Why Use Behavioral Sciences in Nepal’s Policy-Making?

The “Economics in Crisis” theme has become one of the favorite themes of discussions among the journalists, economics commentators and the academicians. All of them, in particular, take examples of failure of modern economic theories to correctly predict Global Financial Crisis 2007-2008, Brexit and Trump Presidency in the US and their overall consequences on world economy to justify their arguments.

As a consequence, there has been an ongoing debate that seeks to try to integrate theories from other academic disciplines into the mainstream economic theories to design more holistic policies that result in better policy outcomes. A 2017 work by Neil Irwon, a senior economics correspondent for The New York Times also highlighted this changing shift in economic thinking and policy-making in the US and other major world economies. These shifts in economic thinking became even more evident after Professor Richard Thaler received last year’s Nobel Memorial Prize in Economic Sciences for his contributions to behavioral economics. Professor Thaler was long been considered as one of the main critics of economics, especially after he published his much debated paper – Toward a Positive Theory of Consumer Choice.

These recent changes in economic thinking, especially those related to incorporating behavioral science components into the long-standing economic theories, go beyond simple debates and have long been affecting lives of the people across the world. The governments, private institutions and policy makers in different parts of the world have long been using behavioral science theories to better the net outcomes of their economic and related public policies. Some of the countries that have been using and also benefiting from behavioral science theories include USA, The Netherlands, UKSingapore and Turkey. Furthermore, besides their considerable influence in economic policies, behavioral science theories – Professor Thaler’s Nudge Theory in particular – also have significant in framing a variety of public policies. For example, countries like Austria, Belgium, France and Spain have proved that effective use of Nudge Theory in organ donation campaigns not only encourages more people to voluntarily donate their organs but also makes overall campaigns more efficient.

In the light of these issues and Nepal’s existing realities, I see ample opportunities for concerned stakeholders in the country to invest in and also engage in researches and discussions focused on identifying applicable behavioral science theories that could best be utilized in ameliorating present economic theories. I have tried to highlight some of these issues in one of my past opinion pieces for The Kathmandu Post.

We all are well aware that Nepal started adopting liberal policies as early as in early 1990s. However, country’s growth since then has been minimal. As expected, people normally blame the decade long Maoist insurgency (1996 – 2006) and ten more years of political transition (2007 – 2017) as key reasons for Nepal’s more than two decades of stagnated growth. But I think, besides aforementioned crises, our failure to update our policies and also formulate new policies as per the changing national and global circumstances also played their roles for minimal growth of the country. I am sure that some of these issues will also be highlighted in World Bank’s upcoming Nepal – Country Diagnostic report. Thus, it is high time that we start discussing about usefulness of behavioral science theories in developing and adopting proper policies that not only drive country’s growth but also help us to maintain existing social, cultural and environmental harmony. What do you think?

Jaya Jung Mahat

Jaya is a researcher at Samriddhi where he leads a research on public debt management in Nepal. He has an MPP from Lee Kuan Yew School of Public Policy, National University of Singapore and is also an alumnus of Evidence for Policy Design, Harvard Kennedy School's BCURE Program.


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