Aman in the United Kingdom opens his email after receiving his monthly energy bill. Along with a smorgasbord of information about energy conservation and his current spending on energy, he sees how much he could potentially save by doing small things, like insulating doors and windows and using more efficient light bulbs. The next day at the supermarket he passes an aisle filled with draft blockers and LED lights. Remembering the email and that potential 200 pound saving, he purchases three energy efficient light bulbs and schedules to have his door re-insulated. This is one example of a new technique the UK government is using to encourage citizens to be eco-friendly, while avoiding the pitfalls of expensive public policy.
In 2010, the UK partnered with an intelligence and consulting company to give its more ineffective and expensive policies a nudge in the right direction. The aptly named Nudge Unit, or more formally, the Behavioral Insights Team (BIT) is co-directed by the UK Cabinet Office and Nesta, the leading UK charity for innovation. The BIT uses ‘nudging’, or ‘behavioral insights’, at the intersection of psychology, political theory, behavioral economics, and social anthropology, to engineer more effective and efficient policy to influence social behavior. Policy goals range from getting more people to save for a pension or actively look for a job if they become unemployed, to encouraging people to recycle or donate to charity.
But what exactly counts as a ‘nudge’? According to Richard Thaler and Cass Sunstein, authors of the book Nudge, it 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.” Thus including more footage of actors recycling in popular TV shows counts as nudging, but limiting trash collection to once a month and expanding recycling pickup to twice a week does not. Nudging is all about using incentives, responses, and psychology to design effective policy.
Beyond working closely with the UK government, the BIT helps other companies, small businesses, and charities use behavioral insights to improve internal affairs and productivity. In addition, the BIT runs workshops and seminars on behavioral insights policy design for multinational organizations such as the UN and World Bank. The BIT defines four stages for creating an effective policy. The first is to outline the ultimate goal (for example, increasing the amount of people that save for a pension). The second is to understand the context in which individuals currently view the ultimate goal (who saves for pensions, who does not, and why). The third step is to aggregate information on people’s behavior and come up with ways to meet the ultimate goal (make it easier or more convenient for people to save for their pension by automatically enrolling them in a pension plan). The final step is to test the new policies with randomized and controlled trials to see if the new policy is more effective than the old way (automatically sign up some people at larger companies for pensions, and compare how much that group saves in comparison to their peers who were not automatically signed up).
The key to BIT policy and the bulk of step three is the Easy, Attractive, Social, and Timely (EAST) set of insights. Study results from the BIT indicate that the most effective policies incorporate all four of these. The Easy part harnesses the tendency to stick with the default: people avoid signing up for or canceling services if they imagine the process will be a hassle. By changing the default to automatically sign someone up for a service, nudging guides individuals toward choices the government considers desirable. The Attractive part aims to make the policy more eye-catching by using personalized messages, colors, or images to capture people’s attention. This part also uses rewards to incentivize participation, such as financial compensation or lotteries, which play on people’s sense of possible winning, but is on the whole, much cheaper for the people who provide the funds. The Social component draws on people’s tendency to behave in accordance with the norm. It aims to make policies seem accepted by the majority, creating a sense of peer pressure to follow the new policy. It also aims to foster network creation, so policy accordance spreads between individuals rather than coming only from government messages. Finally, the Timely part takes advantage of people’s receptiveness to change. People are more likely to alter their behavior when they are undergoing a major life change, or when there are tangible short-term benefits in addition to long-term goals. Nudge techniques target these times at which it is most likely that people will accept change.
Although nudging has proved an enormous success in many respects, opponents say that the idea of the government using covert nudging tactics to achieve policy goals is suspiciously Orwellian. At first glance, nudging seems like it could be used for nefarious purposes: guiding individuals toward government goals that they may not personally believe in and discretely implementing policy controlled by the few at the top of the political totem pole. However, it is important to note that this is already happening on an enormous scale, and billions of people are exposed to nudging each day. How? Through advertising. Nudging is not a new idea, and companies have been using it for decades to sell their products. Adapted to suit government policy needs, there is reason to suppose that nudge tactics could suddenly gain enormous power. People who see advertisements are exposed to temptation or reason to buy the product, but ultimately they have the choice to purchase or not. The same occurs in government nudge policy. If an individual receives an email notice alerting him or her to potential energy savings, that individual is provided with more information about his or her financial situation, not being forced to change his or her lifestyle or behavior. The goals of the government nudge policy will be aligned with what the public voted for, and the scope of BIT influence within the government is on the level of consulting, not of legislation.
Although nudging has proved an enormous success in many respects, opponents say that the idea of the government using covert nudging tactics to achieve policy goals is suspiciously Orwellian.
According to studies from the BIT, nudge policy has been incredibly effective: it has increased saving towards pension funds by employees at large firms in the UK by almost 10 percent, it has increased tax payment rates by over five percent, bringing in 210 million pounds of previously uncollected tax revenue, and increased the number of organ donors by 100,000 people in one year. Perhaps the most compelling argument for nudging is that it puts taxpayer money to more effective use. BIT policy helps governments’ funds go further, which ultimately saves individuals money on the policy goals they voted for, and allows public funds to go toward more tangible projects that improve the quality of life, such as education, public works, and infrastructure. Nudging directs policy in ways where it has the most impact. In other words, it makes government policy actually do what it was designed to do.