Entries tagged with “behavioral economics”.
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Mon 21 Oct 2013
CGD has an interesting short essay up, written by Matthew Darling, Saugato Datta, and Sendhil Mullainathan, entitled “The Nature of the BEast: What Behavioral Economics Is Not.” The piece aims to dispel a few myths about behavioral economics, while offering a quick summary of what this field is, and what its goals are. I’ve been looking around for a good short primer on BE, and so I had high hopes for this piece…unfortunately, for two reasons the piece did not live up to expectations.
First, the authors tie themselves in a strange knot as they try to argue that behavioral economics is not about controlling behavior. While they note that BE studies and tools could be used to nudge human behavior in particular directions, they argue that “What distinguishes the behavioral toolset [from those of marketers, for example], however, is that so many of the tools are about helping people to make the choices that they themselves want to make.” This claim sidesteps a very important question: how do we know what choices they want to make? What we see as problematic livelihoods outcomes might not, in fact, be all that problematic to those living those outcomes, and indeed might have local rationales that are quite reasonable. While this might seem an obvious point, most BE work that I have seen seems to rest on a near-total lack of understanding of why those under investigation engage in the behaviors that “require explanation”. Therefore, the claim that BE helps people make the choices they want to make is, in fact, rather patriarchal in that the determination of what choices people want to make does not rest with those people, but with the behavioral economist. Sadly, this is a fairly accurate representation of much work done under the heading of BE. It would have been better if the authors had simply pointed out that BE is no more obsessed with incentives than any other part of economics, and if people are worried about behavioral control, they’d best have a look at the US (or their own national) tax code and focus their anxiety there.
Second, the authors argue “Behavioral economics differs from standard economics in that it uses a more realistic (and more complicated) model for people [and their decisions].” Honestly, I have seen no evidence for a coherent model of humans or their behavior in BE. What I have seen is a lot of rigorous data collection, the results of which are then shoehorned into some sort of implicit explanatory framework laden with unexamined assumptions that generally do not hold in the real world. Rigorously identifying when particular stimuli result in different behaviors is not the same thing as explaining how those stimuli bring about those behaviors. BE is rather good at the former, and not very good at all at the latter. The authors are right – we need more realistic and complicated models of human decision-making, and there are some out there (for example, see here and here – email me if you need a copy of either .pdf). BE would do well to actually read something outside of economics if it is serious about this goal. There are a couple of disciplines out there (for example, anthropology, geography, some aspects of sociology and social history) that have long operated with complex framings of human behavior, and have already derived many of the lessons that BE is just now (re)discovering. In this light, then, this short paper does show us what BE isn’t: it isn’t anthropology, geography, or any other social science that has already engaged the same questions as BE, but with more complex framings of human behavior and more rigorous interpretations of observed outcomes. And if it isn’t that, what exactly is the point of this field of inquiry?
Wed 28 Nov 2012
While behavioral economics continues to open old questions in development to new scrutiny, I am still having a lot of problems with the very unreflexive approach BE takes toward its own work (see earlier takes on this here and here). Take, for example, Esther Duflo’s recent lectures discussing mistakes the poor make. To discuss the mistakes the poor make, we must first understand what the goals of the poor are. However, I simply don’t see the behavioral economists doing this. There is still a lurking, underlying presumption that in making livelihoods decisions people are trying to maximize income and or the material quality of their lives. This, however, is fundamentally incorrect. In Delivering Development and a number of related publications (for example, here, here, and here) I have laid out how, in the context of livelihoods, material considerations are always bound up in social considerations. If you only evaluate these actions as aimed at material goals, you’ve only got a part of the picture – and not the most important part, in most cases. Instead, what you are left with are a bunch of decisions and outcomes that appear illogical, that can be cast as mistakes. Only most of the time, they are not mistakes – they are conscious choices.
Let me offer an example from Delivering Development and some of my other work – the constraint of women’s farming by their husbands. I have really compelling qualitative evidence from two villages in Ghana’s Central Region that demonstrates that men are constraining their wives’ farm production to the detriment of the overall household income. The chart below shows a plot of the size of a given farm versus its market orientation for the households operating under what I call a “diversified” strategy – where the husband farms for market sale, and the wife for subsistence (a pretty common model in sub-Saharan Africa). As you move up the Y axis, the farm gets more oriented toward market sale (1 on that scale is “eat everything”, 3 is sell and eat equally, and 5 is sell everything). Unsurprisingly, since men’s role requires them to produce for market, the size of their farm has little impact on their orientation. But look at the women’s farms – just a tenth of a hectare produces a marked shift in orientation from subsistence to market production…because women own that surplus beyond subsistence, and sell it. They take the proceeds of these sales, buy small goods, and engage in petty trading, eventually multiplying that small surplus into significant gains in income, nearly equaling their husbands. What is not to like?
