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The making of behavioral development economics

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  • Demeritt,Allison Davis
  • Hoff,Karla

Abstract

A core insight from early behavioral economics is that much of human judgment and behavior is influenced by"fast thinking"that is intuitive, associative, and automatic; very little human thinking resembles the rational thinking that characterizes homo economicus. What is less well-recognized is that innate reliance on cognitive shortcuts means that cultural mental models --categories, concepts, social identities, narratives, and worldviews -- profoundly influence judgment and behavior. Individuals have a cultural"toolkit"or"repertoire"of mental models that they use to perceive and interpret a situation and construct a response. Many researchers have connected cultural mental models to economic development, yet they rarely identify their research findings as"behavioral"economics. This research constitutes a second strand of behavioral economics that illuminates the tight interlinkages between preferences, culture, and institutions and points to new policy opportunities. It brings the discipline almost full circle back to 18th and 19th century perspectives. This essay cautions against strong reductionism in which sociological influences on decision making are squeezed into a rational actor model.

Suggested Citation

  • Demeritt,Allison Davis & Hoff,Karla, 2018. "The making of behavioral development economics," Policy Research Working Paper Series 8317, The World Bank.
    • Handle: RePEc:wbk:wbrwps:8317
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    Cited by:

    1. Francesco Cordaro & Alain Desdoigts, 2021. "Bounded Rationality, Social Capital and Technology Adoption in Family Farming: Evidence from Cocoa-Tree Crops in Ivory Coast," Sustainability, MDPI, vol. 13(13), pages 1-20, July.
    2. Willemien Kets & Alvaro Sandroni, 2021. "A Theory of Strategic Uncertainty and Cultural Diversity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 287-333.
    3. Ralitza Dimova, 2019. "A Debate that Fatigues…: To Randomise or Not to Randomise; What’s the Real Question?," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 31(2), pages 163-168, April.
    4. Victor I. Espinosa & William Hongsong Wang & Jesús Huerta de Soto, 2022. "Principles of Nudging and Boosting: Steering or Empowering Decision-Making for Behavioral Development Economics," Sustainability, MDPI, vol. 14(4), pages 1-18, February.
    5. Dalton, Patricio & Cole, Kim, 2018. "Developing Goals for Development: Experimental Evidence from Cassava Processors in Ghana," Other publications TiSEM d70615df-1579-4d60-bb7b-7, Tilburg University, School of Economics and Management.

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