Overweight, broke, impulsive and dumb: why the World Bank minds our behaviour

Research has shown "that clients often follow advice blindly, literally shutting down their own thinking about the decision problem". Photo / Thinkstock

In the afternoon I counted the wad of crisp 50s lying on the kitchen bench: it was all there.

There was something about this old-school pile of money that demanded spending.
Immediately.

Later that evening, while reading the World Bank's new development report 'Mind, society and behaviour', I diagnosed the problem.

I had "present bias"; I was overweight now - or I was then.

The 236-page World Bank report isn't just about financial problems. The introduction says the study's "main message is that, when it comes to understanding and changing human behaviour, we can do better".

At the very least, the report collates the best current scientific insight into why people do stupid things.
Being poor, for example, makes us dumb, the study says. Or to put in World Bank-speak, "poverty consumes cognitive resources".

"...the pressing financial concerns associated with poverty modify how people allocate their attention and create an intense focus on problems of the present to the neglect of others in the future," the report says.

This may not be news but the World Bank does have a go at providing ideas for minimising "cognitive taxes for poor people" such as simplifying access to benefits and services and building good public infrastructure.

However, having some money is almost as worrying as having none.

"Financial decisions are difficult," the report says. "They typically involve great uncertainty about the future, whether about future income, cash (liquidity) needs, or interest rates."

Most of us are ill-equipped to make these decisions, the World Banks says, derailed by in-built behavioural quirks that perhaps smarter social policies could counteract.
While financial decision-making could also be improved by using the services of a professional adviser, the report says this shouldn't be a full cognitive-outsourcing arrangement.

Research has shown "that clients often follow advice blindly, literally shutting down their own thinking about the decision problem".

"Clients may not understand, or perhaps even perceive, the strategic aspects in the advice relationship. Changes in disclosure rules on conflicts of interest do not change investors' behaviour in an experimental agency setting," the report says. "Careful regulation of financial advice therefore seems warranted."

In short, the World Bank had nothing useful to say about disposing of wads of crisp 50s: this wasn't a FIFA report, after all.

"The empirical evidence suggests that behaviour and decisions driven by impatience, procrastination, and temptation are economically relevant," the study says.
I was in a hurry and briefly thought about pocketing a wad. Then I hesitated before counting the 50s again.

It was still all there.
But, of course, none of it was mine.