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.