The “Nudge Squad”

Behavioral economists and the associated social and cognitive psychologists have demonstrated that choice behavior responds not only to “objective” benefits and costs but to various features of the “choice architecture” the world presents to the people making the choices. If non-enrollment is the default option with an opt-in requirement, fewer people will wind up enrolled than if enrollment is the default, with a fully disclosed and easy opt-out. Since there must be some default setting, there’s no such thing as a neutral choice architecture that elicits subjects’ “true preferences.” The same is true about organizing the food in a school cafeteria: what the kids eat depends in part on where different selections are placed.

People in the sales business spend a lot of time trying to design choice architectures that maximize profits. It seems obvious that people in the public-policy business ought to try to design choice architectures that serve public purposes.

In particular, in cases such as retirement planning and diet, where there’s a systematic difference between what experts recommend and subjects think is in their best interest on the one hand, and subjects’ actual behavior on the other, it seems natural to try to nudge people toward the behavior that’s in their own long-term interest as they see it, which generally means that it has external benefits as well. The same applies, with even more force, to energy conservation, where ordinary consumers systematically leave tons of money on the table for no benefit whatever; a better-insulated house more than pays for itself, quickly, and is also more comfortable to live in.

That’s the idea behind the Thaler and Sunstein “nudge” approach. The current right-wing coalition in the UK has been using it, and the Obama Administration is moving in the same direction.

Of course, it’s always an open question how much good this sort of thing can do. (See below the fold for some examples from the White House release; of course there’s no comparable list of failures.) But it’s really hard to see why anyone would be against strategies that (1) respect autonomy (2) economize on public expenditure and (3) have unambiguously positive results when they have any results at all, especially when the proposal is to do intensive experimental testing rather than rolling out grand schemes. At last, we have a polarization-proof policy proposal!

Oh, wait … I’d forgotten about the utterly pathological government-hatred and obscurantism on the contemporary American right. Fox News breaks the story with a “Govt Knows Best?” scare headline. Nick Gillespie at Reason Hit & Run writes:

Critics point out that a) expert advice is often proven wrong quickly after being implemented and b) government might have more essential functions that gulling citizens into acting one way or another.

In other words, according to Gillespie, since knowledge isn’t infallibility, ignorance is better than knowledge. And governments ought to ignore the the science of human behavior and not think about how to “gull” people into going to school, getting jobs or paying their taxes. By “critics” Gillespie must mean “idiots.” All of this is echoed, with some routine paranoid Obama-bashing added, at the usual collection of wingnut websites.

I don’t expect any better from Fox or PJ Media. But an outfit that calls itself Reason ought to be embarrassed when one of its writers displays such a flair for illogic. Does Gillespie really believe what he writes? I’d hate to think so, and don’t in fact believe it. This is the case Upton Sinclair described: “It is difficult to get a man to understand something when his salary depends upon his not understanding it.” Come to think of it, that’s a testable proposition in behavioral economics.


* Increasing college enrollment and retention: Providing streamlined personal assistance on the FAFSA form (e.g., pre-populating forms using tax return data and following up with a personal call) to low or moderate income individuals resulted in a 29% greater likelihood of their attending college for two consecutive years.

* Getting people back to work: Asking unemployed individuals to create a concrete plan for immediate implementation regarding how, when, and where they would pursue reemployment efforts led to a 15-20% decrease in their likelihood of claiming unemployment benefits just 13 weeks later.

* Improving academic performance: Students taught to view their intelligence as a “muscle” that can grow with hard work and perseverance (as compared to a “fixed trait”, such as eye-color) experienced academic boosts of a letter grade, with the largest effects often seen for low-performing students, students of color, or females in STEM-related courses.

* Increasing retirement savings: The Save More Tomorrow program 1) invites employees to pledge now to increase their savings rate later, since self-control is easier to exert for future events; 2) links planned increases in the savings rate to pay raises, in order to diminish loss aversion; and 3) leverages the power of inertia by keeping members enrolled until they reach a preset limit or elect to opt. Adoption of these auto-escalation plans has boosted annual savings by an estimated $7.4 billion.

* Increasing adoption of energy efficient measures: Offering an attic-clearance service (at full cost) to people led to a five-fold increase in their subsequent adoption of attic-insulation. Interestingly, providing additional government subsidies on attic insulation services had no such effect.

