Nudges

The Basic Idea

In 2012, then-mayor of New York City Michael Bloomberg announced an amendment to the city’s Health Code which would ban any soft drink larger than 16 ounces. The measure came out of a concern for public health but people were infuriated, railing against a “nanny state” that had overstepped its boundaries.1 The amendment was repealed in 2015 after courts ruled that the city had exceeded its regulatory authority. Years later, however, researchers tested an intervention at McDonald’s stores, to see if they could get people to choose less sugary drink options simply by changing the order in which they appeared on the menu. Turns out they could: after 12 weeks, Coca-Cola consumption was down 8%, Coke Zero was up 30%, and nobody was mad.2

This intervention is an example of nudge theory, one of the most influential frameworks to come out of behavioral economics. As decades of research in this field has demonstrated, people are often irrational in their decision making—but they also make errors in systematic, predictable ways.3 Nudges are interventions that capitalize on these biases, but they do so in a non-coercive way, without restricting people’s options or forcing their hand.

We are not for bigger government, just better governance.

– Richard Thaler and Cass Sunstein, Nudge (2008)

Key Terms

Choice architecture. The term “choice architect” refers to anybody who organizes the context in which people make decisions, regardless of whether they realize that this is what they are doing.4 Our choices are influenced by far more factors than we are consciously aware of: people tend to arrive at very different decisions based on seemingly minor differences in how their options are framed, what the default option is, what kind of mindset is primed by the surrounding environment, and so on.

In their book, Nudge: Improving Decisions about Health, Wealth, and Happiness, renowned behavioral economists Richard Thaler and Cass Sunstein illustrate the concept of choice architecture by using real architecture as an example. Earlier in Thaler’s career, he taught a class in a lecture hall that had a large double door. The doors opened outward, meaning they needed to be pushed—but they also had large, vertical handles that called out to be pulled. Even when students (and Thaler himself) knew better, they would often still pull before remembering to push. Their knowledge and experience were drowned out by the signals that their immediate environment was sending.

Our choices are subject to a similar kind of influence from the context in which they are made. Choice architecture is about how these cues affect decision making, for better or for worse.

Nudge. A nudge is “any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives.” Nudges involve very subtle manipulations that people often barely register, such as putting healthy options at eye level in a cafeteria to encourage people to eat better—or, conversely, putting the candy bars right next to the cashier in a grocery store.4,5

Libertarian paternalism. This is the ideology that underlies nudge theory, at least as far as Thaler and Sunstein see it. The nudging approach is libertarian in that it preserves the right of the individual to choose a course of action for themselves, free of interference from governments or corporations, but is paternalistic in that it aims to influence choices in a way that will make choosers better off.4

History

Nudge theory started to gain popularity in 2008 when Richard Thaler and Cass Sunstein published Nudge. They did not technically coin the term “nudge”, which was originally used in the context of cybernetics, the study of complex systems.16 Thaler and Sunstein introduced it into behavioral science and associated it with the growing body of research on non-coercive behavioral interventions. The book became highly influential, making nudges an overnight sensation among policymakers and marketers alike. It was named by The Economist as one of the best books of 2008.22

People

  

Richard Thaler

Richard H. Thaler is a behavioral economist at the University of Chicago. Before his work on nudges, he developed numerous concepts and frameworks to explain the quirky irrationality of human decision making, including the endowment effect and mental accounting.12 In the 1980s and 90s, he often collaborated with the legendary behavioral economists Daniel Kahneman and Amos Tversky. In 2017, he was awarded the Nobel Memorial Prize in Economic Sciences for his contributions to behavioral economics.

Cass Sunstein

Cass R. Sunstein is a legal scholar and behavioral economist at Harvard Law School. During the Obama Administration, he served as the administrator of the White House Office of Information and Regulatory Affairs. Despite working for a Democratic president, his views have been influenced by conservative figures as well as liberal ones, which makes him a controversial figure all across the political spectrum.13 In 2018, Sunstein was awarded the Holberg Prize (considered the equivalent of the Nobel Prize for law and the humanities).14 He also recently appeared on our podcast, which you can listen to here.

