Nudges and behavioural public policy in India

Detail

1. Where nudges fit in economic thought

• Classical and neoclassical economics (from Adam Smith to Marshall) assumes a Homo economicus. This is a fully rational person who knows all the options, calculates perfectly and always acts in their own best interest.
• Behavioural economics studies how real people behave. It finds that people have limited attention, follow habits, copy others and stay with what is already set.
• The Economic Survey 2018-19 argues that choices made by real people differ from the "impractical robots" of classical economics. It also says behavioural economics is especially useful in India, where social and religious norms strongly shape behaviour [2].
• The policy takeaway: design policy for Homo sapiens (real humans), not Homo economicus [2][3].

2. The idea of a nudge

• Nudge (Richard Thaler and Cass Sunstein, Nudge, 2008): a change in the way choices are presented that moves behaviour in a predictable direction.
• Main tools are defaults, reminders and social norms.
• A nudge does not ban any option or change incentives much.

• Placing fruit at eye level is a nudge. Banning junk food is not a nudge, because it removes a choice.

• The OECD defines behavioural insights as lessons from the behavioural and social sciences. These include decision-making, psychology, cognitive science, neuroscience and the study of how organisations behave. Governments use them to make public policies work better [10].

3. Choice architecture and the default option

• Choice architecture: designing the setting in which people choose. This covers the order of options, the default and the framing (how the choice is worded).
• Default option: the choice that applies if a person does nothing.
• People tend to keep the pre-set choice. This is called status quo bias (the habit of preferring things as they are).

• So a well-chosen default is one of the strongest nudges.

• Examples:

• Auto-enrolment in pensions: workers are enrolled automatically and must act to leave. Participation rises sharply.

• Opt-out organ donation (as in Spain): everyone counts as a donor unless they say no. Donor rates rise.

• Worked example (numbers are for illustration only):

• A firm has 100 workers.
• Opt-in design (the worker must fill a form to join the pension): say 40 join. Participation = 40/100 = 40%.
• Opt-out design (the worker is enrolled automatically and must fill a form to leave): say only 10 leave. Participation = 90/100 = 90%.
• The options and the money are the same in both cases. Only the default changed, yet participation went up by 50 percentage points.

4. Libertarian paternalism

• Libertarian paternalism: the idea behind nudges.
• Paternalism: the state steers people towards choices that are better for them.
• Libertarian: people stay free to choose otherwise, and no option is banned.

5. Critiques of nudging

• Manipulation: nudges work below conscious thought, so people may not notice they are being steered.
• Paternalism: who decides what is "better"? The government may be wrong, or may have its own interests.
• Sludge: the opposite of a nudge. It is friction that blocks good choices, such as long forms, many documents or repeated office visits.

• Example: a welfare scheme with a 10-page application loses eligible people because of sludge, not because they do not need it.

• Small effects: compared with hard policy tools such as taxes, subsidies, bans and laws, nudges often have only modest effects.

6. The global model: nudge units

• The UK set up the Behavioural Insights Team (the "Nudge Unit") in 2010. It began on a trial basis under the Cabinet Office [11].

• The US, Australia, Canada, the Netherlands and Germany later set up similar units [11].

• The OECD's 2017 report Behavioural Insights and Public Policy found:

• 202 public entities around the world were applying behavioural insights;

• there were over 100 applications across areas such as consumer protection, education, energy, environment, finance, health and safety, labour markets and public service delivery [10].

• World Bank:

• its World Development Report 2015, Mind, Society, and Behavior, first brought behavioural insights into development policy [12];
• it later set up the Mind, Behavior, and Development Unit (eMBeD), which helps governments use behavioural science in policy [13][11].

7. India: Economic Survey 2018-19

• The Survey was tabled by Finance Minister Nirmala Sitharaman. Vol. 1, ch. 2 is titled "Policy for Homo Sapiens, not Homo Economicus: Leveraging the Behavioural Economics of 'Nudge'" [2][3].
• Three principles:
• (i) Stress the beneficial social norm. Tell people that most others already do the right thing, so they copy the good behaviour.
• (ii) Change the default option. Make the desired choice the automatic one.

• (iii) Repeated reinforcement. Repeat the message many times so the habit sticks.

