Wednesday, July 24, 2019

Power of the nudge

HUMAN reason is limited, and people sometimes do things or make decisions that won’t make their lives better, because some temptations are hard to resist. Fresh fruit is obviously a better snack than a pack of chips, but how often have we passed the produce aisle in favor of dehydrated potatoes coated in salt and oil?

The American economist Richard Thaler has built a career out of the point that humans often make irrational decisions, and that this predictable irrationality can shape economies. This week, Thaler, 72, won the Nobel Prize for Economics. When Bloomberg asked how he intended to spend his US$1.1-million prize, Thaler said he would spend it “as irrationally as possible.”

Thaler’s most popular insight is the nudge. He defines this as an intervention that is meant to help people make better decisions, the kind we would make if we “paid full attention and possessed complete information, unlimited cognitive abilities, and complete self-control.”

The graphic warnings on packs of cigarettes are nudges. The gory images of diseased lungs and infected limbs are meant to discourage potential buyers. Banning smoking in public spaces, however, is no longer a nudge. “To count as a nudge, the intervention must be easy and cheap to avoid,” Thaler and his co-author Cass Sunstein wrote in the 2008 bestseller “Nudge: Improving Decisions About Health, Wealth, and Happiness.” Nudges run on the power of suggestion, but the persons nudged remain free to make choices—no matter how those choices might harm them eventually.

So exciting was this idea—that insights from behavioral science and economics could make public policy work better—that several governments began to look at how they could nudge citizens into making smarter decisions. These include the United Kingdom, the United States, Denmark, France, and the European Commission.

In Iceland, for example, a collaboration among a supermarket chain, the producers of a popular TV show for children, and the government led to a 22 percent increase in the sales of fruits and vegetables. They did that by marking these produce using the same name that the TV show used to refer to fruits and vegetables: they called these “sports candy.” Imagine how much cooler that sounds to a child. (And certain bullheaded adults.)

Another example of a nudge is the use of social norms. In a article last Jan. 28, 2016, Emir Efendic pointed out that in some California neighborhoods gripped by a drought, households were persuaded to use less water after officials made public just how much water everyone else had consumed. “Upon seeing other people decreased consumption, others followed suit,” Efendic wrote. A similar approach resulted in an increase in tax payments.

The Behavioral Insights Team, a “social purpose company” co-owned by the United Kingdom, has documented an increase in tax payments after the notices sent to individual taxpayers were rewritten. “Instead of the usual threatening letters, the new forms only reminded people that the majority of their neighborhood had already filed their taxes,” Efendic wrote. The increase in tax payments? Fifteen percent.

Nudges, as well as opportunities to nudge, surround us. They don’t always work. I, for one, have yet to check the organ donation box on the back of my driver’s license, although I applaud the idea and practice of organ donation. What is the irrationality that keeps me from making this potentially life-saving choice? Since reading Sunstein and Thaler’s work, however, I’ve been imagining possible nudges to encourage fellow citizens to brake at pedestrian crosswalks; read and think before we debate; stop slandering one other online; eat less junk; and generally be kinder. That’s a lot of nudging, no?
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