Richard Thaler, professor of economics and behavioral science at the University of Chicago, and Cass Sunstein, professor of law at Harvard, introduced the idea of nudging to the public in their 2008 book Nudge. (See “A Less Oppressive Paternalism,” Summer 2008.) Halpern explains, “A ‘nudge’ is essentially a means of encouraging or guiding behaviour, but without mandating or instructing, and ideally without the need for heavy financial incentives or sanctions.” As such, nudging seems harmless.
Opposition arises, however, from those who see nudges as too tame, as well as those who see nudging “as some kind of pernicious form of meddling.” To illustrate the former view, take the example of an anti-litter campaign that paints footsteps on a sidewalk to show the way to a garbage can. The nudge supposedly encourages people to dispose of litter properly; critics of the effort would prefer a law that prohibits littering and a fine for those who disobey. To illustrate the latter criticism, take the “midata clause,” which “gave the Secretary of State for Business [in the UK government] the power to require firms to allow their customers access to their own consumption data in ‘machine-readable form.’ ” This nudge supposedly helps consumers make more informed decisions in the marketplace, for instance by showing them which nearby supermarket sells selected items at the lowest prices or with the least carbon footprint. The secretary could not unilaterally impose this regulation. “But,” as though it were a feature and not a bug, Halpern writes, “this sword of Damocles had an almost immediate impact, encouraging at least some companies to comply before they were pushed.” Perhaps he chose his words poorly, but he appears to be saying that nudging worked in this case because the nudgees, if you will, feared being “pushed.” That undermines his argument that nudging is a noncoercive tool of government and gives ammunition to his opponents who fear the “sinister” application of nudging.
Government nudges / Most of the book is about seemingly uncontroversial nudging. Halpern begins with a history of such policies. One early example was Frederick the Great, who wanted his Prussian subjects to produce and consume potatoes. Initial coercive efforts failed. However, by growing potatoes for his own consumption and feigning to protect his crop from theft, he successfully generated covetousness in his subjects and nudged them into producing and consuming spuds for themselves. Another example, Halpern tells us, is the painted lines on a road, which were an early nudge to promote traffic safety; rumble strips are a more recent nudge.
Turn now to policy nudges that relate specifically to the work of the Nudge Unit. The author is proud of nudging more people to save. The Nudge Unit did this by “changing the default.” Employers used to invite their workers to participate in payroll deduction savings plans, but the default was no participation. Participation required a modest initiative to sign up. The UK government passed legislation that switched the default to participation. Employers henceforth “automatically” put their workers in savings plans. The workers retained the right to “opt out,” but that choice would now require the modest initiative. The effect, Halpern reports, is that “more than 90 percent of eligible workers chose not to opt out.” If these workers continue to save over the long run, they will be in better financial shape when they retire.
“Still, just because changing the default works,” he wonders, “is it what people really want?” Indeed, people might say they would like to save more but, when yoked to do so, regret it. But this regret doesn’t appear to be happening. Halpern quotes Harvard economist David Laibson on American attitudes to similar initiatives:
It is hugely popular. US survey data suggests that 9 out of 10 workers who have experienced the pension opt-out support the changes in 401k defaults. And even among the small minority who do opt out, more than 7 out of 10 of them still think the opt-out is preferable to an opt-in arrangement.
Halpern is also proud of nudging delinquent taxpayers. To pull this off, the Nudge Unit borrowed a principle of psychology from Robert Cialdini, emeritus professor of psychology and marketing at Arizona State University. Halpern outlines Cialdini’s principle: “Social norms, and the inferred behavior of others, are powerful influences on our behaviour.” This nudge notified delinquent UK taxpayers that “nine out of ten taxpayers paid on time.” Implementing this nudge was complex, based on a hallmark of the Nudge Unit’s work: the randomized controlled trial. Researchers mailed a standard letter to over 8,000 delinquent taxpayers reminding them to pay up. They mailed another letter, “adding the single (truthful) line that ‘nine out of ten taxpayers pay on time,’ ” to another group of about 8,000 delinquent payers. Some 33.6% of the control group paid up; 35.1% of the latter group paid up. “This might not sound a lot,” Halpern realizes, “but if you are in the business of gathering hundreds of millions of pounds or dollars, and the marginal cost of the intervention is essentially zero, then this is very valuable indeed.” This story continues. Researchers mailed three other types of letters with alternative wording based on social norm theory, and found that they could coax even more late payers to pay up.
Nudges or markets? / Although Halpern is proud of the Nudge Unit’s accomplishments, he is not arrogant. He makes this clear by eschewing “the God Complex: the tendency we all have to believe that what we think and do is right.” A better way of thinking, which he encourages everyone to adopt, is this: “I don’t know—but I know how we can find out.’ ”
The way to find out is through the aforementioned randomized controlled trial (RCT). Consider the use of an RCT to learn the most effective way of encouraging more people to donate their organs. The Nudge Unit was given the opportunity to present British car owners—upon completion of their annual online registration—a proposal to donate. Researchers “brain-stormed” to compose a “control” webpage that some car owners would see, plus seven others “each based on one or more behavioural effects” that were intended to increase participation.
