Nudge

"Nudge is the best endorsement for social psychology that I’ve ever read. Social psychologists, for the better part of a hundred years, have been demonstrating how context can affect our behavior. For instance, we’re markedly more likely to litter if we see someone else liter while we’re walking down the street. When we are trying to choose, should to do X or Y, if X is the default, we’re much more likely to do it. Even if X is something as visceral as opting to donating our own organs in case of death. Conversely, if the default is that you’re not in a program and you have to enroll in be in it, you are much less likely to participate. Sunstein and Taylor describe this class of situational influence as a ‘nudge.’ Meaning, an intervention that can move your behavior a bit, one way or another, while not totally constraining your sense of freewill. Get the weekly Five Books newsletter Nudge has been enormously influential in policy circles. Around the world, city, state, and federal governments are trying to design policies and procedures that nudge. There are nudge units within companies, focused on how to improve the functioning of businesses. So, Nudge has had a huge impact and it does a nice job of describing why social psychology and behavioral science more broadly matter in our world. It’s true that marketers have been nudging people for, for decades. The general concept is not new. What Thaler and Sunstein did was shine a spotlight on the strength and pervasiveness of situational influence—and how small changes to shape choices can have surprisingly big impacts on behavior. Psychologists have demonstrated, since the 1950s, that people tend to underestimate how much situational context and social forces influence their own behavior. Nudge does a really good job of describing all of that research and applying it policy problems. I study the difficulty people have reading each other’s minds, so I know it’s hard to know what others will do next. But the field is moving more into application of our work. You see more behavioral science in business schools, as well as in economics departments and, of course, psychology departments. Governments are getting interested in how behavioral science can shape policy. The biggest challenge to humanity in the coming decades is climate change. Ultimately, it’s a behavioral problem. So, orienting behavioral science towards problem solving and public policy applications is urgent."

"Nudge is also a very important book. One of the reasons Nudge is so important is because it’s taking these ideas and applying them to the policy domain. Here are the mistakes we make. Here are the ways marketers are trying to influence us. Here’s the way we might be able to fight back. If policymakers understood these principles, what could they do? The other important thing about the book is that it describes, in detail, small interventions. It’s basically a book about cheap persuasion. My favourite example is the little fly when men pee [a painted fly in urinals which reduces spillage]. It’s not a big example, it’s not a hugely important social innovation. But it’s significant because it shows that in many cases – such as peeing – we are just not that thoughtful about what we’re doing. And because of that, we could take those cases and think about small ways to change the environment to get people to behave better. “We don’t say to sociologists that they should stop studying sociology just because it doesn’t describe 100% of the variants of human behaviour. The same can be said about economics” The other interesting thing about Nudge , which goes beyond its application to policy, is that it brings up the philosophically difficult debate about behavioural economics: How much do you really want to push people? What level of pushing is OK, and what level of pushing is not OK? That’s a very difficult discussion. Imagine I taught you some tricks that allow you to persuade people to do what you want them to do. Up to what level is this OK, and up to what level is it not? Sunstein and Thaler take a very strong position on that. They call it “libertarian paternalism” [nudging behaviour without eliminating free choice]. At the end of the day, I don’t really agree with their position. But that doesn’t take away from the fact that they are the first ones to bring the discussion to the forefront. I don’t have a complete philosophical position on this. I actually don’t think there is going to be one answer, because it all depends on the cost, and how much danger people can get themselves into. For example, I don’t think that nudges are relevant to the domain of drinking or texting while driving. Sunstein and Thaler think nudges are enough to make people save for retirement. I don’t think so. I think we need to mandate saving for retirement. With the concept of nudges you’re basically saying, “People know what the right thing to do is, and as long as we push them a little bit it will be OK.” It’s a nice philosophical position. Because as a policymaker it’s hard to say, “People are really stupid, we need to protect them from killing and hurting themselves.” But often nudging may not be enough. It’s an empirical question. There are some cases where nudging might be sufficient. Sadly, in other cases where it’s not sufficient, we basically need to think about how to force people to do the right thing. That’s right. And if I were a politician, it would be a tough sell. I don’t want to say to my constituents, “Look guys, I think you’re idiots. You’re incapable of making decisions, so I’m going to make them for you.” But I think there are many cases where this is the right thing to do. Maybe we could force people but allow them to appeal, so that not everybody is forced 100%."

"I chose Nudge because I think it’s the next step. Nudge talks about the way that you present people with choices or the way that you allow people to make choices, very subtle interventions, which really have an effect on the choices people will make. So the way that you organise food on a tray or on display in a store will change the kinds of food that people select to eat. In our case, I know this is one area that we’re moving into – can we help people make better health choices? We talked about the searches people make that convince them they have some terrible disease. That’s one area we could improve. We could present better results to tell people, ‘Actually, you’re not going to die, you’re fine.’ Get the weekly Five Books newsletter But, also, if we know that people are searching for things that are likely to make them unwell, we could design interventions that would get people to make better choices. In the book, I talk about anorexia which is a huge problem. There’s a lot of content online which helps people to maintain their condition or to make it worse. We are not telling them to make certain choices and we’re not forcing behavioural change on people, but we could give these very small nudges, these small suggestions, perhaps using online advertising or in other ways that are more explicit, to help them make better choices. One of the examples I liked in the book was about a road on Lake Michigan which has a curve, and many times people miss that curve and fall into the lake. By cleverly drawing lines across the road at shorter and shorter distances, it gives people the impression they are driving faster and faster and so people instinctively slow down just before the curve and there are fewer accidents. So you are not telling people to slow down or putting a police car there to make sure they slow down. Instead, you make these very minute changes to the environment in a way that suggests to people that they should actually slow down. A lot of people want to, say, quit smoking. They might search for ways to stop smoking or they might search for where to buy cigarettes or something like that. If you search for how to quit smoking, can I put an ad on the side that will actually make you more likely to quit? We have done some research to show how to identify a good ad to place for specific ages and specific demographics, genders, incomes, and so forth. The way we measure this is to see what subsequent searches people make. Over the next few weeks, do you actively go and find a way to quit smoking? Do you stop looking for where can you buy cigarettes? Things like that. So, on the one hand, we can place these kinds of interventions. On the other, we can measure whether they were successful and tune our model so you don’t have to run a whole ad campaign — and then wait for several months to see who stops smoking and survey the population. Within a few days, we can know what’s effective and what’s not and make our ads better. We can use a tool that’s usually used to sell you something to help you improve your health."

