The Nudgy State
How five governments are using behavioral economics to encourage citizens to do the right thing.
In the January/February issue of Foreign Policy, behavioral economist Richard Thaler urges governments to "apply behavioral science to find solutions to persistent problems." Here are five places that are already doing just that.
U.S. President Barack Obama gave behavioral policymaking its highest profile endorsement yet in 2009 by appointing Harvard legal scholar and Thaler’s Nudge coauthor Cass Sunstein to run the White House’s Office of Information and Regulatory Affairs. As "regulation czar," Sunstein was given a wide mandate to apply cost-benefit analyses to programs including the new health-care law and the Dodd-Frank financial regulations. Sunstein, who stepped down last summer, was never popular with conservatives, who saw the "libertarian paternalism" of Nudge as nanny-statism in disguise.
From a public point of view, the most visible of the reforms championed by Sunstein may have been the transformation of the FDA’s food pyramid, dutifully reviewed and ignored by generations of schoolchildren, into a more intuitive plate design, which shows how much of an average meal should be taken up by fruits, vegetables, grains, protein and dairy. Another program pushed by his office, fueleconomy.gov, allows car buyers to compare fuel costs of a car against an average vehicle — rather than expressing it in non-intuitive statistics like miles per gallon. Sunstein claims the federal regulations put in place during Obama’s first term saved more than $90 billion per year for the U.S. government.
IDEAS IN THE ATTIC
Prime Minister David Cameron frequently expressed his admiration for Nudge, the ideas of which meshed well with the more state-centric brand of conservatism — known as "big society" — that the Tory leader championed on the campaign trail. In 2010, Cameron set up the Behavioural Insights Team — quickly dubbed the "nudge unit" by the press — a group of behavioral economists, with Thaler acting as a consultant, given a mandate to "find innovative ways of encouraging, enabling and supporting people to make better choices for themselves."
The unit has undertaken a number of trial programs so far. In one, non-payers of car taxes were sent a letter, including a picture of their car, warning in plain English that their vehicle would be lost if they did not pay up. Including the photo tripled payment rates. The unit has also seen enormous success in informing people by text message that they’re late on taxes or fines.
In another intervention, insulation firms set up a service to clean out customers’ attics while installing insulation. (It was found that people were much more likely to pay for new energy-saving insulation if they didn’t have to go through the trouble of sorting through years worth of junk.) The unit has been an occasional target of ridicule on Fleet Street, but its interventions have been successful enough — about £300 million ($485 million) in savings so far — that other governments are looking to copy it.
THE SHAME GAME
New South Wales, Australia
In September 2012, the government of Australia’s most populous state announced that it would consult with Britain’s nudge unit to formulate new policies over a wide variety of areas. As in other places that have adopted behavioralist ideas, the new plan was decried by some commentators as a "toxic import from Britain" and a "threat … to democratic public life." But the New South Wales government — like Britain, controlled by the center-right — is clearly intrigued by the prospect of increasing government revenue and promoting virtuous behavior in citizens without resorting to direct state interventions.
One program the New South Wales government may copy from Britain is using "peer influence" on citizens. Informing them, for instance, of how much energy their neighbors are using, or how many residents of their town have already paid taxes or fees. By and large, people don’t want to be outliers and tend to moderate their behavior if they know that their neighbors are showing them up.
SIGNS POINT TO BETTER
In 2010, the behavioral philosopher Pelle Guldborg Hansen set up the Danish Nudging Network, an NGO that partners with governments and companies to develop policies rooted in behavioral theory. Most of its ideas are still in the experimental stage, but some show promise. In one experiment conducted by the network, signs were placed next to light switches at a university saying that 85 percent of students remembered to turn off the light when the left the room. The signs led to a 20-26 percent reduction in lights being left on. In a collaboration with the city of Copenhagen, the nudgers put green footprints leading to trash cans in public spaces, which they found reduced littering by 40 percent.
Sometimes, interventions are not so successful. When the network partnered with the Danish National Railway to put arrows leading to staircases in front of station elevators — encouraging commuters to take the healthier route of walking up the stairs — there was almost no effect. Hansen told the Economist, "There are no social norms about taking the stairs but there are about littering."
THE HIV LOTTERY
Western Cape, South Africa
One of the most controversial applications of behavioral economics to public policymaking has been Western Cape Premier Helen Zille’s "Get Tested and Win" campaign, launched in 2011, which enters anyone who gets an HIV test into a drawing for cash prizes up to nearly $6,000. The program developed out of a workshop conducted by ideas42, a Harvard-affiliated organization set up to develop psychology- and economics-based strategies for developing social and economic policy. (The name comes from the answer to the meaning of life in The Hitchhiker’s Guide to the Galaxy.) The government also worked with ideas42 to develop new strategies to reduce traffic fatalities.
"Get Tested and Win" was blasted by critics, including the South African Medical Association, which called it "inappropriate and medically unethical." It probably doesn’t help that Zille, the leader of South Africa’s opposition Democratic Alliance party, has also controversially called for HIV-positive men who knowingly have sex without condoms to be charged with murder. But Zille, who criticizes the national government for encouraging a climate of AIDS denialism, is pressing ahead with the initiative. A similar program is also being planned that will enter schoolchildren who attend afterschool programs and pass drug tests into a raffle for shopping vouchers.