Dr Nicholas Biddle - Centre for Aboriginal Economic Policy Research - A behaviourally informed...

A behaviourally informed social and

Indigenous policy

The Conversation’s 2014, Future of Welfare Conference, 30-31

October

Dr. Nicholas Biddle, Research School of Social Sciences, ANU

Key social policy issues and questions

Dr. Nicholas Biddle <[email protected]> 2

• What are the applied behavioural sciences? • Collection of disciplines that use observation and experiment to

understand and predict people’s choices and decisions under

different circumstances and constraints

• Policy formulation and interventions that are not built on strong

behavioural foundations will not achieve their aims or will have

unintended consequences


Key social policy questions

• How can we ensure that the social security system continues to be affordable?

• Are there policies or settings that discourage those who are willing and able to work from working?

• Can particular services be delivered in a way that is more efficient?

• Are there services that the government is providing that could be provided by others?

• Behavioural insights and social policy • How do cognitive biases and social norms exacerbate social

disadvantage?

• To what extent do addictive/habitual behaviours impact on individual and family outcomes?

• How do we structure our tax and transfer system to overcome these biases?

• How do we balance incentives and complexity?

• How do the cognitive biases and norms within government impact on service delivery?


Key behavioural insights and research


Key insights – Overview

• Homo Economicus the target of many of our social policies (Koh 2012). However, people are neither completely rational, nor completely random in their decisions.

• People exhibit predictable biases that make it less likely that they will achieve their own stated desires

• Can complicate the design and efficiency of public policy, but can also be used to better design policy.

• Bounded rationality and heuristics • We don’t make the perfect decision, but a good enough decision

• Complexity, scarcity and cognitive load • Poverty increases the cost of bad decisions and makes them more likely

• Loss aversion and the endowment effect • We care more about what we lose than what we gain

• Framing and construal • We make decisions based on how the world appears, not how it is.

• Hyperbolic discounting and the power of defaults • We care about the present. A lot

• Happiness and subjective wellbeing • Money buys happiness, but it gets more expensive.

• Identity, stereotype threat, social interaction and social norms • We care about how we see ourselves and how others see us

• Fairness • We care about how much others have, not just how much we have

• Implicit prejudice and discrimination. • Most of us are racist/sexist, we just don’t know it (or care to admit it).


Key insights (I) – Hyperbolic discounting and the

power of defaults

• Individuals value consumption or leisure in the current period higher than they do in future periods.

• The standard assumption is time-consistent discounting. Such consistency has not been supported by empirical data.

• Rather, individuals are very impatient over the short-term but very patient over the long term – Hyperbolic discounting (Frederick at al. 2012).

• Even very small up-front costs can have large implications for people’s long term outcomes.

• This partially explains the power of default options, or the option that will hold if no action is taken.

• The small physical cost of having to tick a separate box on a form, alongside the somewhat larger mental cost of having to figure out which is the best option can lead people to remaining in a program or stream which is not in their own stated long term interests

• Reinforced by loss aversion with the potential gain of choosing a different option being outweighed by the potential loss from actively choosing the wrong option.


Key insights (II) – Happiness and subjective

wellbeing

• In many behavioural models, empirical research and policy design income has been used as a proxy for subjective wellbeing.

• Three reasons for why income (or consumption/expenditure) is not a completely satisfactory substitute for more detailed measures of wellbeing.

• Although the relationship is positive, it is non-linear.

• The distribution of income matters.

• Income matters for wellbeing not just because of what it allows one to consume, but also for the way it positions a person in society.

• Government policy that solely aims to improve income or some other measure of socioeconomic status may not lead to sustained improvements in wellbeing and may even have unintended negative consequences.

• To the extent that people change their behaviour based on their subjective wellbeing, individual and to a lesser extent household income may be less likely to motivate a significant minority of Indigenous Australians to undertake activities that have been shown to have financial benefits.

• This includes education participation, mobility, and certain types of employment.


Relationship between income and wellbeing

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Key insights (II) – Happiness and subjective

wellbeing

• In many behavioural models, empirical research and policy design income has been used as a proxy for subjective wellbeing.

• Three reasons for why income (or consumption/expenditure) is not a completely satisfactory substitute for more detailed measures of wellbeing.

• Although the relationship is positive, it is non-linear.

• The distribution of income matters.

• Income matters for wellbeing not just because of what it allows one to consume, but also for the way it positions a person in society.

• Government policy that solely aims to improve income or some other measure of socioeconomic status may not lead to sustained improvements in wellbeing and may even have unintended negative consequences.

• To the extent that people change their behaviour based on their subjective wellbeing, individual and to a lesser extent household income may be less likely to motivate a significant minority of Indigenous Australians to undertake activities that have been shown to have financial benefits.

• This includes education participation, mobility, and certain types of employment.


Key insights (III) – Complexity, scarcity and

cognitive load

• ‘Bad Decisions Don’t Make You Poor. Being Poor Makes for Bad Decisions’ – Matthew Yglesias, Slate, September 3rd, 2013

• Limited-resource model of self-control. • Individuals have a finite amount of self-control which can be used to undertake

costly behaviour that leads to long-term benefits (like education or savings) or to avoid pleasurable behaviour that leads to long-term costs (like alcohol consumption or risky behaviour).

• ‘Because the poor must overcome more urges and make difficult decisions more often than others, they are more likely to over-eat, overspend and enact more problematic behaviors’ (Vohs 2013: 970).

