Symposium on Behavioural Economics in Policy Making

06 Sep 2019

Dr. Adnan Khan, Co-founder and Board Member CERP and Mr. Maroof Ali Syed, President and CEO CERP were recently invited as panellists to Symposium on Behavioural Economics in Policy Making, a collaboration between B4Development and Lahore School of Economics on September 03, 2019.

The symposium was a one-day event on the role of Behavioural Economics in policy making where notable policymakers, distinguished academics and illustrious researchers came together to discuss the role of Behavioural Economics in matters of compliance, public finance and accountability.

Mr. James Vancel, CEO Busara Center for Behavioral Economics, Dr. Ijaz Nabi, Country Director IGC, and Dr. Azam Chaudhary, Research Fellow CERP and Dean Faculty of Economics at Lahore School of Economics were the panellists of the first session which was on “Using behavioural insights to promote compliance, rule of law and revenue generation”. The speakers exchanged thought-provoking viewpoints on tax compliance around the world with insights from RCTs conducted in Nigeria, Poland, Busara etc. Dr. Azam Chaudhary while discussing nudging Pakistan forward and the reason of low tax collection in Pakistan said “Choice architects need to identify the reason why taxes aren’t being paid. Workings and vehicles matter but the lack of belief that taxes aren’t being spent well in strengthening public services by the government is the major reason for low tax collection.”

Dr. Khan, Mr. Syed and Dr. Hamna Ahmed, Assistant Profession, Lahore School of Economics, were the panel speakers of the second session on “Nudging policymakers for greater transparency and accountability”, chaired by Makhdum Hashim Jawan Bakht, Minister of Finance in Punjab and moderated by Dr.Lori Foster, Professor of Industrial- Organisation Psychology, North Carolina State University.

The session focused on how to nudge the nudgers and explored the behavioural biases that might be impacting the decision making of government and parliament members and how it can be addressed using behavioural interventions.

Dr. Khan opened the session by acknowledging the role of nudges but cautioned it to be a silver bullet that can solve issues. He emphasised on the importance of problem diagnosis and identification and shared key learning insights on why states fail to achieve what they want to achieve. According to him failure to respect initial conditions and to diagnose what is wrong, importing best practises from outside that are not according to the context, and trying to make reforms in one big leap, which often leads to failure are some of the key reasons why states fail. Dr. Khan suggested that reforms should be gradual, building on success and should incorporate the element of learning within themselves: self-correcting mechanism.

Keeping to the theme and topic of the session, Mr. Syed informed the forum about the Punjab Property Tax Project, at CERP, and how the project evolved into providing local Public Services. ‘Tax collection increased by 46% where performance-based incentives were introduced and 41% where performance-based postings were introduced” says Mr. Syed while sharing results of Tax Project. According to Mr. Syed “Inability to tax is both a symptom and a cause. It is a vicious cycle where the inability to tax leads to poor public services, and that leads to erosion of trust by citizen’’. Furthermore, he shared how CERP’s Social Compact Project is building and repairing the trust between citizen and state via local public services through the collection of citizen preferences. Elaborating on the project he said, “It is not just important to create and collect data, but to create salience in the mind of the citizen that these taxes that are being paid are being used to provide them local services”. Answering a question on systemic analysis Mr. Syed said ‘you cannot process the entire system in one go. You need to lift one constraint at a time and see whether the effect was marginal or formidable. One should have a method to your madness to move forward.’

Dr. Hamna Ahmad, the third panellist of the session, shared experiences from her ongoing work aimed to improve governance and service delivery of Third Tier Organisations across the country. 

Concluding the session, Mr. Bakht reflected on the state’s perspective and acknowledged the importance of nudges adding, “no matter how much of public finances are being poured into schemes the required dividend is really not coming out.” According to him, nudges can help pave the way to redefine the state and citizen contract. At the end, Dr. Foster concluded the session by emphasising the need to build trust by organisations using three core components namely ability, benevolence and integrity.

The symposium ended with a round table conference on capacity building and behavioural insights from academics and government officials. The last session of the day aimed to address the ongoing initiatives in the field of behavioural economics to better inform government programmes and policies.