* Increasing tax compliance: Sending letters to late taxpayers that indicated a social norm –i.e., that “9 out of 10 people in Britain paid their taxes on time” – resulted in a 15 percent increase in response rates over a three-month period, rolling out to £30 million of extra annual revenue.

Comments

  1. NCG says

    Hmm. I’m not sure what I think of this yet. I agree that it *sounds* harmless.

    But when you talk about school lunches, it really is true that the feds make mistakes. I just read the other day that some genius wants to push diet sodas at kids. Absolutely the wrong way to go, imo. I am reasonably confident that low fat chocolate milk is much better for a child than Diet Coke. But, no. Thinness over everything else, say our overlords. (Not to mention that diet sodas don’t actually help with weight loss.) Children deserve to eat real food.

    • Warren Terra says

      But isn’t that the point? The idea, if it lives up to itself, is harmless. To attack this idea, rather than attacking possible failures of its implementation, means attacking the idea that there is a role for government at all. Which is, as they say, at least an ideology – but it’s not one that should be recognized as conforming to any realistic vision of how our society as we know it can function, and I don’t think it’s one a significant number of people want. To sincerely promote such a notion should be grounds for exile from the discussion reasonable people are trying to have.

      • says

        To attack the idea is actually to oppose manipulation and dishonesty. It is based on the false premise that “government” has expert knowledge that outweighs specific knowledge of the individual.

        For instance, consider the price of an apple. If you offer me an apple when I am hungry it has value, but if you force me to have an apple when I am not hungry it has no value and may become a storage problem. In various stages of hunger, the value of the apple fluctuates and only specific knowledge and judgement by the individual can decide when the value of the apple matches the price. Government as the “expert” does not know what value an apple has for me RIGHT NOW or at any specific time.

        However, the value to the government of “SAYING” we fed ‘n’ people apples may exceed the actual value of feeding people apples in the eyes of government experts “specific” point of view. So, government may overpay for apples and raise the price of apples for everyone, a negative VALUE to society.

        • J. Michael Neal says

          It is based on the false premise that “government” has expert knowledge that outweighs specific knowledge of the individual.

          I suggest you reread the post because you clearly didn’t understand it. We’re talking about cases in which the expert knowledge conforms to the specific knowledge of the individual. The problem it is trying to deal with is when an individual’s behavior does not match his own opinion about his best interest.

          • Cranky Observer says

            Retirement savings is an interesting example. It is macroeconomicly impossible for an entire population the size of the US to “save” in advance for retirement. Yet we are “nudging” people into allocating some of their salaries to 401(k)s. That is money they could be spending on food, housing, & pleasure today, but we are forcing them to put it into “investment” vehicles where it will ultimately be transferred into the pockets of Wall Street bankers via fees, fraud, and crashes. Is that a good “nudge”?

          • J. Michael Neal says

            It is macroeconomicly impossible for an entire population the size of the US to “save” in advance for retirement.

            Only if you assume the entire population is the same age. As for the rest, while the 401(k) movement is an imperfect approach to saving for retirement, if it’s the only thing available then it’s better than nothing.

          • byomtov says

            It is macroeconomicly impossible for an entire population the size of the US to “save” in advance for retirement.

            Following on JMN’s point, imagine that there are two groups of people: workers and retirees. Workers, of course, eventually become retirees and are replaced by new workers.

            If workers save more for retirement that simply shifts consumption from workers to retirees. It need not reduce total consumption. People consume less while working and more while retired.

      • NCG says

        I need to think more about this, but somehow, there is an air of New Democrat about this post. And I’m sorry but I really can’t stand them lately. They are so weak as to almost be collaborators. It’s just hard to take after a certain point … which feels like it passed a long time ago. I mean, I know Mark isn’t one — thank heavens!!! or I’d have to stop hanging around here — but this stuff just seems so … apologetic or something.

        Plus, I sort of agree more with the idea that we ought to be making people actually think about the choices, not be herded into them. Even if it hurts.

