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The Brainy Business | Understanding the Psychology of Why People Buy | Behavioral Economics

Mar 11, 2022

Today I am very excited to introduce you to Karina Montes and Mario Drago to discuss their work with BE OEFA in Peru. These are the first guests on the show from South  America, and I am so excited to start having a more international presence in the guests coming up this year. Thank you to Carlos Hoyos, a listener of the show and LinkedIn connection for the suggestion and introduction. If you or someone you know is doing some cool work in behavioral economics in a country that isn't yet well represented in the space, reach out to me on LinkedIn or through email. I would love to see if it is a fit to feature on the show just like Karina and Mario's work with BE OEFA. 

OEFA is the environmental regulatory agency in Peru, sort of like the EPA here in the United States, and BE OEFA is a (now award-winning!) team Karina started a few years ago to help incorporate behavioral economics into their work with some amazing results, as you will hear about in today's show.

Show Notes:

  • [00:42] Today I am very excited to introduce you to Karina Montes and Mario Drago working with BE OEFA in Peru. These are the first guests on the show from South America. 
  • [01:42] OEFA is the environmental regulatory agency in Peru. BE OEFA is a team Karina started a few years ago to help include behavioral economics into their work with some amazing results.
  • [04:23] Karina shares about herself and her background. She is an economist at OEFA. 
  • [04:51] Mario shares about himself and his background. He is an external consultant and lawyer. 
  • [06:03] Karina shares the story of reforms that started in 2016. 
  • [08:26] When people weren’t doing what they “should” even though it was the law, they realized they needed to know more about the irrational part of the brain.
  • [10:16] Mario’s relationship with behavioral economics was kind of an accident. 
  • [11:21] Mario’s team was trying to investigate why the public policies were not working. They discovered all the rational measures and economic incentives were not working. 
  • [14:08] Mario was the coach for Karina’s team. Each group worked with one problem, analyzed the behavior of interest groups, set objectives, and assigned the nudges. 
  • [16:27] Sometimes you have to think in another way to promote compliance. 
  • [17:42] They identified five projects they thought could be solved with behavioral science. 
  • [20:18] The five projects seemed very irrational because they thought that the way to solve the problem was easy. 
  • [21:02] BE OEFA was created to be an experimental nudge unit.
  • [23:42] They formed a group with people that were very motivated and already knew about the topic. Hundreds of people completed the test and 30 people were selected for the first group. 
  • [25:01] Mario shares the process he went through to design the projects. 
  • [26:09] The first step was to determine who they wanted to nudge. Then, after identifying the true problems they began the experiments, which lasted 3-12 months. 
  • [29:05] They found something similar in every case. It is always best to understand the problem before investigating the best nudges to use.
  • [30:54] The best nudges are incredibly simple (in hindsight) and obviously work, but they often take a long time to figure out in practice. 
  • [32:17] So much time has to be spent on developing and thinking about who you are talking to, what they are doing, and what mindset they are in.
  • [34:09] In the experiment about liability acknowledgment, the problem was that there was a very low rate of companies that acknowledged liability responsibility after the analysis process began. 
  • [36:55] In the academic research you can find, a 3-4% increase is often a beautiful outcome. Their applied research had a much more significant impact – from 1.4% compliance to over 30%! 
  • [37:49] You don’t only have to provide the information. You have to make sure they understand it, internalize it and get part of their mental process in the right moment with the right incentive. 
  • [39:28] Karina’s tip: having lots of good data is key. 
  • [42:12] It is important to be sure of the problem that needs to be solved. 
  • [43:54] If you are interested in behavioral sciences, there is a lot of space to work in the public sector. If you want to have a career in behavioral economics you can also have public agencies as a client. 
  • [45:28] You have to have information and data.
  • [44:48] Melina shares her closing thoughts. 
  • [46:30] There is a whole community of people who love behavioral economics from around the world waiting to network and connect with you. It is great to have like-minded people to connect with.
  • [47:41] If you enjoy the experience I’ve provided here for you, will you share about it? That could mean leaving a rating/review or sharing the episode with a friend (or 10!)

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I hope you love everything recommended via The Brainy Business! Everything was independently reviewed and selected by me, Melina Palmer. So you know, as an Amazon Associate I earn from qualifying purchases. That means if you decide to shop from the links on this page (via Amazon or others), The Brainy Business may collect a share of sales or other compensation.

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