When researchers handed out fertilizer to farmers in the Busia region of West Kenya, enough for a small portion of their fields, and then compared the crops in the fertilized parts to the ones from unfertilized parts, the numbers were impressive: for every dollar invested in fertilizer, the farmer received close to $1.70 as a return on the investment. And yet, a survey conducted by Michael Kramer, Esther Duflo and Jonathan Robinson indicated that only 40% of local farmers had ever used fertilizer, and a mere 25% used fertilizer on an annual basis.
For classical economists this is a real mystery, as it seems farmers consciously choose not to take advantage of a resource at their disposal. Even among those who received free fertilizer and saw the results with their own eyes, the chances of purchasing fertilizer themselves in the coming years were just 10%. The breakthrough occurred when Esther Duflo met Wyclef Otinao, a local farmer who also worked as a bicycle rickshaw driver. He described to her the way in which he successfully purchased fertilizer almost every year.
For classical economists this is a real mystery, as it seems farmers consciously choose not to take advantage of a resource at their disposal. Even among those who received free fertilizer and saw the results with their own eyes, the chances of purchasing fertilizer themselves in the coming years were just 10%. The breakthrough occurred when Esther Duflo met Wyclef Otinao, a local farmer who also worked as a bicycle rickshaw driver. He described to her the way in which he successfully purchased fertilizer almost every year.
It seemed that the farmers consciously chose not to take advantage of a resource at their disposal. Even among those who received free fertilizer and saw the results with their own eyes, the chances of purchasing fertilizer themselves in the coming years were just 10%.
“I accept the decision regarding purchasing fertilizer for next season immediately after selling the product of the previous season, if I have any money left over after paying for the children’s schools and setting aside the sum I need for ongoing expenses, I immediately purchase hybrid corn seeds and fertilizer.”
When asked why he bothered to purchase seeds and fertilizer ahead of time, and ensure their storage until the next season, he simpler answered: “If the money’s lying around the house something urgent always comes up, someone gets sick, or there’s a sudden expense, and by next season it evaporates.”
And what happens if something urgent comes up after he purchases the fertilizer? Wouldn’t he sell it for that? “Normally I find another solution, slaughter a chicken or just wait patiently, I very rarely sell the fertilizer and seeds I’ve already purchased.”
From an economic perspective this was an illogical approach, the decision on whether to spend money on an urgent need should not be dependent upon the way in which money is kept in the house – in cash or as fertilizer and seeds. However, psychologists know this phenomenon well. It’s very difficult for us to give up immediate needs for future goals, even if the latter is immeasurably more important than the sudden one.
When asked why he bothered to purchase seeds and fertilizer ahead of time, and ensure their storage until the next season, he simpler answered: “If the money’s lying around the house something urgent always comes up, someone gets sick, or there’s a sudden expense, and by next season it evaporates.”
And what happens if something urgent comes up after he purchases the fertilizer? Wouldn’t he sell it for that? “Normally I find another solution, slaughter a chicken or just wait patiently, I very rarely sell the fertilizer and seeds I’ve already purchased.”
From an economic perspective this was an illogical approach, the decision on whether to spend money on an urgent need should not be dependent upon the way in which money is kept in the house – in cash or as fertilizer and seeds. However, psychologists know this phenomenon well. It’s very difficult for us to give up immediate needs for future goals, even if the latter is immeasurably more important than the sudden one.
Data on use of fertilizer among Kenyan farmers
Consider, for example, the following proposal: 100 dollars today or 120 dollars in a week from now? Most people will prefer today, “a bird in the hand is worth two in the bush”. And what about 100 dollars in a year or 120 dollars in a year and a week? By contrast, most of us have no problem waiting that same amount of time – in this case another week – when it comes to the distant future, in order to increase our profits. This is the reason we have no problem pinning obligations on our future selves, like dieting after the holidays, or opening savings after the next pay raise, but it’s much more difficult for us to give up a reward in the present for some reward in the future. This is known as “hyperbolic discounting” or “shifting the present”.
When the Kenyan farmers were asked directly why they did not invest in fertilizer, they replied that “when we have money after selling the product, we don’t yet need fertilizer, and traders in the village don’t yet sell it. On the other hand, when the traders have fertilizer and we need it, we don’t have money anymore…” Wyclef Otinao, on the other hand, hurries to lock in the fertilizer for himself while the money is still available. He is also aided by the fact that, as a rickshaw driver, he spends much time in the city and doesn’t need the village traders’ favors in order to acquire the fertilizer. And thus, it is much easier for him to undergo the trails along the way when the responsible choice has already been made in advance.
When the Kenyan farmers were asked directly why they did not invest in fertilizer, they replied that “when we have money after selling the product, we don’t yet need fertilizer, and traders in the village don’t yet sell it. On the other hand, when the traders have fertilizer and we need it, we don’t have money anymore…” Wyclef Otinao, on the other hand, hurries to lock in the fertilizer for himself while the money is still available. He is also aided by the fact that, as a rickshaw driver, he spends much time in the city and doesn’t need the village traders’ favors in order to acquire the fertilizer. And thus, it is much easier for him to undergo the trails along the way when the responsible choice has already been made in advance.
This is the reason we have no problem pinning obligations on our future selves, like dieting after the holidays, or opening savings after the next pay raise, but it’s much more difficult for us to give up a reward in the present for some reward in the future.
Equipped with Wyclef Otinao’s story, Esther Duflo and her colleagues planned the Savings and Fertilizer Initiative program – SAFI. In one version of the program, a representative of a local association visited around 1,200 farmers immediately after the harvest (when the profits from sales were still in their hands), and offered them vouchers entitling them to a delivery of fertilizers at a date convenient to them towards the sowing period. The plan was not only a tremendous success, increasing the percentage of farmers who use fertilizer by over 50%, but the effect strengthened even more, and as the subsequent season approached, the number increased at a rate of 69%.
The influence of the SAFI program was stronger than the influence of a 50% discount on fertilizer prices. But as soon as the program ended, almost none of the farmers continued it on their own initiative – it is clear that knowledge was not the problem, but rather the lack of any mechanism to secure the commitment in advance. Like Odysseus forced to tie himself to the mast of his own ship in order to avoid temptation, we sometimes need commitment mechanisms that will help us stick to goals that are important to us, and make decisions rationally. But if, in the Western world, a diet or our next vacation are placed on the scales, in third-world countries this is often a question of life and death.
The influence of the SAFI program was stronger than the influence of a 50% discount on fertilizer prices. But as soon as the program ended, almost none of the farmers continued it on their own initiative – it is clear that knowledge was not the problem, but rather the lack of any mechanism to secure the commitment in advance. Like Odysseus forced to tie himself to the mast of his own ship in order to avoid temptation, we sometimes need commitment mechanisms that will help us stick to goals that are important to us, and make decisions rationally. But if, in the Western world, a diet or our next vacation are placed on the scales, in third-world countries this is often a question of life and death.