How to nudge citizens to do good for society

After my last article on econocracy I don’t want my review of economists to end on a negative note (several readers wrote to tell me the field is more diverse than I had indicated), so today I celebrate the winner of the 2017 Nobel Prize for Economics, Richard Thaler, co-author with Cass Sunstein of the 2008 book Nudge: Improving Decisions About Health, Wealth, and Happiness.

The book popularised nudge theory, the idea that governments can design environments that change the way we think and make it easier to choose what is best for us and the societies in which we live. It revealed how to nurture our higher instincts and so do a better job saving for retirement, holding back on excessive consumption and in other ways serving our longer term interests.

Advised by Mr Thaler, David Cameron set up a nudge unit – his “Behavioural Insight Team” – and President Obama introduced a similar group, led by Mr Sunstein, where they brought together concepts from behavioural science, political theory and behavioural economics. Here, and at similar think tanks elsewhere (including in the World Bank and the UN), they came up with policies that use positive reinforcement and indirect suggestions as ways to influence behaviour and decision-making.

Nudging complements other ways of achieving compliance with policies, such as education, legislation and enforcement. It alters people’s behaviour in ways that are voluntary and easy. Like putting healthy foods at eye-level on supermarket shelves or near their check-out points, rather than just banning junk food.

Another impressively effective example from several countries is a nudge that has led to a huge rise in organ donations. They switched to an opt-out system from one where one had to opt in: citizens were now automatically registered for organ donation as the default option unless they chose to state otherwise.

At a lighter level there’s the etching of the image of a fly into the men’s room urinals at Amsterdam’s Schiphol Airport, intended to improve the aim. (Males who visit the men’s facility at Sarit Centre’s Newscafé will be familiar with this target!)

Key to nudging people into actions they otherwise would not have undertaken is to make them much simpler to undertake – particularly complex ones such as applying for higher education or registering into pension funds. And beyond process simplification, easily accessible human assistance has also proved helpful.

Reducing income tax debt is one of the UK’s longest-running and most successful nudge projects. Revised reminder letters informed non-compliers that most of their neighbours had already paid, positioning them as tardy outliers.

But the letters had little impact on the few who owed the most tax, and here the message that worked best was that not paying tax would mean everyone losing out on vital public services like healthcare, roads and schools.

Another project seriously cut the high dropout rate on government-subsidised adult literacy classes, simply by sending students a personalised text message every Sunday night that read: “I hope you had a good break, and we look forward to seeing you next week. Remember to plan how you will get to your class.”

We humans are not fully rational beings, so how we behave is not always aligned with our intentions. We will often do things that are not in our self-interest, even when we know that to be the case. When situations are complex or overwhelming, or when we are under time-constraints or other pressures, we often reach decisions too hastily, too automatically, which can easily lead to sub-optimal judgements. Too few of us take time for adequate reflection that allows us to support our longer term wellbeing.

Some nudging efforts work better than others, but we learn from experience and get wiser over time. It may well be overambitious to nudge our matatu drivers into more responsible behaviour, and for those who drink and drive alcoblow is definitely the surer option.

Finally, it is not just national policymakers who can nudge others into better decision-making. Let me nudge you into having a go, in your workplaces and also in your families. Think of using the carrot as well as the stick with those around you, tickling them into more enlightened behaviour.

How economists have lost touch with reality

A few weeks ago I wrote about the need to amplify the voice of economists in our country. In my article I spoke glowingly about my own experience as an economics undergraduate, acknowledging the way my professors opened up my powers of critical analysis and connected me so fully to the economic issues of the day.

I mentioned that I was still in touch with Vicky Chick, one of my lecturers from those times, and I sent her the article. She immediately wrote back, telling me that the education from which I benefitted was “so different from the usual fare dished up to students now”, and that I was lucky to study economics when I did. I was “educated”, she stated, while today’s students are “trained, indoctrinated or brainwashed”.

She remembered how we used to sit around working things out from first principles, but nobody does that today. Students are over-reliant on multiple-response based assessment, with limited opportunity to critically or independently assess alternative approaches. She then recommended the book The Econocracy: The perils of leaving economics to the experts, written by three dissenting students, members of “Rethinking Economics” (now active in 15 countries), who were fed up with the state of economics in the aftermath of the 2008 financial crisis. They wanted to see economist teachers and technocrats engage much more closely with the economic issues on the ground, and to communicate their proposals more simply.

My story moves to London, where I was recently. During my time there I met with now Emeritus Professor Chick for a coffee, and we returned to the subject of how the teaching of economics has degenerated – and not just in the UK. When we finished we walked across to the nearby bookshop where she bought me a copy of The Econocracy, which she signed below the message “Enjoy and share”.

So, obedient to my mwalimu, here goes. I’ll start by taking from the foreword to the book, written by the chief economist at the Bank of England, Andrew Haldane. He is unreserved in his condemnation of his fellow economists, citing their woeful inability to influence the Brexit battle that preceded – and is now succeeding – the referendum over membership of the EU. With their linguistic complexity these “experts” failed to win over the heads, never mind the hearts, of the voters. As a result, those who took part in the referendum won the day for democracy, marginalising the elite… the “econocracy”.

The book shows how the long-lasting crisis in the economy has led to a crisis in the field of economics itself – fuelled by disgruntled and hitherto compliant students who now rebelled against their obstinately disconnected professors. Faced with freezes on hiring and suffering under the burden of heavy student debt, they now found a bold anti-establishment voice – reinforced by the likes of Jeremy Corbyn in Britain and Bernie Sanders in America.

The book castigates the narrowing of economics to a mere mathematical cost-benefit analysis of alternative policies – applying a mechanical logic that delivers solutions to economic challenges such as harsh austerity programmes – while ignoring broader adverse social consequences and in particular the likely exacerbation of societal inequalities.

No wonder populist politicians assert that we have had enough of experts; no wonder that economist graduates are not fit to advise politicians on how to tackle economic challenges; and no wonder we have become divided between a minority who feel they own the language of economics and a majority who do not. I have no space to elaborate on the CORE (Curriculum Open-access Resources in Economics) economics education – founded at UCL, where I studied – but I urge those interested to look into how this initiative uplifts students of “the dismal science” to a much more positive, realistic and relevant place.

The messages of The Econocracy apply to us here in Kenya too: take a holistic view of policy-making – beyond the confines of narrow economic theory based on the unrealistic assumption of rational human behaviour, and taking account of social and moral perspectives; accept the uncertainty and unpredictability of our world so as not to rely on rigid and perhaps obsolete economic theories; and communicate technical complexities in ways that everyone can follow.