Nudge – not quite the right word
For some, there is something almost friendly sounding about nudge. The idea that we need a little help to make better decisions shouldn’t be a controversial one. But others find the word suspicious, especially when it is suddenly the new favorite of politicians and government officials. Richard Thaler and Cass Sunstein the authors of the so titled book have now offered advice to governments in the US and the UK. There is something intrusive, almost Orwellian, about government trying to change our minds. It brings up ideas of subliminal messaging, and perhaps those ghastly pictures of cancerous lungs on cigaret packets.This kind of image has perhaps played a part in leading some to argue on libertarian grounds that behavioural insights should not have a place in policy making. They see it as overly paternalistic, a limitation on our free will.
As uneasy as this Orwellian image might make us feel, I don’t think its the right one. And as such the title ‘Nudge’ is a little misleading. In explaining why its worth understanding the idea’s appeals to policy makers. So much of what they are trying to achieve is ultimately about changing behavior. Taxes are raised on fuel to stop us polluting the environment or on alcohol to stop us destroying our livers. Laws like ASBOs are made largely for the same reason. Punishment and paying are both ways to incentivise our behaviour.
Traditional economics would consider such measures to be the best ways to influence us. It conceives of humans as rational beings. Weighing up each choice fully, pro and con, in coming to a decision based on the optimization of our interests. What behavioral economics did was use psychological findings to demonstrate a notion that we would all recognize having met some humans – that we don’t think like this. We are not always considered and rational. Instead many (indeed most) of our decisions are taken on gut instinct. Or more precisely are taken using quick rules of thumb, called heuristics. The insight is that these rules or thumb, while amazingly effective, do go wrong and do so systematically. Our choices are as a consequence affected not just by rational considerations, like cost, but also circumstantial ones, like the way a tax form is laid out. Parts of a situation that make us that bit more likely to to err on one side rather than the other.
The nudge insight becomes useful for policy making because changing what used to seem like insignificant details of a situation can have big effects on behavior. A striking example is organ donation. We in the UK have an ‘opt in’ system of consent. If you don’t tick the box the health services can’t use your organs. 27% of us are on the organ donor register. In Austria they have an ‘opt out’ system, 99% don’t opt out. The reason is we suffer from inertia. If there is a box to be checked, something to be thought about, we just avoid it. Another example is tax return forms. Rates of people filling out their returns rose 15% when HMRC tried pointing out in accompanying letters that the majority of the people in the local area had done theirs. Our rule of thumb here is follow the heard.
So are we being tricked out of our money and the Austrian’s out of their organs? I don’t think so. The reason behavior so easily changes in these examples is because it is determined by the quick gut instinct kind of thinking I mentioned above, not by deeply held belief. When surveyed, the vast majority of people support organ donation. And I would guess that the majority of that 15% did mean to send their tax returns, but hadn’t got round to it. This goes to the center of how most nudges work – they don’t change our preferences but help us make choices that are in fact consistent with our beliefs and which other wise would have been led of track by the idiosyncrasies of our cognitive system. As such nudge seems like the wrong word; it implies your being moved in one direction or other rather than being helped along your way.
But in fairness, I’ve not got an alternative that’s nearly as catchy.