What nudge theory got wrong

The bestselling 2008 book Nudgeby Richard Thaler and Cass Sunstein, helped inspire experimentally tested, psychologically informed policy work around the world, often developed by “behavioral insight teams” in or adjacent to government.

Now two leading behavioral scientists, Nick Chater and George Loewenstein, have published an academic working paper suggesting that the movement has lost its way. Professors Chater and Loewenstein are academic advisers to the UK’s behavioral insight group, and blame themselves as much as anyone else for what they now see as mistakes. It’s worth paying attention to what they say.

But first, ponder an advertising campaign from 1971 titled “Crying Indian”. This powerful TV commercial depicts a Native American man paddling down a river that is increasingly laden with trash. “Some people have a deep, abiding respect for the natural beauty that was once this country,” says a voiceover. “And some people don’t. People start pollution. People can stop it. ” The Native American man turns to the camera, a single tear rolling down his cheek. But the message was not what it seemed (and not just because the actor’s parents were in fact Italian): it was funded by some of the leading companies in food and drink packaging.

The advert placed responsibility squarely on the shoulders of individuals making selfish choices. It wasn’t governments who didn’t provide bins, or manufacturers who made unrecyclable products. No, the problem was you.

Chater and Loewenstein argue that behavioral scientists naturally fall into the habit of seeing problems in the same way. Why don’t people have enough retirement savings? Because they are impatient and find it hard to save rather than spend. Why are so many greenhouse gases being emitted? Because it’s complex and tedious to switch to a green electricity tariff. If your problem is basically that fallible individuals are making bad choices, behavioral science is an excellent solution.

If, however, the real problem is not individual but systemic, then nudges are at best limited, and at worst, a harmful diversion. Historians such as Finis Dunaway now argue that the Crying Indian campaign was a deliberate attempt by corporate interests to change the subject. Is behavioral public policy, accidentally or deliberately, a similar distraction?

A look at climate change policy suggests it might be. Behavioral scientists themselves are clear enough that nudging is no real substitute for a carbon price – Thaler and Sunstein say as much in Nudge. Politicians, by contrast, have preferred to bypass the carbon price and move straight to the pain-free nudging.

Nudge enthusiast David Cameron, in a speech given shortly before he became prime minister, declared that “the best way to get someone to cut their electricity bill” was to cleverly reformat the bill itself. This is politics as the art of avoiding difficult decisions. No behavioral scientist would suggest that it was close to sufficient. Yet they must be careful not to become enablers of the One Weird Trick approach to making policy.

Behavioral science has a laudable focus on rigorous evidence, yet even this can backfire. It is much easier to produce a quick randomized trial of bill reformatting than it is to evaluate anything systemic. These small quick wins are only worth having if they lead us towards, rather than away from, more difficult victories.

Another problem is that empirically tested, behaviorally rigorous bad policy can be bad policy nonetheless. For example, it has become fashionable to argue that people should be placed on an organ donor registry by default, because this dramatically expands the number of people registered as donors. But, as Thaler and Sunstein themselves keep having to explain, this is a bad idea. Most organ donation happens only after consultation with a grieving family – and default-bloated donor registries do not help families work out what their loved one might have wanted.

Behavioral science is a great way of finding small tweaks that can make a substantial difference to behavior. Such tweaks help if the behavior change itself solves a problem, but that cannot be taken for granted. It is easy to take a perfectly sound behavioral insight and turn it into a botched piece of policy.

The most successful behavioral public policy has been auto-enrollment into retirement savings plans, which in the UK has dramatically boosted participation in workplace pensions.

In the hotel and restaurant business, participation is up from 5 per cent in 2012 to over 50 per cent last year. This is a triumph. Yet huge problems remain in the pension system as a whole. Pension participation among the self-employed has collapsed over the past quarter century. Pensions are a clear demonstration of the strengths of behavioral policy – and also of its weaknesses.

“We have been unwitting accomplices,” write Chater and Loewenstein, “to forces opposed to helping create a better society.” That is too harsh on themselves and other behavioral scientists. Would we really have excellent universal pensions, a fit and healthy population, and a low-carbon economy, if only we hadn’t been distracted by Nudge? Of course not. But behavioral science is all too good at producing perfect icing for the policy cake; practitioners must never forget the cake itself.

Tim Harford’s new book is’How to Make the World Add Up

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