        • StevenB says

          As a therapist, I can say with some confidence that encouraging, scaffolding, pushing, demanding, or waiting for such “thinking” to happen can be a very….lonely thing. What I remember of social psychology research shows pretty clearly that attitude (or “thinking”) follows behavior a lot more strongly than the reverse. I would even say that if you really want to increase rational engagement, for many if not most you’re better off changing behavior first. The rationalization will follow, if it’s going to happen at all. In my experience relatively few folks actually fit the idealized state of thinking first, behavior second. People generally just don’t work that way.

          • NCG says

            Well, change may take a long time. But I don’t think we should want our government to “change” people’s behavior, except as a last resort. It is much more democratic to educate people, even children, and then let them make their own choices.

            But I think we have a definitional problem here. I would count a “nudge” as, putting the fruits and veggies around in more places, and making them cheaper. (And that’s one nudge I have no issue with at all.) Whereas, banning chocolate milk is not a “nudge,” it’s a flat-out denial, and not a smart one, imo. If you only sell skim milk, you can expect that fewer children will drink any milk at all, and that’s just stupid. Why not also sell almond milk and soy and so forth? Fizzy water drinking fountains? (They have them in Italy.) Whatever it takes to get something healthier down their little traps.

            We should just be very careful about the nudging. It’s easy to be wrong.

    • rachelrachel says

      You think low-fat chocolate milk is “real food”? They take the fat out of it, and then to make the stuff drinkable they add chocolate flavoring and refined sugar.

      On the other hand, whole milk is real food.

      • Ken Rhodes says

        Do I think low-fat chocolate milk is “real food.” You betcha.

        Skim milk is “real food.” It contains protein and other important nutrients. I drink it, in preference to whole milk, because it is MUCH healthier for me than whole milk. And I would recommend it to the diet of any non-vegan who’s not lactose-intolerant.

        If someone finds low-fat milk more palatable than skim milk, it’s still “real food.” And if adding some chocolate flavoring makes it more palatable, it’s still “real food.” And adding some sugar (in preference to chemical sweeteners) adds some calories, and perhaps some slight extra risk to your teeth, but it doesn’t make it any less “real food.”

        If you can get your kids to ask for a glass of low-fat chocolate milk instead of a can of soda, you’ve taken an important step towards “real nutrition” awareness.

      • NCG says

        I agree with both of you! I drink whole milk (as added-chemical free as I can afford …), and choco sometimes too.

        I am just sorry to see the government make such a stupid mistake. Instead of banning chocolate milk in schools, they could have asked the mfrs to just cut some of the sugar out. (It could be just my idiot local district that did this, come to think of it. But, the diet soda pushing was in an article on federal policy, iirc.)

        I am on the fence about whether whole milk is bad for kids. I have a good friend who swears by the unpasteurized grass fed kind. Sorry but the feds’ record on nutrition is just not very trustworthy yet. Which is a work in progress, fine, I get it. And sure, it makes a ton of sense to put the fresh stuff near the checkout, if that’s what Mark is talking about. (And a subsidy would be nice.)

        But to push DIET SODA on young people? Sorry but that’s just not excusable. And if they mess up things this simple, well, it does give one pause.

  2. Stephen says

    As someone who occasionally comments here – almost always in disagreement with the blogs’ authors, I have to say that I totally agree here.

    I myself am skeptical about the potential of “Nudge” programs (largely because the idea has been around for over a decade and the examples being trotted out are largely the same ones Dick Thaler trotted out when I took his class in 2001; I would have expected the concept to have racked up more success stories by now).

    But these efforts are remarkably low cost and almost completely harmless even if they don’t work. And hell – with broader exposure maybe some inventive souls will uncover dozens of promising “Nudge” ideas. Innovation often comes at the price of creative destruction. When life offers you a chance to get some innovation in exchange for creative neutrality you take it every time.

  3. MikeM says

    One can also consider actual architecture as well as “choice architecture.” For example, one could require a polluting factory to use its own effluent as input to its processes.

  4. j.m.g. says

    voting is the paradigmatic example – here in Oregon, with its all-mail election system, what excuse do we have for not requiring the counties to send to all registered voters* a ballot that must be returned so that the voting rolls can continuously be groomed and maintained accurately. You don’t have to vote; but you do have to return the ballot envelop and correct your mailing address.