• Scarcity (Mullainathan and Shafir 2013) • ‘Scarcity directly reduces bandwidth – not a person’s inherent capacity but

how much of that capacity is currently available to use’ (47)

• ‘Having to fill out forms is a potential snag for everyone, a chance to procrastinate and forget. But with their bandwidth taxed, and perhaps a bit of stigma attached, it is a bigger snag for low income-income people’ (221)


Key insights (III) – Complexity, scarcity and

cognitive load – Indigenous results

• Biddle (2011) showed that for Indigenous Australians ‘Those who felt they were more financially secure … and those who had avoided financial stress over the previous 12 months … were more likely to report frequent feelings of happiness and less likely to report intense feelings of sadness.’

• Indigenous people currently experience a very high degree of financial stress • This is likely to negatively impact on their ability to make long term decisions that reflect their own

needs and aspirations.

• But, there are concerns about the effect of income support on people’s long-term behaviour…

• Some empirical support: • Even after controlling for income, health and demography, the longer a person spent with government

support as their main source of income the lower their levels of subjective of wellbeing.

• A person who spent the maximum number of months on income support (24 months) had a probability of being a happy person all or most of the time that was 0.070 percentage points lower than someone with zero months on income support.

• The predicted difference in terms of self reported sadness is even larger with a difference of 0.080 percentage points between the minimum and maximum.

• Raises a difficult trade-off: • While reducing income support may create the right incentives to change behaviour, it will also place

additional cognitive load on individuals that may make such behavioural change less likely. There is, like in many areas of social policy, a carefully balanced trade-off.


Key insights (IV) – Implicit prejudice and

discrimination • Altonji and Blank (1999: p 3168) define labour market discrimination as

• ‘a situation in which persons who provide labor market services and who are equally productive in a physical or material sense are treated unequally in a way that is related to an observable characteristic such as race, ethnicity or gender.’

• Such definitions work well for aspects of discrimination which are conscious and results from personal animosity or hostility towards another group. However, most prejudice is implicit

• That can have a more damaging effect on those who experience it.

• 2008 (NATSISS) – ‘In the last year, have you felt that you have been treated unfairly … because you are Aboriginal or Torres Strait Islander?’

• Around 28% of Indigenous Australians aged 15 years and over reported that they experienced some form of discrimination in the previous year.

• Using the Longitudinal Study of Indigenous Children (LSIC), Biddle and Bath (2013) showed that:

• ‘Children whose carers felt they were discriminated against because of their Indigenous status are significantly less likely to be attending preschool’ than those who did not report such discrimination.


Key insights (IV) – Implicit prejudice and

discrimination – The child protection system

• April 2014 report from the Behavioural Insights Team (BIT) in UK: • Suggested that behavioural factors might complicate or reduce the

efficiency of social workers’ decision-making.

• Workers are under considerable time and workload pressures and are therefore more likely to rely on intuition

• High cognitive load can lead to an increased reliance on defaults, available heuristics and stereotypes and confirmation biases

• In 2012–13, Aboriginal and Torres Strait Islander children were 8 times as likely as non-Indigenous children to be receiving child protection services

• 150.9 per 1,000 children compared with 18.5 for non-Indigenous children

• Much of the discrimination appears to be implicit, unintentional or ‘statistical’. According to Reconciliation Barometer:

• Only 20 per cent of the general community thought that Indigenous Australians were hard working compared to 71 per cent of who thought Australians in general are.

• Only 15 per cent thought Indigenous Australians were disciplined compared to 41 per cent for Australians in general.


Towards a behaviourally informed social and

Indigenous policy


Data to support a behaviourally informed social

policy • New social policy questions require new data and methods

• Particularly the case for behaviourally informed social policy - Strong burden to prove the effectiveness of programs that vulnerable individuals are defaulted into

• Methods • Evaluations of social programs that identify causality

• Mixed methods approaches to understand complexity

• Experimental techniques that model behaviour in social policy relevant settings

• Social network analysis that focuses on how people interact

• Spatial analysis of where people live and interact

• Data • Administrative data, particularly at the unit record level

• Longitudinal databases with a broader set of cohorts and populations

• Linked cross-sectional databases

• High quality attitudinal data


[email protected]

http://thenumbercruncher.org/


mailto:[email protected]



References • Altonji, J., and Blank, R., (1999). ‘Race and Gender in the Labor Market.’ in

Ashenfeleter, O., and Card, D., eds. Handbook of Labor Economics, Vol. 3A Amsterdam: North Holland.

• Frederick, S., Loewenstein, G., and O’Donoghue, T., (2002) ‘Time Discounting and Time Preference: A Critical Review’ Journal of Economic Literature 40(2): 351-401

• Hardin, C.D., and Banaji, M.R., (2013) ‘The Nature of Implicit Prejudice’ in Shafir, E., (ed.) (2013) The Behavioral Foundations of Public Policy Princeton University Press, Princeton

• Koh, T.Y., (2012) ‘Key Ideas in Behavioural Economics – And What They Mean for Policy Design’ in Low, D., (ed.) Behavioural Economics and Policy Design: Examples from Singapore World Scientific Publishing Company, Singapore

• Mullainathan, S., and Shafir, E., (2013) ‘Decision Making and Policy in Contexts of Poverty’ in Shafir, E., (ed.) (2013) The Behavioral Foundations of Public Policy Princeton University Press, Princeton

• Thaler, R.H., and Sunstein, C.R., (2008) Nudge: Improving Decisions on Health, Wealth, and Happiness. New Haven, CT: Yale University Press, 2008.


Dr Nicholas Biddle - Centre for Aboriginal Economic Policy Research - A behaviourally informed...

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