Q&A

The World Bank’s Global INsights Initiative (GINI) was formed to put the key findings of your World Development Report into practice. Please summarize those findings.

The main message that came out of that report was that development policy is due for a redesign, based on a more realistic understanding of how people think, behave and make decisions.

In contrast to the rational model — whereby people have unlimited computational power to make rational decisions on the basis of consistent and self-interested preferences and explicit information — realistic thinking is very different. It relies on three principles: We usually think automatically and fast; we are highly influenced by our environment and by social norms; and explicit and implicit information derived from our worldviews (i.e. mental models) affect how we interpret information and make decisions. In the report, we emphasized that everyone thinks this way — not only end users and consumers, but policy makers, heads of companies, and even heads of state.

Put simply, decision making is highly contextual. You might typically assume that if you raise the price of something by 10 per cent, people will demand less of it