Research

Want to Have Impact?
Pay Attention to the Behavioral Details

If you want to achieve significant social impact, having a well-conceived strategy is not enough. Indeed, effecting social change often requires changing behavior, and little things can make a major difference when it comes to behavior. Thus, success frequently depends on seemingly minor situational and operating details.

Princeton Professor of Psychology and Public Affairs Eldar Shafir delivered this powerful message in a presentation on the behavioral economics of poverty at a recent conference on “Helping Consumers Help Themselves: Improving the Quality of Judgments and Choices” at Duke University’s Fuqua School of Business.

Though Shafir was focused on issues of poverty, the same principles apply to any social venture that intends to change or influence behavior. One of the classic studies he cited involves health care. In this study, a social psychologist provided students with persuasive communications about the risks of tetanus and the value of inoculation, as well as where they could go to receive a shot. A follow-up survey indicated that the students’ attitudes and beliefs were changed significantly, but only 3% actually got shots. Another group received the same communications, along with a map on which the infirmary was circled and students were urged to commit to a specific time. Of this group, 28% followed through and received inoculations. (Leventhal, Singer, and Jones, 1965) The increased impact was achieved through attention to details that facilitated action-- details that are not intuitive from the perspective of the ever-popular “rational actor model.” This lesson applies whether you are trying to change behavior regarding HIV testing, recycling, use of mentoring programs, participation in the arts, or any area of concern to social entrepreneurs.

Shafir and his colleagues Marianne Bertrand from the University of Chicago and Sendhil Mullainathan from Harvard University are currently exploring the role that behavioral economics may play in helping us understand and reduce poverty. They argue that the poor are human just like the rest of us. They exhibit the same weaknesses and biases that can lead to quirky or irrational behavior, though given their more tenuous economic situation, the consequences for the poor are often far direr. Given this reality, the researchers suggest that nonprofit organizations and government agencies seeking to serve the poor should pay greater attention to situational details that can have a large impact on their target audiences’ behavior. Indeed, modest programs designed with proper attention to operational details could yield far greater results than costly major interventions designed without attention to the situational and behavioral factors at play.

To illustrate their point, they offered the following excerpt from a 36-page food stamp application:

If you are a non-citizen applying for Medi-Cal and you are not (a) LPR (an alien who is a lawful permanent resident of the U.S.), (b) an amnesty alien with a valid and current I-688, or (c) PRUCOL (an alien permanently residing in the U.S. under color of law, please do not fill in the shaded box for “Birthplace.”

At the end of this form, just above their signature, applicants are advised that failure to “follow food stamp rules” may result in fines up to $250,000 and/or jail for up to 20 years. And the application instructions inform individuals that if they are six minutes late, they will not be granted an appointment, even though they should expect to spend several hours completing the intake process. According to Shafir, in just reading this document, potential applicants have been alienated and successively treated “like a PhD, a criminal, and a child.” From the perspective of a behavioral scientist, it demonstrates a “lack of behavioral insight that understandably results in low program take-up.”

Social entrepreneurs may be less likely to erect this kind of bureaucratic barrier, but they can be equally insensitive to the psychological factors that inhibit the behavioral changes they are trying to effect. For instance, they may assume that if they offer a course on financial management to low income individuals, most of the participants will manage their money more carefully. However, as with the tetanus example mentioned earlier, such a session may change knowledge and beliefs without changing behavior.

Countervailing forces are quite strong. Moreover, the poor are often targeted by high-cost lending schemes, such as predatory mortgages, payday loans, high-rate used-car loans, and rent-to-own offers, by businesses that market their services aggressively and use psychological factors to their advantage.

Apparently, it is not hard to use some simple psychological tactics to persuade people to pay higher prices for financial services. Shafir described a large-scale study he and his colleagues, along with two others, recently conducted to test the role of psychological factors in economic decision making. They worked with a South African bank to send out nearly 60,000 letters to existing clients offering them a short term loan at a specific, randomly chosen interest rate, ranging from 3.25% per month to 11.75% per month. Not surprisingly, as economic models would predict, demand for the loan decreased as interest rates increased. However, the psychological factors also affected demand in ways that rational economic choice would not predict. For instance, men were significantly more responsive to letters with a picture of a female. The picture had the same effect as a change in interest of roughly 4.5% per month.

Social entrepreneurs need to pay attention to operating and marketing details in the same way. For example, in a study with Chicago’s Shorebank, Shafir and his colleagues found that financial education workshops have much greater impact when a bank representative is present. The presence of this representative significantly increased the number of individuals opening an account compared to workshops at which participants received a referral letter to take to the bank, even though the vast majority of those participants claimed they would open an account after the workshop. Of perhaps even greater importance, the presence of a bank representative at the workshop also had a significant positive effect on participants maintaining and using the account, as well as on using services such as Electronic Fund Transfer, direct-deposit, and ATMs. Like the map and time commitment in the tetanus study, having a bank representative present at the workshops opened up the “channel” to increase take-up and utilization of the banking program.

By understanding and testing the implications of these and other behavioral studies, Shafir and his colleagues challenge the traditional thinking that major effects and social problems are due to major causes and thus require major interventions. Thus, those responsible for designing and implementing social programs would be wise to pay attention to subtle psychological factors and, when appropriate, use this knowledge to promote socially desirable behavior.

Shafir was one of several researchers presenting papers at a conference for authors contributing to a special issue of the Journal of Public Policy and Marketing on “Helping Consumers Help Themselves: Improving the Quality of Judgments and Choices.” Insightful comments were offered by John Herrera, Chairman of the Board, Latino Community Credit Union, Patrick Malone, Duke Center for Child and Family Policy, and Bob Giloth, Annie E. Casey Foundation.

All of the papers at the conference examined the limitations of traditional policy instruments that attempt to make consumers better off by offering more choices, by providing better information about options consumers might consider, or by providing incentives for consumers or sellers to change their behavior in a socially beneficial way. The special issue is due out in May 2006.

According to Fuqua’s John Lynch, the Roy J. Bostock Professor of Marketing and co-editor for this special journal, “Public policy in the US is dominated by analyses from economics and law. This was an exciting conference because all of the papers relied on well-known principles from literatures on psychology and consumer behavior to suggest new policy remedies to improve consumer welfare. The paper presented by Shafir was a particularly good fit with CASE, because the remedies proposed by Eldar and his colleagues relied more on small-scale social entrepreneurship than on big-government interventions. Greg Dees and Beth Anderson were a very big help in putting this session together with commentators working in the practical world of social entrepreneurship.”

Further reading:

“A Behavioral-Economics View of Poverty,” Marianne Bertrand, Sendhil Mullainathan and Eldar Shafir, American Economic Review, 2004, vol. 94, issue 2, pages 419-423.

“Effects of Fear and Specificity of Recommendation Upon Attitudes and Behavior,” H. Leventhal, R. Singer, and S. Jones, Journal of Personality and Social Psychology, 1965, issue 2, pages 20-29.

Teaching Case Study: Latino Community Credit Union, The Fuqua School of Business, Center for the Advancement of Social Entrepreneurship, SE-02, February 2004.

The Winter 2005 issue of the Annie E. Casey Foundation’s policy magazine, ADVOCASEY, explores "The High Cost of Being Poor." The articles discuss the high prices that low-income Americans pay for consumer goods and services, alternatives to "payday lending," improving access to car ownership, and combating predatory mortgage lending.