On 13th April,2020 , The Bhawanipur Education Society College organised a webinar in collaboration with Meghnad Desai Academy of Economics, Mumbai on the field of study and a theory that is needed the most in the current time period. Webinar on Behavioural Economics and Nudge Theory was conducted by Prof.Shagata Mukherjee, Assistant Professor , Meghnad Desai Academy of Economics. Prof.Shagata Mukherjee did his Ph.D. from Georgia State University’s Andrew Young School of Policy Studies in Atlanta, USA. Prof. Mukherjee teaches courses in Microeconomics, Behavioural and Experimental Economics, and Public Policy of Development at MDAE .The webinar was began at 6pm and lasted till 8:30 pm with a total of 183 attendees throughout.
The webinar began with our Dean of Student Affairs, Prof.Dilip Shah’s interaction with Karan Shah,CEO, Meghnad Desai Academy of Economics. The strengthening relations of both the institutions were discussed in the beginning. Karan Shah, further explained the academic and industrial experience and exposure that MDAE provides to its prospective students. This was followed by the introduction of Prof. Shagata Mukherjee , an expert on behavioural economics , by Karan Shah ( CEO,MDAE).
Prof.Shagata Mukherjee began the first section of the webinar with the topic “ Behavioural Economics – Explaining the Rationale of Irrationality” where he explained what Behavioural Economics is , Why and how is it different from the mainstream or Neo-Classical Economics that we usually study and what behavioural economists actually do. In words of Prof.Mukherjee, “ Behavioural Economics develops alternative explanations to the Neo-Classical Economics about Human Behaviour. While in Neo-Classical Economics it is assumed that Marginal Benefit is equal to Marginal Cost and Demand is equivalent to Supply; Behavioural Economics states that no one usually behaves in such a way in real world and that people usually do not equate their Marginal Benefit to Marginal Cost while purchasing. In order words it takes Behaviour as a decision making process and not standard equations.”
He further revealed that even though the idea of Behavioural Economics is new in India, it was introduced first way back in 1759 by Adam Smith in his book “ Theory of Moral Sentiments” while 1776 is regarded as the starting point of modern economics; but the idea got popular in 1955 when Herb Simon developed the model of Behavioural Economics – the idea of bounded rationality. According to the Theory of Bounded Rationality, Human Beings are not fully rationale but they are rationale in some bounded constraints. Herb Simon was even awarded with Nobel Prize for his theory in 1978. Although, Herb Simon introduced the Theory of bounded Rationality , Kahneman and Tversky are regarded as the modern gurus of behavioural economics. He then revealed the Two Cognitive System – Automatic and Reflective System introduced by Kahneman and Tversky. He revealed that we as humans use both systems depending on situation. Taking the current example of the market situation of COVID 19, he explained that we are currently using our automatic system of decision making since on average ,most are panic buying products. He then introduced Heuristics and explained how Government of India is currently using the Anchoring Heuristics in order to decide whom to test and how many to test and which policy to develop and how to do so whereas we as citizens are using the Availability Heuristics in order to make decisions , while in the initial days USA used the optimistic heuristics as they thought that they won’t catch the disease and the numbers will soon come down to zero but on the contrary the numbers increased. He then explained that framing of policies in a way that will show losses is far more effective than those that show profits i.e in current scenario, the framing of lockdown shows that losses that the citizens might face if they do not follow the rules and since generally people are risk averse(Prospect Theory) , the lockdown policy is somewhat successful in India as compared to countries which did not frame their policy response to COVID-19 in such a way.
Prof.Mukherjee then began the second section of the webinar with the topic “Nudge Theory”. In his words , “ A nudge is something that influences behaviour without mandating it or by without removing choices” . He then explained the scenarios where a Nudge is needed i.e When we have to make Fraught Choices , Harder Choices , Infrequent Choices (such as choosing a college ) or when there is low feedback or no experience. He then explained that violating social distancing is a negative fraught choice as it will benefit now but may cost life later but obeying social distancing norms is a positive fraught choice as they are costs now say not going out or attending any event and benefits later i.e healthy life and being safe from the disease. He then explained each of the scenarios where nudge is required.
In the third section of the webinar he correlated the heuristics and nudges with local example of Bengal and used Cartoon examples such as Simpsons to explain the correlation and to clear all concepts he explained in the webinar. He then used the example of the CM of Bengal, Mamata Banerjee’s action of drawing circles in market at distance to promote social distancing and explained various such kinds of nudges being used currently. He further enlightened the students about various Nudge Units around the world that work on building and implementing policies with the help of Behavioural Economics and how the Punjab Nudge Unit , India trains all government officials in order to solve issues using Nudges and build policies using behavioural economics. He then informed how Central Nudge Unit by NITI AAYOG is currently advocating behavioural economics and how it is going to be harder for government once lockdown is lifted as the major issues will involve “ How to nudge people into following social distancing norms or to still make them wash hands frequently ?”
The fourth and last section of webinar included him suggesting books and answering all the questions. The webinar content raised questions such as “ Are nudges used in elections ?” , “ How can nudges be commercially exploited and how to save ourselves from bad nudges?” , “Are nudges ethical ?” and many more. He cleared all doubts and questions.
“Irrationally Exuberance” , “ Advances in Behavioural Finance I & II” , “The Winner’s Curse” , “ Predictably Irrational” , “ Animal Spirits” , “ Nudge” , “ Poor Economics” , “ Thinking Fast and Slow” and “ Misbehaving” are just few of the books that Prof. Mukherjee recommended to those who were interested in exploring the field of behavioural economics more.
The webinar ended with Prof.Mukherjee and Karan Shah thanking Prof. Dilip Shah for the initiative of organising the webinar for the benefits of the students during the unproductive time of lockdown and the students thanking Prof.Shagata Mukherjee for being a “Good Nudge” in the time of lockdown.
The student co-ordinators of the event were Kashish Burman ( B.Sc Economics , Second Year) and Hardik Vora ( B.Sc Economics , First Year ).