    (*which should automatically be all citizens graduating from HS here, with their registration becoming effective when they reach 18, and all citizens who relocate to Oregon, and all non-HS grads who seek any govt benefits or enroll in public schools or community colleges)

    • says

      In other words, create a department which encourages people who are uninterested and uninformed into participating by spending tax dollars to make NOT voting as difficult as voting. These people would be perfect to “suggest” how they should vote and the suggestions would never not oppose the people making the suggestions.

  5. says

    Keith (deleting this comment) is applying nudge tactics. The prior comments of Doo Doo are still here, but this one containing ranting and character assassination, has been deleted.

    Let’s see if your behavior changes from here on out. Hope so.

  6. James Wimberley says

    Where is Brett Bellmore when we need him? Doo-Doo: we are usei here to libertarians who make some sort of argument.

  7. Brett Bellmore says

    I *do* have a life, which even involves sleeping as much as 6-7 hours a day.

    “Nudging” sounds great, until you realize that it just means manipulating people to do what you want, which doesn’t sound quite so great. And that “nudges” can morph into “shoves”. And that there’s absolutely nothing about the concept of “nudging” which restricts it to good ideas. Or that a federal Department of Manipulating People, (The DMP?) is being created without any actual legislation. Or wonder about transparency.

    But, what the hell, it’s Obama, that’s enough for you to swallow just about anything. Enjoy it when the next Republican administration does the same.

    • Ken Rhodes says

      C’mon Brett, why did you have to clutter up a rational comment with that silly last sentence?

      The government has been nudging us (for at least my lifetime) with the tax code without regard to party politics. No matter who’s in power, we object not to the tax breaks (loopholes?) that favor one party or the other, but to the ones that don’t help us. Was it Republicans or Democrats who first instituted the mortgage interest deduction to promote home ownership? Who knows? Who cares?

  8. Ebenezer Scrooge says

    I think Gillespie said two things: 1.) Experts are often wrong; and 2.) “government might have more essential functions that gulling citizens into acting one way or another”. The first statement, I agree, is irrelevant bullshit. The second packs two statements into one. The first statement is basic libertarian theology: government shouldn’t do much. It’s a faith-based statement: not worth arguing with. The second part of the second statement is more interesting, and defensible on its own terms.

    You can read Gillespie to argue that government–and those dealing with government–should only adopt a certain form of rhetoric: let me call it “republican rhetoric” (small-”r”!). In effect, all discussion by and of government should sound like it came from George Washington: appeals can only be made to logic and the common good. This would preclude appeals to interest, and appeals to emotion or psychology. I don’t think that this position is a silly one: the Founders would have understood it, and likely agreed with it. But they’ve been dead for about 200 years, and we live in a different country. It’s now a democracy more than a republic. It uses the rhetoric of the demos. This includes a lot of political huckstering.

    Essentially, Gillespie’s position on public rhetoric is anti-democratic. But then again, he is a libertarian, so he is being consistent. A progressive can’t disagree with his stance on public rhetoric from within his frame of reference. Of course, progressives reject the libertarian frame of reference, so his stance on public rhetoric becomes irrelevant.

    • Brett Bellmore says

      I can see how you could claim “Experts are often wrong” is irrelevant; They could be often wrong AND none the less the best basis for making decisions. But I don’t see how you can claim it’s “bullshit”. Diet is a classic area for “nudges”, and the gyrations over the years in “expert” dietary advice would have been hilarious if they didn’t have consequences, like most of the country unnecessarilly put on a low salt diet.

      • StevenB says

        Brett, wonder of wonders, I agree. As a commie socialist pinko I think some of the worst sins in this arena can come from the left – many of my friends and acquaintances are really bad about making sure everyone is jumping on the latest “research based” lifestyle bandwagon. Common sense and restraint might be required when contemplating these programs.

  9. Cranky Observer says

    So would it be OK for a hard Radical Right Republican administration (Christie/Jindal, say) to start “nudging” people to behave more in keeping with right wing/christianist principles?

    Cranky

  10. Sebastian H says

    If government programs were easy to reverse, based on mature science, and updated often to new understanding, you would have a better point about expert opinions. But they don’t actually change easily in the face of new information, which means that for immature science areas (like diet) they tend to lock into a fad and get stuck. (See low to no fat diets). The problem with nudges is it moves it all do a non conscious level which is fine for good things but crappy for bad ones, and reduces accountability for both.

