Why governments should look to “nudges” to improve policy

(Flickr / Lauren Manning)

(Flickr / Lauren Manning)

Though you may not realize it, you’re probably being “nudged” by the government.

In simple terms, a “nudge” in behavioral science is just a way of influencing people’s choices. (The term was popularized by University of Chicago economist Richard H. Thaler and Harvard Law School Professor Cass R. Sunstein in their book “Nudge: Improving Decisions about Health, Wealth, and Happiness.”) Nudges have endless uses, and can easily go too far.

For example, the products displayed most prominently at the front of the supermarket are the ones you are being nudged to buy — a relatively tame way of influencing your choices. Yet other companies use large sale signs or flashy campaigns to convince you that you’ve found a once-in-a-lifetime deal. In reality, of course, no one pays the full price.

In recent years, the government has also started embracing the nudge. Mandating that calorie counts appear on restaurant menus? That’s supposed to make you eat healthier. Warning labels on packs of cigarettes? That’s to discourage smoking.

Nudges can be beneficial in many cases, encouraging smarter choices for society without actually removing the opportunity to make the bad choice. And yet it has still awakened a considerable amount of controversy.

When does nudging go too far and turn into manipulation? Governments must be careful to not turn a nudge into a shove toward a preferred outcome. Obamacare’s requirement that every American buy health insurance or pay a penalty, for example, is not simply a nudge because it levies a penalty on those who make a choice other than the one preferred by the government. New York’s ban on large sodas is also not a nudge, since it does not actually preserve the alternative choice.

President Obama’s recently created Social and Behavioral Science Team (SBST) issued its first annual report last year, and the findings are worth reading. By transparently reporting the results of its experiments, the SBST sets an example of how the government should implement nudges without crossing the line into secretive manipulation.

The SBST tried a number of experiments with mixed results: rewording e-mails to improve participation in government retirement programs, making printers default to double-sided outputs to save paper, and changing the time that workplace surveys were sent to increase response rates.

“Because SBST projects are designed to address only the behavioral barriers that affect how people engage with programs, project effects can be modest,” the team’s report concluded. “Yet, because behavioral changes to program administration often require little or no additional cost, returns on investment can be large even when project effects are small.”

Some nudges can be extremely beneficial with very little detriment or social manipulation. For example, a proposal called the Auto-IRA, which originated in the conservative Heritage Foundation, would help ensure retirement security for millions of American workers. Currently, many people do not save through an individual retirement account (IRA) or a 401k at work because signing up for these additional programs is too confusing.

But proponents of the Auto-IRA are pushing for a law that would require employers to enroll their employees in one of these retirement savings programs by default. Employees could still opt out at any time, but automatic enrollment would remove the administrative burden that prevents so many Americans from being adequately prepared for retirement. The proposal would add little, if any, cost to the employer.

“Research from behavioral science demonstrates that seemingly small barriers to engagement — such as hard-to-understand information, burdensome applications, or poorly presented choices — can prevent programs from working effectively for the very people they are intended to serve,” said the SBST report.

If governments use nudges effectively, they may be able to improve society while preserving choice — and that’s something for everyone to get behind.

Published on Opportunity Lives