TOWHATEXTENTISTHEUSEOFCHOICEARCHITECTURE ANDNUDGETHEORYCONDUCIVETOWARDSCREATING EFFECTIVEGOVERNMENTPOLICIES?
EthanChoi
Impact&ResearchFellowshipProgram,HarvardStudentAgencies.IncollaborationwithLearnwithLeaders
ABSTRACT
This article aims to evaluate the ways in which choices that are presented to consumers affect their decision-making, which in turn affects the ways in which governments intervene in the free market. Traditionally, governments assume the homo economicus when devising microeconomic intervention approaches.An alternateviewoninfluencingconsumerbehaviourisexploredthroughthelensofNudgeTheory.Itisshownthatnudging,aswellasotherwaysofadaptingone's decisionenvironment,canbemoreeffectiveininfluencingbehaviourthanthroughtraditionalformsofinterventionandcoercion.However,thepracticeofnudging presentsevidentpracticalandethicaldisadvantages.
KEYWORDS:Nudgetheory,choicearchitecture,intervention,libertarianpaternalism.
INTRODUCTION
The case for libertarian paternalism - the notion that economic institutions can affectdecision-makingwhilerespectingfreedomofchoice,isclear.Coinedby behavioraleconomistThalerandscholarSunsteinin2003,libertarianpaternalismupholdsthenotionthatindividualsshouldhavethelibertytooptout-while givingthempaternalisticnudges.Similarly,asymmetricpaternalismreferstopoliciesdesignedtoassistconsumerswhoarepronetoactingirrationally,whilenot harmingthosewhomakerational,deliberatedecisions.
Choice architects are cognizant of the notions of libertarian and asymmetric paternalism.Theycapitalizeonintrinsiccognitivebiasesthroughadjustingthe quantity and quality of choices presented. They change the ways in which options are presented to customers. This is done through the employment of “nudges”,whichinfluenceconsumerbehaviourbyimplementingsmalltweaks, withoutultimatelyaffectingtheconsumer'sabilitytochoose.
InNudge:ImprovingDecisionsaboutHealth,Wealth,andHappiness,ThaleroutlinedanexampleofNudgeTheoryinuse.(Thaler,2008)Whilehewasteaching university courses, students would surreptitiously walk out of class. The door hadlargewoodenhandles.Thalernoticedthatstudentshavetheinstinctofpulling when faced with a handle instead of pushing to exit a room - yet the door opened outward, meaning that students had to push. Such an example underscoresinterplaybetweenstimulus(woodenhandles)andresponse(pushorpull), demonstrating poor choice architecture. When human instincts contrast with design,choicearchitecturefails.
Onthemicro-level,choicearchitectsindirectlymodifythechoicesthatotherpeople make. Good choice architects make decisions that merit society.They produce architecture that reflect human behaviour On the macro-level, governmentsdesignatespecializedunitstoinfluenceconsumerbehaviourthroughwellchosennudges.Thesenudges,asatypeofmicroeconomicintervention,present themselvesasspecialtypesofincentivesthatimposecognitivecosts.
GovernmentInterventionduringtheCOVID-19Pandemic
Duringthecoronavirus(COVID-19)pandemic,nudgeswereusedinavarietyof waystoencouragepeopletomakesaferandhealthierchoices.Intheearlystages ofthepandemic,theUKgovernmenthasoptedfornudgessuchasinformingcitizenstowashtheirhands,self-isolateiftheyshowcommonsymptoms,aswellas presenting scientists at the helm of the effort to combat COVID-19. The UK's mainrationaleforthesenudge-baseddecisionsistosavemorecoercivenudges forwhenthepandemicisnearingitspeak.Appealingtopredictionsabouthuman behaviour,theUKgovernmentbelievesthatcitizenswillbecomefatiguedofpandemic restrictions, and thus seek alternative means of bypassing them (Yates, 2020).