  11. paul says

    All of the arguments against nudging seem to me to miss Mark’s crucial initial point: institutions and their architecture affect choice. So it’s not whether we nudge people, it’s what directions we nudge people in. You can see this, for example, in all of the republican vote-suppression laws being enacted. None of these laws make it impossible for people to vote, but they do nudge them away from the ballot box.

    • Cranky Observer says

      I despise the Republican vote fraudsters with a burning passion, but they didn’t “nudge” anyone: they debated, passed, and signed their vote-suppressing laws right out in the open via democratic processes. Which at least gives us the ability to publicize and repeal them. How do we repeal a “nudge”?

      Cranky

      Seriously people: we need more openness in our government, not less.

      • paul says

        You repeal a nudge the same way you repeal any other regulatory action: you instruct the agency in question to do something different. My point is that these vote-suppressing laws *are* nudges. They don’t prevent anyone from voting, they just complicate the institutions so that not voting becomes the default. Motor-voter and extended voting days are also nudges, in the direction of more voting.

        In short, some nudges are the result of legislation, some of administrative action. Doesn’t really matter.

  12. SamChevre says

    If you meet the specified condition of a “default, with a fully disclosed and easy opt-out” for nudges, and they stay that way, I don’t see that what either Gillespie or Fox News says would indicate that they have a problem.

    The problem–observable in both private-sector and government–is that nudges meeting those criteria tend to move away from them. For example, the overdraft-overdraft fee issue; it was always possible to opt out of approving overdrafts, and it probably met some regulation that it had to be disclosed–but it was not actually well known, nor was it easy to figure out how to do. Cigarette warning labels might be reasonably described as a nudge; I wouldn’t characterize today’s policies wrt cigarettes overall as a nudge. Similarly with soda in schools; it didn’t take long to go from “not the only menu item” to “not sold at all”.

    That’s the punchline of the Fox article, with which I’d agree; nudges tend to turn into shoves.

  13. H. Beaver says

    “since knowledge isn’t infallibility, ignorance is better than knowledge.” – I read the short post by Nick Gillespie and didn’t get that conclusion out of it. He seems to be saying that the knowledge of the individual should be respected when it comes to individual choices rather forcing individuals accept the collective knowledge of experts, which is often wrong. People may disagree with that but it’s not a hard idea to grasp. I don’t see how anyone could read that as “ignorance is better than knowledge.” But it’s a good example of how experts can let their personal political bias get in the way of simple facts and is all the more reason to seriously consider the legitimacy Nick’s post.

  14. Ralph says

    Hey, it’s the Fonzie of Freedom. What do you expect?

    MK wrote: But an outfit that calls itself Reason ought to be embarrassed when one of its writers displays such a flair for illogic.

    You must not read Reason very often. I stopped years ago. They are never embarrassed. They cheer.

  15. Brian Schmidt says

    My personal nudge suggestion: tax refunds get automatically enrolled in IRS-created savings/investment accounts that are the personal property of the taxpayer. Taxpayer has to opt-in to get a refund check instead. Taxpayers might start overpaying taxes in their weekly paychecks, knowing that the overpayment is just an investment.

    To get Republican support, the accounts could allow stock investments at limited risk levels, like the Chilean system.

    • paul says

      I like this idea, except to get republicans onboard you’d probably have to have the accounts administered by a financial institution, at which point there would be a monthly fee for keeping the account, a fee for withdrawals, a fee for finding out how much money was in the account, a fee for having money paid in…

  16. Fallibilist says

    Pick on stronger interlocutors!

    Mario J. Rizzo and D. Glen Whitman, “The Knowledge Problem in the New Paternalism,” Brigham Young University Law Review 905 (2009), pp. 905-940.

    D. Glen Whitman, “Against the New Paternalism: Internalities and the Economics of Self-Control,” Cato Policy Analysis, no. 563 (2006). (Optional)

    D. Glen Whitman and Mario J. Rizzo, “Paternalist Slopes.” From: 2 NYU Journal of Law and Liberty, 411-443 (2007). (Optional)

    Mario J. Rizzo and D. Glen Whitman, “Little Brother is Watching You: New Paternalism on the Slippery Slopes,” 51 Arizona Law Review 685-736(2009)

    Bonus point if you can pick out the “nudge” above. ;)

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