The Role Of Behavioural Science In Policy-Making ~An Indian Perspective.

Human beings are rational individuals

Remember the time when you were binge-watching Game of Thrones for 5hours?

OR

The Instagram trends you have followed to increase your followers?

Rationality — A core assumption of mainstream economics textbooks, that has been challenged for overly simplifying the ‘messy and mysterious working of actors’ (World Development Report,2015). Liberal thinkers oppose government intervention and believe that maximising satisfaction is the best policy option.

However, decision-making is influenced by human emotions along with societal norms, cultures and institutions. As pointed out by Keynes, often investment involves the working of ‘animal spirits’ i.e. intuitions and emotions instead of rational calculations. Again due to the imperfections of credit markets in developing countries, there are shreds of evidence of informal social contracts where an individual prefers to cooperate as long as others in the group are cooperating.

Social ostracization prevents individuals from deviating from pre-determined actions. We internalize several aspects considering it inevitable, calling it ‘social facts’, which reveal the influence of cultures and stereotypes on individual…