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“Brand new value is generated between different systems, where inter-cultural friction arises.”, says Professor Ueno at the enrolment ceremony of Tokyo University[1].
If this applies to the generation of innovation, what elements (systems) should be blended with Behavioural Insight (BI) for the further social innovation?
In this series of column, I will present the potential elements which might cause synergetic impact with BI especially putting the focus on development context.
Using “Nudge” theory for climate change adaptation
Behavioural Insights and Climate Change
The application of Behavioural Insights is gaining popularity in climate change policies. In particular, it has been incorporated in the area of climate change mitigation. Examples include effective message delivery systems for energy demand management, and appealing button designs urging people to switch off appliances for energy conservation. However, little attention has been paid to adaptation policies. These are policies put in place to minimize the disastrous effects of climate change. The lack of attention is not because the application of Behavioural Insights does not complement adaptation strategies. In fact, there are many contact points where it could enhance their effectiveness.
Many of adaptation strategies require “preparedness”, which we recognize as important, but often fail to embody. Hence, there is room for Behavioural Insights, especially “Nudges”, to enhance these strategies. In this article, I will introduce some examples describing how, and in what policy domains can “nudge” bridge the gap between conventional and desirable behaviours in adaptation measures.
Domain 1: Disaster Risk Reduction
Climate change is said to bring about more extreme weather conditions, and this would cause more frequent and severe natural disasters. In particular, flooding is expected to affect a considerable number of people. According to UNDRR, extreme weather events affected 60 million people in 2018[2]. Among several different weather events, flooding saw the highest proportion, affecting 35.4 million people[3].
Flood risk mitigation requires sufficient preparation and an understanding of its risks. However, there is a behavioural gap here because people do not take it seriously, perceiving the risk as not their problem. Even if a city government distributes hazard maps presenting the flood risk and evacuation points, it is questionable to what extent people take them seriously.
In this regard, Terpstra et al. (2014, p1517) revealed that fear appealing messages, on flood risk associated with climate change, encourage people to seek further information[4]. They focused on the “framing” of risk and conducted Randomized Controlled Trial (RCTs) in the Netherlands to figure out how different messages affect people’s perception of flood risks and thereby motivate them to seek further information. On a web survey, compared to the controlled group (with no intervention) and two other groups used different messages (One was a brief explanation on the city’s flood management policy, and the other refers to the amenities of living near water.),, a message referring to the disastrous impacts of climate change through photos of floods, motivated individuals to seek further information.
Terpstra et al. (2014, p1507) argued that “[r]isk communication stimulates changing thoughts about risks”, and stated, “[w]hile perceiving a threat is generally recognized as a cognitive process, emotions such as fear are considered necessary to fully understand human responses to risks. These cognitive and emotional processes together motivate adaptive coping behavior.”[5].
Of course, it is also crucial to consider to what extent this kind of fear-appealing message is socially acceptable in light of ethical considerations. Nevertheless, these findings and perspectives on “adaptive coping behavior” would be helpful in applying BI to disaster risk reduction as an adaptation strategy.
Based on the EAST framework, City of Yokohama also worked on revising messages on brochures presenting flood risks and urging preparation in collaboration with YBiT. Such experiments by city governments would be valuable to share through city-to-city development cooperation to enhance the effectiveness of climate change adaptation policies.
Domain 2: Crop Failure and Fertilizer Use
Agriculture is one of the sectors most vulnerable to climate change. Today, 80% of the poor live in rural areas and survive mainly on farming[6]. Multiple climate risks such as droughts, floods, storms and reduced sunlight hours expose them to the risk of crop failure. In order to adapt to changing climates and weather patterns, farmers need to expand their adaptive capacity and take on proper coping strategies. However, this is not easy because it requires behavioural change, and in some cases, a little hassle. Here, the “status-quo bias” can be an obstacle.
Using fertilizer can be one of the valuable ways to adapt to climate change and increase the crop yields. In Kenya, the Ministry of Agriculture encouraged farmers to use the optimal amount of fertilizer to increase their yields. Researchers also confirmed that this amount could enhance productivity by up to 50%[7]. However, not many farmers purchase it although they understand the benefits. In such a circumstance, behavioural economists such as Professor Esther Duflo, the Nobel economic prize winner, designed an intervention based on nudge theory. In collaboration with NGOs, they started a coupon program, selling fertilizer coupons through door-to-door sales immediately after harvest, a time when they have enough money and are thinking about productivity[8]. This allowed farmers to purchase fertilizer coupons in advance to use it for the next year. (If they have a coupon, fertilizer is delivered before the next farming season.) This resulted in a 50% increase of farmers’ fertilizer use and enhanced their productivity[9]. This example shows that a “timely intervention” proposed in EAST framework can overcome a little hassle or “status-quo bias” which often causes a “last-mile challenge” in development.
Micro Saving and Insurance
As mentioned at the beginning, “preparedness” is a determinant for climate change adaptation. In this sense, saving and insurance play a particularly significant role in building livelihood resilience. For savings, Banerjee and Duflo (2012) suggested that savings are particularly important for the poor because they work as financial buffers protecting them from external shocks[10]. Karlan and Appel (2012) also emphasised on the role of saving and argue that the poor recognize its necessity and they are motivated to save money; therefore, what we should do is to offer options[11]. However, despite the proven impact of saving, it is a common discourse that even if people understand the importance and are motivated, they cannot save money as planned.
