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Improving Decisions About Health, Wealth and Happiness

Richard Thaler and Cass Sunstein

The idea of 'libertarian paternalism' - design things in a way that leaves people free to choose. Try to nudge them towards choices which would make their lives better, but allow them to opt out if they want. So putting healthy foods at eye level on supermarket shelves is a nudge, but banning junk food is a mandate.

More books on Mind

We have this unrealistic idea that humans are rational, but really that's only when they've exhausted all other options. Our decision-making is lousy. We have a strong 'status quo' bias. If you buy a new cell ph, usually leave all default settings in place.

We usually make dumb choices because we are novices playing against experts. The higher the stakes, the less chance we get to practice. Don't make many new career choices, don't marry or buy a car often. But we're really good at grocery shopping! We learn by trial and error, and getting feedback. But long-term processes don't give us feedback until it's too late. You can eat a high-fat diet for years before the heart attack.

In chess the novice gets cleaned up. In real world we are novices playing against expert marketers trying to sell us things.

The best way to persuade people is to tell them that everyone else is already doing it.

When you ask people what they intend to do, they are more likely to change their behaviour to be consistent with their prediction

Suggests shd separate idea of 'civil union' from 'marriage'. Civil union a license from the state giving a couple legal status for tax and legal purposes. Marriages cd be provided by private organizations - anything from churches to scuba clubs - who can make whatever rules they like. Currently, rel groups insist that they should be allowed to define marriage as they like. Suggest that no-one, starting from scratch, wd design present system with all complications of divorce and custody.

Within reason, the more you ask for, the more you get. A charity that suggests you give $100, $250, $1000 gets more than if the options are $50, $100 and $250. Smart negotiators often get amazing deals for their clients by starting with an opening offer that makes their adversary thrilled to pay only half that amount.

More books on Behaviour

Nearly everyone thinks they have an above-average sense of humour (because after all, they know what's funny)

People are unreasonably optimistic, even when the stakes are high. Most people have heard the stat that 50% of marriages fail. But at the time of the ceremony, they believe their is zero chance that theirs will fail. The same thing applies across the board. Asked to envisage the future, students typically say they are far less likely than peers to be fired from a job, have a heart attack or get divorced.

Hot and Cold decisions. Ulysses tying himself to the mast so he cd hear the Sirens but not be able to be tempted by them. But we underestimate the effect of arousal. When we are 'cold' we do not appreciate how much our desires and behaviour are altered when we are 'hot'.

Incentive. Thaler had problem with student who cdn't beat procrastination in finishing thesis. So he got student to write series of cheques for $100, each payable on the first day of the month of each of next few months. The deal was that Thaler wd cash the cheque if the student hadn't put a new chapter of thesis under his door by midnight on last day of each month. And he wd spend the money on a student party to which the guy wd not be invited. He never missed a deadline.

Just asking people about their intentions is enough to shift behaviour. Call someone the day before an election and ask if they intend to vote increases participation by 25%.

Subconscious cues - smell of disinfectant makes you more likely to clean up lunchroom when you've finished eating.

Treatment of prostate cancer has 3 options - surgery, radiation or watchful waiting. Each of these options comes with a complex set of possible outcomes relating to quality and length of life. Are you willing to risk a one-third chance of incontinence or impotence in exchange for an average increase in life expectancy of 3.2 years?

Thing is, most patients make the decision in the meeting where the doctor gives them the choice. And the choice they make strongly depends on which method the doctor specializes in.

More books on Health

Organ donors. Suppose I and a friend each need a new kidney. Each of us has a relative who is willing to donate one of their kidneys, and although the donors are not a match for their relative, they are for the friend. Why is it acceptable to arrange the trade of these kidneys, but unacceptable to buy and sell them?

(NY Times)

The federal government found a clever way to make a little extra money last summer.

Some vendors who provide federal agencies with goods and services as varied as paper clips and translators were given a slightly different version of the form used to report rebates they owe the government.

