Psychology, Economic Policy Design, and Implementation: Contributing to the Understanding of Economic Policy Failures in Africa

Abstract

When designing economic policies, policy makers work with the assumption that targeted beneficiaries would respond in a manner that would lead to success of the policy. However, the responses of beneficiaries do not always follow the expected pattern. Drawing on Thaler and Sunstein’s (2008) and Asante’s (2003) theses, this paper projects the view that economic policies that fail to take account of the psychology of the target people fail. The position in this paper is based on the premises that human beings, as choice architects, are not necessarily rational beings always acting in their self-interests and that culture, traditions, and national aspirations influence the success of economic policies. It is argued that inertia (the unwillingness to move or change the status quo) is related to how individuals living in poverty respond to policies intended to alleviate their conditions. New theoretical insights are advanced and recommendations made on the basis of the exploration of the literature.