Fortunately, there have been numerous attempts using nudge theory to encourage saving. Karlan and Appel (2012) reported that “commitment saving” was effective in the Philippines[12]. In this saving scheme, clients set a saving target, and they could not withdraw money unless their saving reaches that amount. It seemed inconvenient but it gained popularity in the Philippines. Those offered this commitment savings account recorded a 47% increase in savings in 6 months and 82% increase in one year on average[13]. Confirming this result, Karlan and Appel (2012) concluded that the poor could increase savings if they are provided with proper tools.
The IPCC Fifth Assessment Report (AR5) raised insurance as one of the critical adaptation options for health, human security and crop yield[14]. The Paris Declaration also refers to insurance to avert, minimize and address losses and damages associated with the adverse effects of climate change[15]. To reflect these needs, more insurance companies including microfinance institutions are developing climate-change-related insurance schemes such as climate insurance, weather (or rainfall) insurance and crop insurance. However, these attempts would also be subjected to behavioural gaps. The poor do not enrol in insurance even if they understand the benefits. In many cases, “present bias” negatively affects the preparation for future risks. This refers to the tendency for individuals to place disproportionately more value on the present than the future. To encourage enrolment, Karlan and Appel (2012) argued that making the insurance option attractive is important and therefore, marketing strategies are needed despite it not being well considered in development aid[16]. Their experiment in India proved that in-person marketing, visiting each household and explaining insurance programs can increase enrolment. In particular, if the sales person is introduced by a reliable acquaintance such as a microloan officer, it increases the effectiveness by one-third[17]. A similar result was reported by Banerjee and Duflo (2012). Their experiment revealed that by visiting each household, the number of climate insurance contracts increased to 4 times in India[18].
As shown in the examples, nudges using commitment, attractiveness, and social networks can encourage people to engage in favourable behaviour in saving and insurance enrolment, which are seen as critical coping strategies against climate change.
More Opportunities in Adaptation
As shown in the examples in three policy domains, BI can be applied to climate change adaptation. In fact, it would fit very well because challenges in adaptation measures often run into the issue of human irrationality, induced by decision making biases such as “status-quo bias” and “present bias”. We cannot take appropriate action even if we recognize we need to do so. In this respect, the conventional approach based on education and awareness raising is not enough. This is exactly where BI can work well in a cost-efficient way. In fact, research and know-how on each intervention such as nudges for flood evacuation, fertilizer use, and insurance enrolment have already been accumulated. However, the challenge is that they are not framed or examined as climate change adaptation policy measures. Therefore, it is expected that the current nudge practices will be integrated into and re-examined under the context of climate change adaptation.
Yusuke Takagi (YBiT member)
Edited by Mika Kunieda, Lek Hong
[1] Ueno, C. (2019) “Congratulatory address at undergraduate entrance ceremony at Tokyo University 2019”. [Online] Available at https://www.u-tokyo.ac.jp/ja/about/president/b_message31_03.html [Accessed September 23rd, 2019].
[2] The UN Office for Disaster Risk Reduction (UNDRR). (2019) “2018: Extreme weather events affected 60m people” [Online] Available at https://www.unisdr.org/archive/63267 [Accessed December 8th, 2019].
[3] Ibid.
[4] Terpstra, T., Zaalberg, R., de Boer, J., & Botzen, W. (2014). “You have been framed! How antecedents of information need mediate the effects of risk communication messages”. Risk Analysis 34(8), 1506-1520.
[5] Ibid.
[6] The World Bank (2019) “Agriculture and Food” [Online] Available at https://www.worldbank.org/en/topic/agriculture/overview [Accessed December 8th, 2019].
[7] Karlan,D. and Appel, J. (2012). “More Than Good Intentions: Improving the Ways the World’s Poor Borrow, Save, Farm, Learn, and Stay Healthy”, Boston: Dutton.
[8] Ibid.
[9] Ibid.
[10] Banerjee, A, V. and Duflo, E. (2012) “Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty”. New York: Public Affairs.
[11] Karlan,D. and Appel, J. (2012). “More Than Good Intentions: Improving the Ways the World’s Poor Borrow, Save, Farm, Learn, and Stay Healthy”, Boston: Dutton.
[12] Ibid.
[13] Ibid.
[14] IPCC (2014) “Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change” [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)]. IPCC, Geneva, Switzerland, 151 pp. [Online] Available at https://www.ipcc.ch/report/ar5/syr/ [Accessed December 8th, 2019].
[15] The United Nations (2015) ”Paris Agreement” [Online] Available at https://unfccc.int/files/essential_background/convention/application/pdf/english_paris_agreement.pdf [Accessed December 8th, 2019].
[16] Karlan,D. and Appel, J. (2012). “More Than Good Intentions: Improving the Ways the World’s Poor Borrow, Save, Farm, Learn, and Stay Healthy”, Boston: Dutton.
[17] Ibid.
[18] Banerjee, A, V. and Duflo, E. (2012) “Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty”. New York: Public Affairs.