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.