"We’re now coming up to 2008, when Richard Thaler and Cass Sunstein published this book. It looks quite a bit different from the first two in that it reflects much more modern psychology. I admired Adam Smith for his personal observations, but there was no experimentation, there was no real modern psychology in it. What Sunstein and Thaler emphasise is a lot of principles of psychology that can only be understood with regard to actual experiments. So they talk about things like anchoring, availability, representativeness, heuristic optimism, overconfidence, asymmetry of appreciation of gains versus losses, status quo bias, framing, self-control mechanisms – all the things that we’ve learned about. We’re way ahead of Adam Smith now in our understanding of people, and that suggests a different model for our economy. Nudge doesn’t present itself in a grandiose way at all, but it’s a very important book. It really is a different model of our economy, and how government should be involved. The book points out that the free enterprise system emphasises choice. The classic theory of capitalism is that information is decentralised – it can’t be centralised – and so the important thing is that people should be, as Milton and Rose Friedman put it in their 1980 book of that name, “free to choose”. If people are free to choose, that will allow the economic system – and this is Adam Smith again – to adjust its activities to take account of all of their diverse information. But what Thaler and Sunstein point out is that individual people are not experts in making any of these choices. They succumb to these psychological errors. As a result, they say that what our society should be doing is providing what they call “choice architecture”. The government, which in their model is benevolent, sets up rules that encourage people to make the right choices, that nudge people to make the right decisions. But in cases where people have specific information that makes them want to do otherwise, they can. I could give you the first example in their book, which is the Save More Tomorrow scheme. The problem they identify is that most people —at least in the United States, but I’m sure in other countries as well— don’t save enough for their retirement (or whatever) and that that failure to save is acknowledged. A survey of people in the United States asking, “Do you think you are saving enough?” found that most people said, “No, I’m not.” So it’s like dieting, in that most people wish they were slimmer than they are, but they can’t quite do it. Similarly, they wish or think they should be saving more, and they can’t quite do it. That means we ought to offer policies or programmes that nudge them, that help them. In the case of dieting, you don’t leave bowls of candy out all around the house if you know you’ll be tempted by them. Our society has to try to nudge people towards other virtues, like saving. The Save More Tomorrow plan is thus a very ingenious idea: You offer people the option of signing up for a programme that will withhold from their pay cheque any future pay increases. So you sign up today and you’ll be saving more tomorrow. And experiments with this show that it does indeed raise the saving rate. So this is the kind of thing the government needs to think more about doing. Abject acceptance of Adam Smith’s principles suggests that we should provide people with the most elaborate choices. The naive assumption has been that people can handle those choices, which isn’t right. But, instead, the government has a different role. It’s still a free enterprise system, but it’s one that has nudges in various places. Cass Sunstein, one of the two authors, was in a high position in the Obama administration, and some of their proposals made it into legislation. I’m not a political scientist; government is imperfect, and it reflects special interests, but sometimes it triumphs. Sometimes it does work. You bring in experts and they point out that we need to put chlorine in the water supply, and we do it. It does work. Sunstein and Thaler’s proposals will probably be somewhat adopted. It’s an interesting phenomenon, and it may not be permanent. I think it may reflect the stage that China is going through. It used to be that the Japanese had a higher saving rate. In China, they have a sense of epic transformation right now. It’s a kind of patriotic feeling, as well as a sense of uncertainty, that encourages saving. It’s not the capitalist difference, I don’t think. You’re suggesting that China saves more because of some cultural values that are at odds with capitalism? That’s a stereotype of the Dutch, isn’t it? That they’re stingy? I bet it’s not true. If the Dutch had been conspicuous savers for centuries, they would be vastly richer than any of us. It would accumulate over centuries. I like to use another example from Holland, which is that home prices in Amsterdam, according to Piet Eichholtz at Maastricht University, haven’t gone up – they’re no higher in real terms today than they were 300 years ago. So, I’m sorry, but you can’t be right. The amazing thing about saving is that if you really save a lot and you do it for a hundred years, reinvesting interest, you will get awfully rich, and that’s a fact. The best example of that is not Holland, it’s Singapore, which has had a government imposed saving plan. In Singapore, they have a mandatory saving plan that has propelled that nation up rapidly. It’s just arithmetic. If you save and invest, it adds up, because of the power of compound interest. Yes, that’s right – by nudging people, rather than caning them."