The World Bank recently launched its flagship ‘World Development Report,’ (WDR) and it’s surprising. As the guy who runs a Blog called “There are Free Lunches,” my immediate thought when seeing the report was: Aren’t the guys from the World Bank the ones who believe that people are rational self-interested agents, and that money is the solution to all the problems in the world? But soon I realized had been caught by the subtle but powerful forces of the availability heuristic, a mental shortcut people use when they have to make judgments under conditions of uncertainty. The heuristic entails basing judgments on scenarios that immediately come to mind, rather than on using all information appropriately. Thus, the ideas that immediately came to my mind when I thought about the World Bank were: money + loans + poor countries. Only when Varun Gauri, co-director of the report, told me they were “launching a new report that reviews exciting, early efforts to diagnose and solve psychological, cognitive, and social constraints to development economics and policy.”, I understood I had been fooled again by one of the many psychological and social shortcuts that, although evolutionary useful, nowadays bias our minds, govern our lives, and determine the faith of our societies and economies. In the following paragraphs we will be able to understand, through several examples picked from the WDR 2015, how small and low cost government interventions can tackle these biases and generate large development benefits.
Posted on: Sat, 20 Dec 2014 16:14:06 +0000
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