Karla Hoff
James Walsh
Publication Date
December 11, 2017

The World Bank (Hoff); University of Oxford and The World Bank (Walsh)

"A central theme of this essay is that institutions create concepts, categories, social identities, and other mental models that can persist long after the institutions are abolished. The mental models influence how boundedly rational people process information and what they want and aspire to become."

According to this World Bank Policy Research Working Paper, people all over the world are prevented from participating fully in society through mechanisms that go beyond the structural and institutional barriers identified by rational choice theory (poverty, exclusion by law or force, taste-based and statistical discrimination, and externalities from social networks). The purpose of this synthesis essay is to provide a perspective from behavioural economics on four additional forces that maintain social exclusion and on interventions to overcome them.

The paper opens by explaining that most social sciences recognise that stable institutions have cognitive foundations. They include concepts, categories, social identities, and worldviews. Institutions that are stable give people experiences that lead them to form these subjective mental structures. They function like lenses; they shape how an individual processes information - what she attends to, what she perceives, and how she interprets ambiguous signals. The symbolic systems make the user a reflection of the community by influencing how others see her and how she sees herself. Institutions that create hierarchies of ascriptive groups (e.g., by race, gender, or ethnicity) impair the ability of others to learn things about the person that do not fit the category, since mental models filter information in a way that tends to preserve categorical beliefs. Abolishing or reforming a discriminatory institution may have little effect on these lenses; groups previously discriminated against by law or policy may remain excluded through habits of the mind. In fact, mental models that an institution of social exclusion creates can be deliberately strengthened after the institution is abolished in order to make the old social pattern persist.

Drawing on many social sciences, 21st century behavioural economics introduces into economic theory mental models as a new variable. The new variable is shaped by experience and exposure. The new variable affects social exclusion through four mechanisms - four social barriers - discussed in the paper:

  1. Implicit (unconscious) discrimination - Several examples are provided. As noted here, implicit bias by supervisors against minority staff can directly impair their performance. Identification of the impact of implicit discrimination leads to the question, Can a policy intervention reduce it? Evidence suggests that information alone may not be enough to change beliefs, since individuals tend to resist corrective information that calls their priors into question. However, a longstanding body of work on prejudice reduction emphasises the beneficial impact of interactions between social groups. Much of this work argues that prejudice results from a lack of experiential knowledge and understanding of outgroups and that it can be overcome by interactions between the groups; examples are provided. An alternative approach to reducing discrimination is to increase self-awareness. Publicising the extent of implicit bias may alert people to their unintended discriminatory actions and thereby reduce, or even eliminate, the discrimination. It is sometimes possible to make small changes in a decision-making environment to activate scripts that rely less on stereotypes and thereby reduce discrimination.
  2. Self-stereotyping and self-censorship - To function well, people need to understand themselves in terms that sustain their sense of personal integrity and value and that accurately reflect their abilities. Many institutions are designed to support the psychological and social needs of dominant groups by providing role models, narratives, and rituals to embolden individuals to make the effort needed to succeed. Groups at the margins of society, on the other hand, often must expend extraordinary effort to negotiate their place in environments not made for them or hostile to them. Several examples, including of "stereotype threat," are provided, focusing on castes in India, as well as gender. Research has shown that even minor interventions can insulate socially excluded groups from the "threat in the air" created by social stigma. The report discusses experiments with disadvantaged students in the United States (US) and an intervention in India that reduced the legitimacy of domestic violence. The latter involves a theatre for development programme, Jana Sanskriti, active in villages in West Bengal, India since 1985, that engages in fieldwork in which villagers describe their problems, including incidents of domestic violence. The goal is to enable villagers to change their shared representations, for example, of domestic violence, and collectively rehearse social change. To evaluate the impact, Hoff, Jalan, and Santra (in progress) surveyed random samples of registered voters in villages where the plays had been performed and in matched villages where plays had never been performed. The study finds that exposure of a village to the plays reduced from 14% to less than 4% the fraction of women who thought domestic violence was legitimate. Exposure also reduced the percentage of households in which domestic violence had recently occurred from 32% to 26%. In the new mental models, domestic violence is perceived as cruel and illegitimate.
  3. The difficulty of adapting "fast thinking" to two worlds (a violent world of disadvantaged groups and an orderly world of school or work) - Economically and racially segregated neighbourhoods put disadvantaged individuals in a difficult position: They do not access as young children the more privileged settings in which they can learn the mental models, norms, and rules of thumb needed to thrive in such environments. Yet behavioural economics suggests that the person can change her mental models and behaviour if given adequate social and psychological supports. This section of the paper discusses interventions that have increased individuals' life skills and raised their aspirations. One set of interventions helped individuals form goals and the strategies and emotional skills to achieve them. Another set of interventions gave individuals who grew up in violent neighbourhoods the cognitive tools to adapt to a non-violent environment and build productive lives.
  4. "Adaptive preferences" of the oppressed - A subjugated group may come to see its subjugation as natural, normative, or even preferred. But, as Bandura has shown, by observing others, individuals may develop higher aspirations and more positively assess their prospects for achieving them. Successful role models can help individuals imagine new life paths and boost their perceived self-efficacy. (A natural experiment in India shows how exposure to women pradhans (village council leaders) changed beliefs in at least four ways that reduced the social exclusion of women.) Another way to change the adaptive preferences of disadvantaged groups is through documentaries of people who escaped poverty, and soap operas that expose viewers to new ways to build their lives. There is evidence that exposure to unfamiliar outcomes and social patterns even in fiction can give individuals new role models. For example, as reported here, soap operas in Brazil depicting agentic women with few or no children was a statistically significant factor in the recent decline in Brazil's fertility rate. Organisations such as BBC Media Action have brought this approach to scale across the world, tackling problems such as ethnic conflict, poor health, and oppressive gender norms.

In conclusion, in contrast to traditional economics, "behavioral economics shows that social exclusion is caused not just by structural and institutional barriers, but also by social and psychological factors, and further, that interventions can change them or go around them....The policy implication in behavioral economics is that equality of outcomes between ascriptive social groups, such as those defined by race, gender, or ethnicity, should be a policy target along with formal equality of opportunity....A rapidly growing literature, which this essay selectively reviewed, shows that interventions can relax the constraints created by mental models that are a legacy of historical institutions. The impacts of many of the interventions described in this paper are difficult to explain in rational choice theory, but are not difficult to explain under the quasi-rational, enculturated actor framework of behavioral economics."


World Bank Documents & Reports, February 13 2018; and email from Karla Hoff to The Communication Initiative on February 15 2018. Image credit: Center for Financial Education and Capability