Consequences

The fact that nudges are so non-intrusive means that they are also very cost-effective—and policymakers quickly took notice of this approach to changing behavior.6 Unlike many of the traditional strategies, such as government-imposed bans or taxes, nudges, unobtrusive as they are, are unlikely to ruffle too many consumer feathers, making it easier to effect policy change.

In 2010, the UK became the first country to set up a “nudge unit,” formally known as the Behavioral Insights Team (BIT). Initially a team of just 9 people, BIT was tasked with applying the insights of the behavioral sciences and behavioral economics to a huge range of problems, from convincing more people to install government-subsidized loft insulation7 to helping young people engage more with pension plans.8

In one famous project led by BIT, the team experimented with leveraging social norms as a way to get people to pay their taxes on time. Ordinarily, the government’s tax department, HM Revenue and Customs, would send a simple letter that reminded the recipients that their taxes were past due. In the BIT intervention, the letters were changed ever so slightly, to include one of the following sentences:

  1. Nine out of ten people pay their tax on time.
  2. Nine out of ten people in your local area pay their tax on time.
  3. Nine out of ten people with a debt like yours pay their tax on time.
  4. Nine out of ten people with a debt like yours, in your area, pay their tax on time.

Just for extra emphasis, each of these options was followed by “You are in the minority that does not pay their tax on time.”

BIT found that the last option was most effective: it increased the number of letter recipients who paid their taxes by 6%, amounting to millions of people and more than £200 million in extra revenue for HM Revenue and Customs within the first year of the project.15

In 2014, the US government followed in BIT’s footsteps by starting the Social and Behavioral Sciences Team, with the aim of doing similar work. Unfortunately, that group was dissolved in 2017.9 (BIT is still active but is now a semi-privatized company.) Numerous other governments have also started up nudge units, including Canada, Singapore, France, and Germany.10

For all of its usefulness for policymakers and despite the fact that Thaler and Sunstein had public policy in mind when they wrote their book,9 nudges have probably had the warmest reception in the private sector. Businesses across many different industries have taken up nudging as a tool to achieve everything from improving customer satisfaction to increasing employees’ sense of loyalty to their employer.11 The simplicity of nudges, and the ease of implementing them, has made them a hot topic in virtually any context where the ultimate goal is behavior change.

Controversies

As beloved as nudges are by governments and marketers, the approach is not without its detractors—and because of the paradoxical nature of the underlying philosophy of nudges, libertarian paternalism, it has garnered criticism from people on both ends of the political spectrum.

One of the biggest concerns when it comes to nudging is the question of whether or not it is ethical. Where is the line between subtly helping people make better decisions and sneaky social engineering? Who has the right to decide what is best for somebody?

For many critics, nudges are manipulative, violating people’s autonomy as well as their dignity. Progressives also see nudges as a bandaid fix for wider societal failings, targeting individual behavior instead of seeking to fix structural problems.16 For example, governments may turn to nudges in an effort to help people make healthier food choices and curb the growing epidemic of obesity—but this approach ignores systemic factors that contribute to the problem, such as poverty, poor nutritional education, and unequal access to healthy foods. Sometimes, a nudge isn’t going to cut it.

