This piece was written by Nicholas Gruen, CEO of Lateral Economics and Chairman of the Open Knowledge Foundation. For more like this, see our government innovation newsfeed.
The way standard economics focuses on the problems illuminated by its formal models has squeezed non-monetary incentives and “irrational” motives from economists’ purview.
Though for different reasons, bureaucracies are often similarly oblivious to the life world of those they serve.
There are two potential “narratives” (as we say these days) regarding the way behavioural economics or “behavioural insights” can help in shedding some of these blinkers.
The first is that behavioural economics and insights are a sign that economists and policymakers are starting to accommodate more realistic models of people into their operations.
Tips and tricks like A/B testing of different approaches, text message reminders and manipulating “defaults” (or what happens when people do nothing), can all improve outcomes from increasing savings or arrears payments, or increasing take-up of various government programs.
Still to me anyway, there’s something unsatisfying and typically “top-down” about this.
Bureaucracies almost inevitably breed complacency with their way of doing things
The second potential narrative is that these tips and tricks are just tips of an iceberg, with that iceberg being government agencies really engaging with those they’re supposed to be working for — us. Bureaucracies almost inevitably breed complacency with their way of doing things being ingrained.
The political philosopher Friedrich Hayek placed his own support for markets in the wider context of this failure of bureaucracies and the systematic knowledge of disciplines learned in universities to connect with the life world of the community. As he wrote in his famous essay “The Use of Knowledge in Society”:
Today it is almost heresy to suggest that scientific knowledge is not the sum of all knowledge. But a little reflection will show that there is . . . a body of very important but unorganized knowledge: . . . the knowledge of the particular circumstances of time and place. [In this] respect . . . practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active cooperation.
However, Hayek only applied this very general critique to one situation: the failure of professions like engineers and accountants to understand the value of the knowledge of time and place provided by traders who would, signal their specific information — for instance about a good or bad harvest — to the whole market via the impact of their buying and selling.
But central planning, with its unique strengths and weaknesses, is everywhere in any functioning economy. Virtually all organisations are centrally planned — reflecting a single ultimate source of authority, whether they’re governments in liberal democratic societies or firms, large or small. Taking proper regard for informal knowledge of the life world in all those organisations remains a major challenge.
Even in competitive markets, the effort that successful businesses put into customer satisfaction suggests how hard it is to get organisations to think beyond their own boundaries.
And if that’s the case, how much harder is it for government agencies, staffed mostly by well-educated people, to engage with less well-heeled individuals and communities with different cultures to their own employees?
Ponder these words of a girl — Mystic (pronounced Mystique) — who was in out-of-home care from age three in South Australia:
It happened so quickly. Once I turned 18, they sort of kicked me on my arse. They said “here’s $750, see you later, thank you”. And I’m just like “what the hell?”. .… It makes you feel non-existent on this earth. Like you are an alien.
Almost to a person, the people who designed and administered the system that turned Mystic out the day she turned 18 began their working lives wanting to improve the lives of others. Their professions spoke of respecting and helping their clients. But things turned out differently.
If you’re helping a family, there’s more engagement to be done than AB testing
Behavioural economics may not have discovered any tips and tricks to deal with this situation, but it nevertheless holds out to us constant examples of the need for those seeking to serve others to show some curiosity about how things are for others — if for no other reason than to achieve better program outcomes.
So, I see behavioural economics as one end of a larger continuum which is about organisations and systems learning the counter-cultural art of engaging “the other”. Behavioural insights work has typically focused on techniques that are relatively straightforward and easily scalable.
But the other side of “engaging the other” involves the kind of “deep engagement” I became familiar with when I was chairing The Australian Centre for Social Innovation (TACSI). If you’re helping a family or a community, there’s plenty more engagement to be done than AB testing.
TACSI’s Family by Family program completely rearranged the usual structure of social policy interventions attempting to put families at the centre of the program. (Yes, I know everyone claims that their “customers/clients” and the community are at the centre of everything they do — it’s on all the visions and missions and corporate catechisms — but some knowledge of what is necessary to even get close to such an aspiration shows you how hollow such claims are.)
So for me behavioural insights units and the radical redesign of existing services pursued by organisations such as TACSI are each fundamentally about the same thing — what for government institutions is the surprisingly difficult business of engaging “the other”. Both, in their different ways, are at their best as subversions of entrenched complacency. — Nicholas Gruen
(Picture credit: Unsplash)