The only difference: The signature box was at the beginning of the form rather than the end. The result: a rash of honesty. Companies using the new form acknowledged they owed an extra $1.59 million in rebates during the three-month experiment, apparently because promising to be truthful at the outset actually caused them to answer more truthfully.

The altered form is among the early successes of a year-old effort by the Obama administration to apply academic research on human behavior to the business of running a government. The idea is that a little science might help the government collect taxes, distribute benefit payments and even help people find jobs, get an education or save for retirement.

This month, the White House announced the creation of a Social and Behavioral Sciences Team to lead this push, and President Obama issued an executive order encouraging agencies to conduct their own experiments.

"The goal is to help people who want to take a given step but may face some barriers," said Maya Shankar, the Oxford-educated scientist who leads the team. "You can do everything to make sure that a program is well designed, but if it's not getting into the hands of people who are supposed to be benefiting from it, everything up to that point was for naught."

Governments generally operate on the assumption that people are rational. One of the basic implications of mainstream economic theory is that public policy works best when people are treated as rational decision makers.

Yet a growing body of research has found that people are not only irrational on occasion, but they tend to be irrational in some consistent and predictable ways. People tend to be influenced by the last thing they heard. They tend to fear losses more than they like profits. They tend to be a little lazy.

And researchers from this new school argue the government should account for these tendencies. "Almost any domain that they let us go in, we could figure out some way of making at least modest improvements in what they're doing," said the University of Chicago economist Richard Thaler, one of the founders of behavioral economics and a leading advocate of governments making use of what he calls 'nudges.'

Ms. Shankar and her team of 15 - including psychologists, economists and sociologists - conducted about a dozen experiments over the last year to prove the value of the approach, but so far the successes remain small. The rebate forms, for example, increased revenue by about 6 percent.

Moreover, nudges are hard to mass-produce. The British government, which created a 'nudge unit' in 2010, found it could increase collections from delinquent taxpayers by telling them nine in 10 neighbors had paid up, a common marketing technique. But when the United States Treasury Department tried a similar technique last year, it did not work.

And changing behavior is tricky. The most important change behavioral economics has made in federal policy is a 2006 law that made it easier for companies to enroll workers in retirement plans by default. The change has increased participation, but it also may have reduced the amounts some people have saved. People enrolled by default also tend to stick with the default savings rate, often lower than the average for people who sign up themselves.

"Is the government really competent to determine the directions in which we should be nudged?" asked John Cochrane, a Stanford University economist. Mr. Cochrane said the administration's experiments so far seem basically harmless - government spam, messaging people to tell them to do x or y or z. But he said he was troubled by the possibility of more forceful nudges devised by technocrats influenced by lobbyists or other political considerations. "The case for the free market is not that each individual's choices are perfect," he wrote in a recent blog post. "The case for the free market is long and sorry experience that government bureaucracies are pretty awful at making choices for people."

Still, behavioral scientists have won the attention of policy makers partly by holding out the promise of improvements at very little cost. Nudges are cheap. The idea that tweaking a tax-collection letter might bring in as much money as hiring tax collectors is deeply appealing in an era of austerity.

"I think we can achieve a real increase in well-being, in happiness, in a stronger society without necessarily having to spend a whole lot more money," David Cameron, the British prime minister who created the first 'nudge unit,' said during his 2010 campaign. An early victory: The British team found people who had not registered vehicles were more likely to do so if they were sent a picture of the car beside the standard warning it could be taken away.

Civil servants in Britain are being trained in behavioral science, and the governments of Australia, Denmark and South Africa are among those dabbling in nudgery. The British program, spun out of the government, was recently hired by Bloomberg Philanthropies to work with American cities. The World Bank is mulling the lessons for economic development.

Ms. Shankar's team asks federal agencies about their priorities, then mines the academic literature for ways to improve those policies. The team also has created a network of academic institutions to provide advice.

