One of the key aspects of human efficiency is making decisions based on facts, data, and nonideological logic. This is a critical aspect of having an efficient government and political system.
In this post, we will look at possible behavioral solutions for poverty in the U.S. The key idea behind behavior-based solutions is providing some sort of motivation to get people to do what is considered to be the right thing, the responsible thing, or the logical thing, depending on what the thing is that we are talking about.
People act in a certain way and different people act or react differently from one another. Often times unfortunately, people do not react in a rational or logical manner for any number of reasons such as habits or laziness. And this is where the problem comes in, especially when their actions affect others negatively, whether it be their families, children, or the rest of society. Poverty and crime and their causes are an example.
There are generally two ways to change behaviors. One is more or less a forced method where a requirement is imposed to receive something in return. An example of this is work requirements to motivate able-bodied adults on public assistance to either work, go to job training, or do community service in order to avoid losing some assistance benefits. This has proved to be successful in Maine.
The other is fairly new and more subtle in nature. It is referred to as to “nudge” and is based on the 2008 book by Richard H. Thaler and Cass R. Sunstein. Nudging is in a field called behavioral economics. It is basically providing some incentive to get people to do something that makes sense that they would not normally do if left to themselves.
For example, humans often make decisions that provide them with short term benefits vs. higher future rewards, such as not saving for retirement or not paying off bills, both of which are not in their long-term best interest.
In an example provided, since people like to gamble, families that made mortgage payments on time became eligible for drawings with prizes. This was successful in getting people to pay their mortgages on time which benefited everyone, including the participants.
In another example, since people want to be part of a crowd, borrowers in India join repayment groups which meet weekly and provide incentive to make payments to pay off their loans. Other methods are being used to get people to pay their taxes and install insulation in their attics.
In summary, behavioral economics can be used to solve poverty by making people more efficient. In other words, by making people more responsible with their money, by planning better, and by thinking long-term.
Of course, there are detractors who feel such tactics are more coercion than motivation. But since it provides a benefit for both the individual and society and since the field is relatively new, it is worth developing. We need to be open to new ideas and this is one that could have huge benefits.
The goal of these posts is to provide the fact-based story behind issues that we are facing in this country. We can no longer allow ideology to make decisions for us when facts and data prove that we should be doing thing differently.
Next: Healthcare in America