Questions have also been raised about the potential for nudges to be used for nefarious purposes. It is clear that Thaler and Sunstein genuinely intended nudges to be used for social good: they are careful to specify in their book that nudges should be used to enrich people’s lives “as judged by themselves,” and they establish that nudges should be transparent and come with the option to opt out. But it’s all on the honor system: there is no guarantee that the governments and organizations co-opting choice architecture for their own purposes will adhere to these principles. Richard Thaler has written that whenever he’s asked to autograph a copy of Nudge, he signs it, “Nudge for good”—but also that “this is meant as a plea, not an expectation.” Thaler has said that he is already troubled by the use of nudging in the private sector.17

Finally, in more recent years, some scientists have argued that nudges are simply not very effective, or at least not in all the contexts many had hoped they would be. Attempts to replicate the results of some major nudge studies have failed, finding no difference between groups that received a nudge and a control group who didn’t.18 This isn’t to say that the entire approach should be thrown out; it’s most likely the case that nudges work very well in some situations and not so well in others. Still, it’s probably safe to say at this point that nudges are not a one-size-fits-all solution to society’s problems as many initially dreamed, and this has put a dent in their popularity in some circles.19

Case studies

Reducing prescribing errors by redesigning hospital prescription charts

(Health x Risk Mitigation)

The most common type of medical intervention is the prescription of medication. Unfortunately, those prescriptions are written and filled by humans, and humans are prone to making mistakes. When doctors accidentally overlook a patient’s allergies when they prescribe them an antibiotic or their reliably illegible handwriting causes a nurse or pharmacist to accidentally give somebody the wrong medication or dose, the consequences can be life-threatening. In the UK, it is estimated that more than 1 in every 15 prescriptions contains some type of error.20

In 2014, BIT conducted a study at Imperial College London known as the IDEAS project (Imperial Drug Chart Evaluation and Adoption Study). This effort involved manipulating the choice architecture of prescription charts filled out by medical staff, in order to cut down on the number of mistakes being made. The changes included:

  • Using default options to ensure medications were prescribed for the correct amount of time
  • Making incompletely-filled boxes more salient
  • Providing an example of how prescriptions should be written, to prime more legible writing
  • Including a short checklist to remind prescribers of tasks that are often forgotten

These nudges significantly reduced the number of common prescribing errors.21

Related TDL content

Giving People the Tools to Nudge Themselves

Choice architecture presents a difficult problem: how can policymakers balance the desire to help people with the ethical concerns that surround nudging? These questions are the focus of this conversation with cognitive scientist and philosopher Samuli Reijula, who argues that there’s a way to get the best of both worlds: self-nudging.

To Nudge, or Adjudge? That’s the Enviro-Policy Question

Carbon taxes are often seen as the go-to solution to reduce carbon emissions—but is this really the best approach? This article explores the drawbacks of carbon taxes and the benefits of using nudges in their place.