The adjusted rebate forms, for example, were inspired by a 2012 study. Researchers similarly adjusted the form sent to customers of an auto insurance company asking them to report how many miles they had driven. Those asked to sign at the top reported driving about 2,400 more miles.

(The persistence of these effects is an open question. The first time a person signs, they answer the questions more honestly, but by the 10th time, the nudge might be powerless. Ms. Shankar said there had been a little dip in rebate payments since last summer, but the effect remained quite strong. Mr. Thaler noted that alarm clocks wake people up every morning.)

Perhaps even more than new ideas, the behavioral group is bringing a new approach to government. Experimentation is the key: Different nudges are tried systematically, results are quantified and, even after the best approach is selected, the team goes back to see how things are working.

The team, for example, created eight versions of an email encouraging members of the military to enroll in a retirement savings program. About 80,000 service members received each version. The most effective, which combined step-by-step instructions with an example of how much a person could save by putting away a little money each month, roughly doubled enrollment rates.

These efforts are informed by common sense as much as academic insight. People are more likely to do things that are easier to do. Yet simplicity has rarely been a priority in the development of federal programs. "They've been more worried about making sure it's legally perfect than making sure it's understandable to anybody," Mr. Thaler said. "So there's a lot of room to simplify things."

(NY Times)

HOW do we really feel about policy 'nudges'?

Earlier this month, President Obama signed an executive order directing federal agencies to collaborate with the White House's new Social and Behavioral Sciences Team to use insights from behavioral science research to better serve the American people. For instance, studies show that people are more likely to save for retirement when they are automatically enrolled into a 401(k) retirement saving plan that they can opt out of than when they must actively opt in. The idea behind Mr. Obama's initiative is that such soft-touch interventions, or 'nudges,' can facilitate better decisions without resorting to heavier-handed strategies like mandates, taxes and bans.

The response to the executive order has been generally positive, but some conservatives have been critical, characterizing it as an instance of government overreach. ("President Obama Orders Behavioral Experiments on American Public" ran a headline on the website The Daily Caller.) However, it is worth noting that when a similar "behavioral insights team" was founded by the conservative government of the British prime minister, David Cameron, it met resistance from the political left. ("Brits' Minds Will Be Controlled Without Us Knowing It" ran a headline in The Guardian.)

Is it possible that partisans from both ends of the political spectrum conflate their feelings about a general-purpose policy method (such as nudges) with their feelings about a specific policy goal (or about those who endorse that goal)? We think so. In a series of recent experiments that we conducted with Todd Rogers of the Harvard Kennedy School, we found evidence for a partisan nudge bias.

In one experiment, we presented participants of varying political persuasions with short descriptions of various behavioral policy nudges (e.g., designating enrollment in a program as a default). To explain how such policy tools could be applied, we illustrated them using either an example of a liberal policy priority (e.g., encouraging low-income individuals to enroll in food stamps programs for which they were legally eligible) or a conservative policy priority (e.g., encouraging the wealthy to take advantage of capital gains tax breaks they were legally eligible for). The participants were then asked to rate how ethical, manipulative and coercive they found the nudge to be, as a general policy approach.

We found that the illustrations - which were arbitrary examples, logically speaking - greatly influenced their evaluations. In almost every case, respondents on the left of the political spectrum supported nudges when they were illustrated with a liberal agenda but opposed them when they were illustrated with a conservative one; meanwhile, respondents on the political right exhibited the opposite pattern.

In another experiment, we found that even when both the nudge and the policy that it promoted were held constant, people's evaluations were strongly biased by the political party that endorsed the policy. For instance, we told participants that the government could increase participation in an employer-sponsored retirement savings program by automatically enrolling employees. This proposal was modeled after a key provision of a law signed by George W. Bush and later extended under the Obama administration. For some participants, we mentioned that the policy was endorsed by the George W. Bush administration; for other participants, we mentioned that it was endorsed by Mr. Obama.

Again, we found that both liberals and conservatives were strongly affected by the administration mentioned. Conservatives found the use of automatic enrollment defaults more acceptable when they learned that it was endorsed by Mr. Bush than by Mr. Obama, whereas liberals had the opposite response.