• Its examples:

• Swachh Bharat Mission: used social norms and made the message on open defecation clear and visible [2];
• Beti Bachao Beti Padhao: cited as a success. The Survey proposed a reframe as "BADLAV" (Beti Aapki Dhan Lakshmi Aur Vijay Lakshmi), which presents daughters as wealth and victory rather than a burden [2];
• LPG "Give It Up" campaign (2015): asked households who could pay the market price to give up their LPG subsidy voluntarily.
  • More than 1.03 crore consumers had given up the subsidy by 12 December 2018 [6].
  • A later PIB release put the number at nearly 1.04 crore [7].
  • (NCERT: "over 1 crore households".)
  • This worked through social norms and moral appeal, with no legal force.
• Proposed nudges:
  • tax compliance: publicly honour top taxpayers, so paying tax earns status;
  • savings;
  • health.

8. India: institutions and schemes built on nudges

• NITI Aayog: a Behavioural Insights Unit was set up with the Gates Foundation (2019, per the scaffold; its current status was not checked against a source).
• POSHAN Abhiyaan (2018):
• aims to improve nutrition for children, adolescents, and pregnant and lactating women [8];
• is designed as a Jan Andolan (people's movement), with people's participation and community mobilisation as core parts [8];
• holds Poshan Maah (nutrition month) every September to change nutrition behaviour [8].

• Scale:

  • the 6th Poshan Maah (2023) registered over 6 crore activities on the Jan Andolan dashboard in its first 12 days [9];
  • the 7th Rashtriya Poshan Maah (2024) recorded over 10.27 crore activities [8].

• Mission LiFE (Lifestyle for Environment):

• launched on 20 October 2022 at the Statue of Unity, Ekta Nagar (Gujarat), in the presence of UN Secretary-General António Guterres [4];
• aims to nudge individuals and communities towards a lifestyle that does not harm nature [5];
• people who follow such a lifestyle are called Pro-Planet People (P3), and the mission wants to build a global network of them [5];
• its target is to mobilise at least 1 billion Indians and other global citizens to act for the environment during 2022-2027 [5];

• it shifts the focus of climate policy from "mindless consumption" to "mindful use" of resources, relying on individual behaviour rather than only regulation [5].

• Auto-debit defaults:

• Atal Pension Yojana contributions are debited automatically from bank accounts;
• PMJJBY/PMSBY premiums are auto-renewed every year from the account;
• the result is that inertia works for the saver, because doing nothing keeps the person insured or saving.

Prelims Hooks

• Nudge (2008) was written by Richard Thaler and Cass Sunstein. Thaler later won the Economics Nobel for behavioural economics (2017).
• Libertarian paternalism means steering people towards better choices while leaving all options open. A ban is not a nudge.
• Sludge is the opposite of a nudge: friction such as long forms that blocks good choices.
• Status quo bias is why defaults are powerful. Opt-out organ donation (Spain) and pension auto-enrolment are the classic examples.
• The UK's Behavioural Insights Team (2010, Cabinet Office) was the first "Nudge Unit" [11].
• Economic Survey 2018-19, Vol. 1, ch. 2: "Policy for Homo Sapiens, not Homo Economicus". Its three principles are social norm, default, repeated reinforcement [3].
• BADLAV = Beti Aapki Dhan Lakshmi Aur Vijay Lakshmi, a proposed reframe of Beti Bachao Beti Padhao.
• GiveItUp (LPG): 1.03 crore voluntary surrenders by 12 December 2018 [6].
• Mission LiFE launched 20 October 2022 at Ekta Nagar. "Pro-Planet People (P3)". Target: 1 billion people during 2022-27 [4][5].
• Poshan Maah is held every September. The 7th edition (2024) recorded 10.27 crore activities [8]. The World Bank's WDR 2015 is titled Mind, Society, and Behavior [12].

Mains Points

• Low-cost complement to hard tools: nudges (defaults, norms, reminders) cost little and keep choice free.
• GiveItUp saved subsidy money with no legal force [6].
• Auto-debit keeps APY and PMJJBY/PMSBY cover running.

• They work best alongside subsidies, laws and infrastructure, not as a replacement. Swachh Bharat needed toilets as well as norms.

• Ethics and accountability: nudges work below conscious thought, so they raise concerns about manipulation and about who defines "better".

• Safeguards: transparency, testing through randomised trials, an easy opt-out, and public reporting. The OECD notes that these practices are now widespread among 202 public bodies [10].

• Removing sludge as governance reform: in India, complex forms and paperwork keep eligible people out of welfare schemes.

• Simplified forms, automatic eligibility through data, and auto-renewal can raise take-up, especially among the poor and people with little formal schooling.

• Behaviour-led climate and health policy: Mission LiFE (P3, 1 billion target) [5] and POSHAN's Jan Andolan [8] show a shift towards changing citizen behaviour through mass campaigns.

• The risk is that responsibility moves from firms and the state to individuals.
• Results need to be measured by outcomes (emissions, stunting), not by counts of activities.