Sources

  1. Farago, J. (2018, August 13). Michael Bloomberg’s soda ban: The CEO of New York Inc strikes again. The Guardian. https://www.theguardian.com/commentisfree/2012/may/31/michael-bloomberg-soda-ban-ceo-new-york-inc
  2. Travers, M. (2019, July 19). McDonald’s joins in the effort to nudge consumers away from unhealthy soft drinks. Forbes. https://www.forbes.com/sites/traversmark/2019/07/19/mcdonalds-joins-in-the-effort-to-nudge-consumers-away-from-unhealthy-soft-drinks/#24f5f3414ed7
  3. Günter, A., Smith, M., Sperling, J., & Dickson, T. (2018, February 27). Behavioral science in business: Nudging, debiasing, and managing the irrational mind. The McKinsey Podcast [Podcast]. McKinsey. https://www.mckinsey.com/business-functions/organization/our-insights/behavioral-science-in-business-nudging-debiasing-and-managing-the-irrational-mind
  4. Thaler, R. H., & Sunstein, C. R. (2009). Nudge: Improving decisions about health, wealth, and happiness. Penguin.
  5. Clear, J. (2016, February 29). Why stores place candy by the checkout counter (And why new habits fail). Medium. https://medium.com/the-blog-of-james-clear/why-stores-place-candy-by-the-checkout-counter-and-why-new-habits-fail-27d82c951522
  6. Magda Osman, « Nudge: How Far Have We Come? », Œconomia [En ligne], 6-4 | 2016, mis en ligne le 01 décembre 2016, consulté le 29 septembre 2020. URL : http://journals.openedition.org/oeconomia/2490; DOI: https://doi.org/10.4000/oeconomia.2490
  7. Bell, C. (2013, February 11). Inside the coalition’s controversial ‘nudge unit’. The Telegraph. https://www.telegraph.co.uk/news/politics/9853384/Inside-the-Coalitions-controversial-Nudge-Unit.html
  8. Behavioural Insights Team. (2020, September 23). Nudging young people to engage with pensions. The Behavioural Insights Team. https://www.bi.team/blogs/nudging-young-people-to-engage-with-pensions/
  9. Stillman, S. (2017, January 23). Can behavioral science help in Flint? The New Yorker. https://www.newyorker.com/magazine/2017/01/23/can-behavioral-science-help-in-flint
  10. These 10 governments are leading the world in behavioural science. (2019, March 1). Apolitical. https://apolitical.co/en/solution_article/these-10-governments-are-leading-the-world-in-behavioural-science
  11. Güntner, A., Lucks, K., & Sperling-Magro, J. (2019, January 24). Lessons from the front line of corporate nudging. McKinsey & Company. https://www.mckinsey.com/business-functions/organization/our-insights/lessons-from-the-front-line-of-corporate-nudging
  12. Karp, G. (2012, April 30). Profile: Richard Thaler, University of Chicago Booth School of Business professor. The Chicago Tribune. https://www.chicagotribune.com/business/ct-xpm-2012-04-30-ct-biz-0430-executive-profile-thaler-20120430-story.html
  13. Wallace-Wells, B. (2010, May 16). Cass Sunstein wants to nudge us. The New York Times – Breaking News, World News & Multimedia. https://www.nytimes.com/2010/05/16/magazine/16Sunstein-t.html
  14. Harvard Law School. (n.d.). Cass R. Sunstein. https://hls.harvard.edu/faculty/directory/10871/Sunstein
  15. Doshi, M. (2017, June 10). How the British government got more citizens to pay their taxes on time. BloombergQuint. https://www.bloombergquint.com/politics/uk-the-nudge-unit-uses-behavioural-science-to-influence-policy-outcomes-such-as-improved-tax-collections-and-pension-enrolment
  16. Schmidt, A. T., & Engelen, B. (2020). The ethics of nudging: An overview. Philosophy Compass, 15(4), e12658.
  17. Thaler, R. (2015, October 31). The power of nudges, for good and bad. The New York Times. https://www.nytimes.com/2015/11/01/upshot/the-power-of-nudges-for-good-and-bad.html
  18. Piper, K. (2020, February 26). Why we can’t always be “nudged” into changing our behavior. Vox. https://www.vox.com/future-perfect/2020/2/26/21154466/research-education-behavior-psychology-nudging
  19. O’Brien, H. (2019, May 22). Cass Sunstein and the rise and fall of nudge theory. Global Current Affairs, Politics & Culture. https://www.newstatesman.com/politics/economy/2019/05/cass-sunstein-and-rise-and-fall-nudge-theory
  20. King, D. (2014, December 10). Redesigning hospital prescription charts to reduce prescribing errors. The Behavioural Insights Team. https://www.bi.team/blogs/redesigning-hospital-prescription-charts-to-reduce-prescribing-errors/
  21. King, D., Jabbar, A., Charani, E., Bicknell, C., Wu, Z., Miller, G., Gilchrist, M., Vlaev, I., Franklin, B. D., & Darzi, A. (2014). Redesigning the ‘choice architecture’ of hospital prescription charts: A mixed methods study incorporating in situ simulation testing. BMJ Open, 4(12), e005473. https://doi.org/10.1136/bmjopen-2014-005473
  22. Pick of the pile. (2008, December 4). The Economist. https://www.economist.com/books-and-arts/2008/12/04/pick-of-the-pile

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