Behavioural Economics and International Development

Adam Smith is one the founding fathers of modern economics. It is therefore not surprising that even within the context of behavioural economics, we are often inclined to refer to the Theory of Moral Sentiments (Smith, 1971 [1759]), and ⁄ or The Wealth of Nations (Smith, 2007 [1776]), as both publications advance some of the basic tenets of modern economics, including rational behaviour, self-interest and indeed how to address poverty and other developmental matters as well. What is not widely known is that the interconnectedness of behaviour and development has been recognised for centuries. For example, in ancient India, Kautilya, who was a statesman, scholar and sage in 4thcentury BC, wrote about public policy, culture, behavioural economics, poverty and welfare in Arthashastra (The Hindu, 2002; Sen, 1988; Sihag, 2005). Yet, behavioural economics and tackling the core issues of development have arguably made little or no progress until the last few decades, notably through the early path-breaking work of Herbert Simon, Douglass C. North, Amartya Sen, Daniel Kahneman and Vernon Smith, among others – for example, see the article by Smith (1987).