attention to other people’s good behaviour can reform deviants.
And penalties don’t work?
In some contexts. Researchers Uri Gneezy (co-author of The Why Axis) at the Israel Institute of Technology and Aldo Rustichini at Tilburg University noted that parents who picked up their children from day-care centres in Haifa, Israel, were sometimes unintentionally late. But when a small penalty was introduced on late-comers, parents stopped showing up on time entirely.
How do you explain that?
Earlier, parents had non-financial incentives for being on time; such as avoiding the guilt of inconveniencing day-care workers. But as soon as they had the option to pay a fine and avoid the guilt, they grabbed it.
The lesson from all this?
People are not always motivated by money considerations. Sometimes, appealing to their ‘civic sense’ or pointing them to the ‘social norm’ can often yield more fruitful outcomes for the ‘greater common good’.