It is one thing to show that laypeople are biased in their evaluation of nudges; it is another thing to show that experienced policy makers are similarly biased. In a final experiment, we approached sitting United States mayors at a summer conference and described the use of automatic enrollment defaults, then illustrated how they would work with either a liberal or conservative policy application. Here again, mayors tended to favor use of the policy tool when it was illustrated with an example that accorded with their own politics, but opposed using the very same tool when it was illustrated with an example that did not.

OPPOSITION to these policy interventions can certainly stem from principled beliefs. We found that people with more strongly libertarian sensibilities tended to be more resistant to nudges. However, we also found that evaluations of nudges were affected roughly three times as much by political preferences as by libertarian values.

Perhaps more important, we also found that when behavioral policy tools were described without mention of a specific policy application or sponsor, the bias disappeared. In this 'blind taste test,' liberals and conservatives were roughly equally accepting of the use of policy nudges.

This last finding is good news, because scientifically grounded, empirically validated behavioral innovations can help policy makers improve government initiatives for the benefit of all Americans, regardless of their political inclinations.

(MY Magazine)

The right nudge - a subtle, well-placed behavioral cue - can work all kinds of magic. It can motivate people to do mind-numbingly boring tasks. It can get them to stop checking their phones so often. To eat less sugar. To drink more wine.

That's the idea behind so-called 'nudge theory,' an idea in behavioral economics that people don't necessarily need reward, punishment, or other heavy-handed tactics to get them to act a certain way, or make a certain choice. All they need is a small tweak to the setup in question - for example, wording an ask for money in a way that will encourage more charitable giving, or rearranging a school cafeteria to make it easier for kids to choose healthy food. In 2014, President Obama even put together a sort of nudge task force, the Social and Behavioral Sciences Team, to investigate ways to spur people to do things like apply for government benefits or pay back loans. The key is that you don't know you're being manipulated; you're just naturally responding to your surroundings.

But as Simon Oxenham recently reported in New Scientist, new research suggests that it doesn-t matter - we-re susceptible to manipulation even when we know it-s taking place. Oxenham explained the study:

Some of the volunteers were told no extra information, while others were told that the default donation was €8, a move inspired by studies that have found that default options influence economic decision-making. But some of these volunteers were also told that the preselected default might have been chosen to influence their behaviour - whereas others were told that it was definitely picked for this purpose. A fifth group was told that the default may have the power to influence their decision, and that it had been purposely picked to increase the amount they gave.

In the end, the nudges made a difference: On average, the people who received them donated €2.87, compared to €1.67 for those who didn't. But what didn't make a difference was how much information the participants had about those nudges - the average donation didn't fluctuate between those who were aware they were being nudged and those who had no idea.

As Oxenham notes, this isn't the first study to support the idea of transparency around behavioral manipulation. Past research has found that explicit nudges can work for getting people to choose healthier food, for example, and placebos have proven effective even when patients are aware that's what they're getting. Turns out, in the right context, we're pretty open to letting ourselves be manipulated - plus, it's not like knowing about the nudge would really stop you from getting another glass of wine.


Policymakers around the world are embracing behavioural science.

IN 2013 thousands of school pupils in England received a letter from a student named Ben at the University of Bristol. The recipients had just gained good marks in their GCSEs, exams normally taken at age 16. But they attended schools where few pupils progressed to university at age 18, and those that did were likely to go to their nearest one. That suggested the schools were poor at nurturing aspiration. In his letter Ben explained that employers cared about the reputation of the university a job applicant has attended. He pointed out that top universities can be a cheaper option for poorer pupils, because they give more financial aid. He added that he had not known these facts at the recipient’s age.