Well, from the perspective of those in these villages, here is something: among the Akan, being a “good man” means being in control of the household and out-earning your wife. If you don’t, your fitness as a man gets called into question, which can cost you access to land. For wives, this is bad because they get their land through their husbands. So as a result, being in a household where the woman out-earns her husband is not a viable livelihoods outcome (as far as members of these households are concerned). Even if a man wanted to let his wife earn more money, he would do so at peril of his access to land. So he is not going to do that. What he is going to do is shrink his wife’s farm the next season to ensure she does not out-earn him (and I have three years of data where this is exactly what happens to wives who earn too much). There is a “mistake” here – some of these men underestimated their wives’ production, which is pretty easy to do under rain-fed agriculture in a changing climate. That they are this accurate with regard to land allocation is rather remarkable, really. But the decision to constrain women’s production is not a mistake, per se: it is a choice.
We can agree or disagree with the premises of these choices, and their outcomes, but labeling them as mistakes creates a false sense of simplicity in addressing problematic outcomes – because people only require “correction” to get to the outcomes we all want and need. This, in turn, rests on/reproduces a sense of superiority on the part of the researcher – because s/he knows what is best (see a previous post on this point here). That attitude, applied to the case above, would not result in a productive project design aimed at addressing income or other challenges in these villages.
Yes, people do things against material interest…but there is always a logic behind a decision, and that logic is often deeply entrenched. We would be better off talking about decisions poor people make (for better or worse), and dedicating our time to understanding why they make these decisions before we start deciding who is mistaken, and what to do about it.
I’ve just burned 15,000 words in Third World Quarterly laying out my argument for how to think about livelihoods as more than material outcomes – and how to make that vision implementable, at least via fieldwork that runs in length from days to months. I am happy to send a copy of the preprint to anyone who is interested –and I will post a version to my website shortly.
Wed 27 Apr 2011
Just a quick thought, given the interest in my last two posts. I have (obviously) been driven a bit crazy by the RCT/behavioral economics folks who suddenly seem to be coming around to either qualitative methods to explain their results . . . which are generally results that qualitative researchers have known about for a long time. In other words, it seems to me that there is a real danger here that a sort of waving at qualitative methods (i.e. the “bad journalism” approach, where you just do a bunch of interviews without considering who to interview, how to interview them, why interviews vs. focus groups vs. whatever, etc.) might become yet another way to prolong the hegemony of economics over development thinking.
I’m worried about this because while I think economic approaches and theory have purchase on explanation to varying degrees depending on the subject at hand and the scale of analysis, in the end any effort to explain the emergence of and means of addressing a development issue or challenge at a scale that might have meaningful impact that relies on the economic alone will not result in a particularly complete explanation for observed events, nor will it help us understand likely outcome pathways in future similar situations. Put another way, only sometimes can economics get us to a “good enough” solution that enables really productive development work.
What if I told you that I had really good, concrete empirical data from a really tiny dataset (two villages in Ghana, but the entire population of those two villages, so no sampling issues) that clearly demonstrated that any effort to explain livelihoods decision-making in these villages cannot be productively explained by economic approaches – whether crude (i.e. assumptions about maximizing behavior) or complex (game theoretic approaches)? Instead, the data makes it remarkably clear that the economic, while a component of decision-making, is just one component of a project of household governance – it is a clearly external (etic, for you anthro types out there) heuristic that improperly parses the social processes that lead to livelihoods decisions. In short, I can show where the explanatory power of “the economic” stops, and where meaningful explanation requires a re-embedding of the economic in larger social processes that cannot be reduced to the economic (and, at the same time, which demonstrates that the economic cannot be reduced to any of these other processes).
Basically, I’m starting to walk you through my retheorization of livelihoods as what Foucault called governmentality . . . but I could also work this up as a means of discrediting the RCT and behavioral economics turn toward the qualitative by arguing that these efforts are tails wagging the dog . . .