Behavioural science is emerging as an integral part of public policy in countries around the world. This article seeks to document and assess some of the implications for the changing face of public policy in light of a wider scale of application of ‘nudge’ theory in India.
List, J., & Gneezy, U. (2014). The why axis: Hidden motives and the undiscovered economics of everyday life. Random House UK, 2013; pp. 288, Rs.331.
Many social scientists will agree that the best way to get to the heart of a social phenomenon is to observe it as it happens, much like a fly on the wall. This assertion, comes with a number of qualifying statements, the most pertinent of all relating to the scale of the social phenomenon (i.e., local, national, or global). Of course, a social scientist may not be able to capture the entire process, but will often want to address questions related to the source of such phenomena (“Why do women earn less than men in most labour markets?”) or understand its impact on human life and the social environment (“What happens when schools incentivize students to learn with money?”). Ideally, a scientist would like to address the problem of causality, well beyond merely establishing interesting associations. In ‘The Why Axis’, John List and Uri Gneezy argue that the best way to get to the heart of the matter is by using field experiments.
Apart from psychologists, many social scientists have abandoned the use of experimentation in academic research, according to the authors. Their introductory note cites this, as well as the clarity that experiments can provide on the problem of causality, as one of their main reasons for taking up this methodology. The authors draw on their extensive work in gender differences, education, charitable giving, and consumer pricing using field experiments to highlight how a little experimentation can go a long way. Given that these are a broad spectrum of issues that are common ground for economists now (Levitt and List, 2009), the authors are able to clearly highlight the methodological benefits of using field experiments to infer causal links.
Going into extensive details of how they ran their experiments, the authors are able to maintain academic rigor in their exposition, while also avoiding any heavy jargon. While the authors do not explicitly explain how to run an experiment (which might have been useful), they offer a wide range of their own professional experiences to learn from. In choosing to disentangle racial and prejudice-based discrimination from “economic” discrimination, the authors explore an area that is relatively new to economics – whether incentives are the reason behind discrimination. They throw in a mix of surprising (and sometimes counterintuitive) results – from finding that incentivizing one actor in a school system of teachers, parents, and students is enough to improving test scores, to greater evidence of economic discrimination against homosexuals by those are most likely to be discriminated against themselves.
The Why Axis also draws on List and Gneezy’s large scale public schools field experiment in Chicago, which cost nearly $15,000 per student to implement. Given that they are still running a majority of the studies related to schooling, some results cited were preliminary, but offer significant glimpses into policy implications for improving public schools in America’s poorest areas. They also cite interface with public officials (such as Ron Huberman, credited with turning around the Chicago Public Schools system), offering important insights into how to get such large-scale field experiments funded and executed.
However, there continues to remain scepticism about the external validity of the results of such large scale field experiments, as well as the replicability (given the costs associated with running an experiment; but see Ehmke and Shogren, 2010). While List and Gneezy address these issues only briefly at the start and end of the book, it does little to convince a business manager or young researcher to weigh the value of conducting such experiments. If anything, in arguing that “it would be too costly to not experiment” (emphasis added), The Why Axis leaves the perennial question of making such experiments cost-effective unanswered. Perhaps a useful companion to the book may be along the lines of previous books with similar themes (Nudge by Thaler and Sunstein has a Nudge blog and guidelines on how to implement successful nudges in everyday lives, Freakonomics authors Steven Levitt and Stephen Dubner started a blog as well).
The Why Axis is an optimal compilation of field experiments in economics, and a good introduction to recent evidence from using such a methodology in economics (in addition to Banerjee and Duflo’s Poor Economics, 2011). The authors provide interesting insights into human behaviour by harnessing the powerful causal inference offered by field experiments, while also suggesting future directions for where experimentation can lead the social sciences. Ultimately, understanding the black box that is the human mind has now become important to economic science.