The letters had the effect that was hoped for. A study published in March found that after leaving school, the students who received both Ben’s letter and another, similar one some months later were more likely to be at a prestigious university than those who received just one of the letters, and more likely again than those who received none. For each extra student in a better university, the initiative cost just £45 ($58), much less than universities’ own attempts to broaden their intake. And the approach was less heavy-handed than imposing quotas for poorer pupils, an option previous governments had considered. The education department is considering rolling out the scheme.

The trial was run by the Behavioural Insights Team (BIT), a company spun out of the British government in 2014 and which remains in part publicly owned. BIT has pioneered the use of psychology to help policymakers change behaviour through “nudges” rather than taxes or laws. That approach is spreading, as governments from Australia to Qatar, and bodies such as the UN and World Bank, follow.

When BIT was set up, in 2010, the very idea provoked objections. Some critics feared that nudges would do little good, and that their effects would fade over time. Others warned that governments were straying perilously close to mass manipulation. More recently, some of the findings on which the behavioural sciences rest have been questioned, as researchers in many fields have sought to replicate famous results, and failed.

By and large those doubts have been allayed. Even if specific results turn out to be mistaken, an experimental, iterative, data-driven approach to policymaking is gaining ground in many places, not just in dedicated units, but throughout government.

Nudging is hardly new. “In Genesis, Satan nudged, and Eve did too,” writes Cass Sunstein of Harvard University. From the middle of the 20th century psychologists such as Stanley Milgram and Philip Zimbardo showed how sensitive humans are to social pressure. Daniel Kahneman and Amos Tversky described the mental shortcuts and biases that influence decision-making. Dale Carnegie and Robert Cialdini wrote popular books on persuasion. Firms, especially in technology, retail and advertising, used behavioural science to shape brand perception and customer behaviour—and, ultimately, to sell more stuff.

But governments’ use of psychological insights to achieve policy goals was occasional and unsystematic. According to David Halpern, the boss of BIT, as far as policymakers were concerned, psychology was “the sickly sibling to economics”. That began to change after Mr Sunstein and Richard Thaler, an economist, published “Nudge”, in 2008. The book attacked the assumption of rational decision-making inherent in most economic models and showed how “choice architecture”, or context, could be changed to “nudge” people to make better choices.

In 2009 Barack Obama appointed Mr Sunstein as head of the White House’s Office of Information and Regulatory Affairs. The following year Mr Thaler advised Britain’s government when it established BIT, which quickly became known as the “nudge unit”. If BIT did not save the government at least ten times its running cost (£500,000 a year), it was to be shut down after two years.

Not only did BIT stay open, saving about 20 times its running cost, but it marked the start of a global trend. Now many governments are turning to nudges to save money and do better. In 2014 the White House opened the Social and Behavioural Sciences Team. A report that year by Mark Whitehead of Aberystwyth University counted 51 countries in which “centrally directed policy initiatives” were influenced by behavioural sciences. Non-profit organisations such as Ideas42, set up in 2008 at Harvard University, help run dozens of nudge-style trials and programmes around the world. In 2015 the World Bank set up a group that is now applying behavioural sciences in 52 poor countries. The UN is turning to nudging to help hit the “sustainable development goals”, a list of targets it has set for 2030.

Not all these schemes involve a dedicated nudge unit. Many draw on initiatives that predate BIT. But all use similar insights from behavioural psychology to design and test policy tweaks. These are summed up in EAST, a mnemonic devised by BIT: in order to change behaviour, make good choices easy, attractive, social and timely.

One of the best-known nudges is to set the desired outcome as the default. For example, enrolling all workers in a company pension scheme, and requiring them to opt out if they do not wish to be members, greatly increases savings rates compared with when non-membership is the default. The power of making things easy was also demonstrated by a trial in 2012, in which the forms used by poor Americans to apply to university were pre-filled with data from tax returns. That raised the likelihood that they would go to university by a quarter. Nudges that involve making the desired choice more attractive, or at least more obvious, range from making the wording on letters about late payment of taxes more emphatic to placing healthy food at eye level in canteens.