The beauty of the RCT is that they didn’t have to guess which webpage would induce most people to join the register; testing would show that. The control page stated, “Please join the Organ Donor Register.” Of more than 100,000 British car owners who saw that, 2.3% opted to sign up. The biggest response came from those who saw the control message plus this: “If you needed an organ transplant would you have one? If so please help others.” Of the more than 100,000 who viewed that page, 3.2% signed up. “This is equivalent,” Halpern calculates, “to around 100,000 extra people joining the register a year compared with the control.” The trial also showed that those who viewed a webpage with “a picture of happy, healthy people” induced a smaller proportion to join than the control webpage. This is humble pie for “leading behavioural scientists and policy experts” who predicted the picture would prompt more people to donate.
What is missing from Halpern’s discussion of nudging more people to donate organs is the prospect of a market for organs. We can be confident that a well-informed policy analyst understands the promise a market holds for reducing a shortage of human organs. In the case of e‑cigarettes, we might expect him to give the market process more of the credit it deserves. “The battle over e‑cigarettes,” as Halpern sees it, “illustrates a classic type of policy: deciding what the position should be on whether to allow or restrict an activity or product, ultimately expressed through regulation and law.” E‑cigs caught the attention of behavioral scientists because their research shows that “it is much easier to break a habit, or shift a behavior, by introducing a substitute behavior rather than simply extinguish it.” In other words, e‑cigs offered a new way to quit smoking by substituting them for traditional cigarettes.
The Nudge Unit supported a market; the role of government would be “to make sure that e‑cigs didn’t have other toxins, and that they had enough nicotine in them to be effective.” Health officials, reluctant to allow individuals another way to obtain a nicotine fix, and producers of nicotine patches and gum, resentful of new competition, resisted. Faced with resistance, the Nudge Unit examined “quit rates of smokers.” Quit rates among smokers using “nicotine replacement therapy” (patches and gum) had been declining from the late 2000s through 2014. However, the quit rate for users of e‑cigs ramped up from about 5% in 2011 to about 30% in 2014. The quit-rate data helped convince UK officials to allow e‑cigs on the market without onerous regulation.
Permitting the market to operate is so far a successful policy. “Depending on your assumptions,” Halpern reports, “estimates suggest that from 20,000 to 200,000 extra smokers are quitting a year as a result of the availability of e‑cigs in the UK alone.” On that basis, he broaches the possibility of prohibiting traditional cigarettes. Perhaps he attributes too much credit to the success of e‑cigs to “an argument based on behavioural science principles” and not enough to the market because the Nudge Unit would not have had quit-rate data to examine without a market. And if we are to believe that nudgers respect the freedom to choose, why flirt with a ban?
Why trust nudgers? / Behavioral science is Halpern’s hammer, and real-world problems are the nails. The author sees applications everywhere. At the individual level, behavioral principles imply that workers looking for jobs should disregard “what they had done last week” in order to focus on “what they would do next week.” On a macroeconomic level, they overcome the pessimism that grips an economy during recession and influence businesses to adopt “government growth-related schemes.” Halpern and colleagues even managed to persuade UK officials to produce data on “subjective well-being” and gear policy toward increasing it. If the public embraces his enthusiasm for “a well-being viewpoint,” we can expect politicians to start taking credit for increases in the index of life satisfaction during their tenure. At this point, one begs to know, is nudging a panacea?
Fortunately, Halpern recognizes that “there are real dangers in getting too carried away with thinking that nudges are the answer to everything.” He engages criticism from three sources: “the right,” “the left,” and “liberals and democrats.”
Right-wing critics view nudging as a threat to freedom. He takes their challenge seriously. He vows that the Nudge Unit will tell the truth, deliberate in the public eye, and submit to “checks and balances.” For instance, “an academic advisory panel” provides feedback and ethical advice.
Left-wing critics view nudging as insufficiently aggressive to achieve their paternalistic goals. If my impression is correct, he has little interest in this critique. Nudgers, by nature, prefer subtle forms of persuasion over blunt mandates and prohibitions. Nudges influence behavior at the margin, he explains, and he describes how they may work in both the short and long run.
On behalf of “liberals and democrats,” the author asks, “Why should we trust the nudger to know better?” and “Who nudges the nudgers?” Not only liberals and democrats want answers to those questions.
“Ultimately,” Halpern concludes, “you—the public, the so-called ‘ordinary citizen’—must decide what the objectives, and limits, of nudging and empirical testing are.” This is a tall order. We are already busy dealing with government interventions in the market; we now have the job of checking government interventions into our minds.
