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Free exchange
Nudge nudge, think think
Mar 24th 2012 | from the print edition
FREAKONOMICS was the book that made the public believe the dismal science has
something interesting to say about how people act in the real world. But Nudge
was the one that got policy wonks excited. The book, first published in 2008,
is about the potential for behavioural economics to improve the effectiveness
of government. Behavioural economists have found that all sorts of
psychological or neurological biases cause people to make choices that seem
contrary to their best interests. The idea of nudging is based on research that
shows it is possible to steer people towards better decisions by presenting
choices in different ways.
That theory is now being put to the test. One of the book s co-authors, Cass
Sunstein, has been recruited by Barack Obama to the White House. Richard
Thaler, the other co-author, has been advising policymakers in several
countries including Denmark, France and, above all, Britain, where David
Cameron has established a Behavioural Insights Team, nicknamed the Nudge Unit.
The Nudge Unit has been running dozens of experiments and the early results
have been promising*. In one trial, a letter sent to non-payers of vehicle
taxes was changed to use plainer English, along the line of pay your tax or
lose your car . In some cases the letter was further personalised by including
a photo of the car in question. The rewritten letter alone doubled the number
of people paying the tax; the rewrite with the photo tripled it.
Changes to language have had marked effects elsewhere, too. A study into the
teaching of technical drawing in French schools found that if the subject was
called geometry boys did better, but if it was called drawing girls did
equally well or better. Teachers are now being trained to use the appropriate
term.
Another set of trials in Britain focused on energy efficiency. Research into
why people did not take up financial incentives to reduce energy consumption by
insulating their homes found one possibility was the hassle of clearing out the
attic. A nudge was designed whereby insulation firms would offer to clear the
loft, dispose of unwanted items and return the rest after insulating it. This
example of what behavioural economists call goal substitution replacing lower
energy use with cleaning out the attic led to a threefold increase in take-up
of an insulation grant.
All this experimentation is yielding insights into which nudges give the
biggest shove. One question is whether nudges can be designed to harness
existing social norms. In Copenhagen Pelle Guldborg Hansen, founder of the
Danish Nudging Network, a non-profit organisation, tested two potential social
nudges in partnership with the local government, both using symbols to try to
influence choices. In one trial, green arrows pointing to stairs were put next
to railway-station escalators, in the hope of encouraging people to take the
healthier option. This had almost no effect. The other experiment had a series
of green footprints leading to rubbish bins. These signs reduced littering by
46% during a controlled experiment in which wrapped sweets were handed out.
There are no social norms about taking the stairs but there are about
littering, says Mr Hansen.
Differences in culture can have a big impact, too. Nudge described an example
in America, where telling high users of energy how their consumption compared
with that of their neighbours prompted them to use less. This approach is now
being tested in Britain. But hopes are low that it will work in France. The
French have a tendency not to comply as easily with perceived social norms the
way Anglo-Saxons would, says Olivier Oullier, a behavioural and brain
scientist who advises the French government. Telling someone in France that
their neighbour is using less electricity or saving more water is not
sufficient.
Bigger tests of nudge theory are in the works. Organ donation is one area. In
Denmark nudgers reckon that requiring members of the public to make a decision
on whether to donate when applying for a driving licence, say will forcibly
overcome an inclination to procrastinate over unpleasant choices. That, they
hope, would lead to many more people becoming organ donors. A bill to require
this is now before the Danish parliament.
Checking the box
Others focus on the role that inertia plays in decision-making, and the
tendency that people have to pick the default option in a range of choices. In
October new British legislation will change the default option for corporate
pension plans, so that employees are automatically enrolled unless they
actively choose to opt out. The hope is that this will significantly increase
retirement saving. Mr Obama has proposed something similar for America s 401(k)
retirement schemes, although this idea has gained little traction.
It remains to be seen how the most promising trials of nudge theory can be
scaled up. Critics of big government remain suspicious of nudging: Mr Sunstein
used a recent essay in the University of Chicago Law Review to endorse its less
inflammatory virtues of reducing the regulatory burden and increasing
government transparency. And not every policy works as planned: Mr Oullier
wants the European Union to test the anti-smoking warnings it puts on cigarette
packets, for instance, after research found that those who say they are most
shocked by the more graphic images were also those who most craved a smoke
after seeing them. But the initial signs are promising. If nothing else, the
nudge revolution encourages the use by government of plain language; favours
the design of policies that actually take account of real-world behaviour; and
allows the testing of ideas on a small scale before wider implementation. It
deserves to be pushed.
Sources
Empirically Informed Regulation by Cass R. Sunstein, The University of
Chicago Law Review
Applying behavioural insights to reduce fraud, error and debt by Behavioural
Insights Team, UK Cabinet Office
Behaviour Change and Energy Use by Behavioural Insights Team, UK Cabinet
Office
Better Choices: Better Deals by Behavioural Insights Team, UK Cabinet Office
Counter-stereotypic beliefs in math do not protect school girls from
stereotype threat by Pascal Hugueta and Isabelle R gnerb, Journal of
Experimental Social Psychology, July 2009
http://www.economist.com/blogs/freeexchange
from the print edition | Finance and economics