Among the most effective nudges are “social” ones: those that communicate norms or draw on people’s networks. A scheme tested in Guatemala with help from the World Bank and BIT tweaked the wording of letters sent to people and firms who had failed to submit tax returns the previous year. The letters that framed non-payment as an active choice, or noted that paying up is more common than evasion, cut the number of non-payers in the following year and increased the average sum paid. And a trial involving diabetes shows that it matters to nudge at the right moment. In 2014 Hamad Medical Corporation, a health-care provider in Qatar, raised take-up rates for diabetes screening by offering it during Ramadan. That meant most Qataris were fasting, so the need to do so before the test imposed no extra burden.

Owain Service, BIT’s managing director, says it was initially accused of “tinkering at the margins”. But nudging is now being brought to bear on bigger, harder, problems. One is making public bodies more representative of those they serve. American police forces have long struggled to recruit from ethnic minorities; many worry that their failure to do so harms community relations and makes it tougher for officers to do their job. Many attempts have been made to improve matters, without much success. But BIT’s North America team helped the police force in Chattanooga, Tennessee, to test various versions of job ads. Those emphasising the challenge of the job or the career benefits attracted many more black and Hispanic applicants than those emphasising the impact of the work on the community or the opportunity to serve.

Of particular interest in aid and development are recent efforts to use nudges to tackle corruption. The World Bank has been involved in several trials, for example one in Nigeria to improve record-keeping in health clinics, thereby making it less likely that money will be stolen. It has found that giving health workers who keep good records certificates that they can display in their clinics makes a worthwhile difference. Another promising area involves motivating people to refuse bribes. Anti-corruption policies generally rely on punishment. But behavioural insights suggest harnessing social norms, for example by publicly celebrating those who stay clean.

Far from being fleeting, as had been feared, at least some nudges have been shown to form lasting habits. Todd Rogers of Harvard University found that asking prospective voters just once to note down exactly when they were going to vote not only increased turnout in an imminent election, but also in subsequent ones. The Guatemalans who received the letters that worked best to encourage taxpaying the following year turned out to be more likely to pay up the year after, too.

Technology is increasing the impact of behavioural techniques. Several British departments employ data scientists who can run speedy trials of letters and leaflets, much as media companies learn what works online by “A/B testing” content, serving one version to half their audience and another to the rest to see which one is more viewed, liked and shared.

Many of the early critics of nudge techniques regarded them as infantilising, or even a type of government mind control. “Nanny is alive and well in Westminster” ran the headline of a newspaper article about the nudge unit in 2011; the author went on to deride the unit’s “Orwellian overtones”. Many worried about the idea of bureaucrats being given free rein to shape behaviour by imperceptibly tweaking government communications and environmental cues.

Even the proponents acknowledge the risks. “Hitler nudged, so did Stalin,” writes Mr Sunstein. Laws in some American states that have suppressed black people’s votes, such as those passed by North Carolina in 2013, look remarkably like nefarious nudges, from limiting the types of IDs that can be used for registration to banning out-of-precinct voting. All made voting less easy, attractive, social and timely—and disproportionately cut the number of black people voting.

North Carolina’s laws were struck down on appeal last year, in a nice demonstration of the need for checks and balances when it comes to nudging, as with all other policy action. And all governments nudge whether they have a dedicated unit for doing it, Mr Sunstein points out, and whether or not they mean to. There is no purely neutral way of presenting choices, so why not try to choose the one that results in the best outcomes? As long as that choice is made in a transparent manner, and is subject to democratically elected politicians, nudging offers policymakers an alternative to both the nanny state and the unintelligent one; a middle way that he describes as “libertarian paternalism”.

A “replication crisis”, in which scientists in many fields have repeated published experiments and failed to find the same results, has hit particularly hard in the behavioural sciences, with some much-cited findings now open to question. But the approach taken by nudge units and their kind already incorporates the remedy. It has nudged policymakers towards a new way of thinking about policy that involves trial and error, and step-by-step improvement. The theories of behavioural science can only suggest which nudges to try; it is for policymakers to find out which ones work.

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