In the absence of vaccines and evidence-based treatments, nudges may seem just.Apaper published by JayVan Bavel, associate professor of psychology at NewYorkUniversityand41otherresearchersstressedtheimportanceof“highlighting bipartisan support”, “leveraging the impact of norms”, and using phrases such as “physical distancing” instead of “social distancing” - a classic exampleofframingthroughwordchoice(Baveletal.,2020).Byrelyingonthe factthatpeoplearehighlyreactivetothereactionsofothers,nudgesincreasethe propensitythatcitizenswouldabidetoacceptablesocialnormsandconventions. Nudges such as “the overwhelming majority of people believe that everybody should practice physical distancing by staying home” act as a mechanism for
gentlyguidingpeopletowardsmakingbetterdecisions.Crowdsourcinguserratings could also help to eschew false information, save for specialized “echo chambers”thatactivelypromulgatemisinformation.Though,theeffectiveness ofusingnudgingtowardsvariousstakeholdersisvaried.AstudybySandersetal. concluded that loss aversion does not replicate in the COVID-19 pandemic throughanalyzingindividuals'responsestotheframingofmessages.Thisstudy highlightstheimportanceoffindingeffectivenudgingpoliciesthatinducesselfreflectionwithintheindividual.
Inthiscasestudy,thenotionof“fatigue”isdubious.HowdoestheUKgovernment know when, or if citizens will feel fatigued upon an imposition of rigid coronavirusmeasures?Evenmoreimportantly, ifcitizensarefatiguedby rigid measuresandwillcircumventthemasacopingmechanism,doesn'ttheimposition of avoidable measures provide more robust incentives for circumvention? This case study reveals the limitations to the application of Nudge Theory By capitalizing on the fact that humans invariably fall for psychological biases, behavioralscientistsruntheriskoflargemarginsoferrorintheeffectivenessof policy-making.Whileitisunwisetoassumethehomoeconomicus,itisequally as unwise to over-compensate for psychological biases. Effective nudges successfullybridgethegapbetweenhumaninstinctsanddesignthoughaplethoraof biases(availabilitybias,poorheuristicsetc.)actasabarricadebetweenhuman instinctsanddesign.
NudgeUnits
“Byknowinghowpeoplethink,wecanmakeiteasierforthemtochoosewhatis bestforthem,theirfamiliesandsociety,”Thalerwroteinhis2008bookNudge (Thaler,2008).Asanalternativetodirecttaxesandsubsidies,nudgesrelyonconsumers'irrationalrulesofthumbtomaximiseutility(Fusaro,2021).
Someexamplesofnudgesasaformofgovernmentinterventionincludetheprovisionofinformationaboutsocialnorms,includingone'samountofelectricity usage relative to one's neighbors, as well as posters or signs that demonstrate appropriatesocialbehaviourinpublicplaces.Theimpositionofnudgesappeals totheinnatecognitivenatureofherdmentality,capitalizingonthefactthatone automatically, invariably, and sometimes irrationally adheres to social norms. Theeffectivenessofthismeansofappealvariesbetweentargetaudiences.
EversinceThalerandSunsteinintroducedtheconceptofnudgingin2008,many governmentshaveemployedbehavioralscientistsandeconomiststoaidpolicymaking.Apalpablebenefitofnudgesisthattheyaidgovernmentsindelivering greaterbenefitsatlowercosts.
The UK's Behavioral Insights Team (BIT) and the US Federal Government's OfficeofEvaluationSciences(OES)aretwowell-renownednudgeunitswhose aimsaretousebehavioralsciencetoassistthegovernmentandtheprivatesector, andthusstrengthentrust(Baveletal.,2020).Thoughthebasictheoryofnudging remains(andinfact,somearguethat“nudging”isjustanoveltermforinfluencing behaviour), governments have increased their understanding on which nudgesarebeneficialtowardstheconsumer
Howdoesonecreateeffectivenudges?TheEASTframework,developedbythe BIT,answersthe“what”question,detailingthatnudgesshouldbeeasy(requires minimalefforttochoose),attractive(attractsourattention),social(adherestothe factthatwearesocialbeings),andtimely(promptedwhenindividualsaremost receptive). One observes that most government nudges adhere to this frame-
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work;takepeopleinSwitzerlandbeingnudgedtoautomaticallyenrollincleanenergyprograms(Sunstein,2016).Settingdefaults,acommonformofnudging, minimisethecostsofdecidingandchoosingwhattodo.Additionally,research hasshownthatindividualsrarelychangetheirdefaultcourseofaction(Thaler, 2008).
The“when”questionisequally,ifnotmoreimportantthanthe“what”question. The BASIC framework - “Behaviour, analysis, strategy, intervention, and change”prescribesasetofstepstowardstheeffectiveimplementationofbehavioralinsightframeworks.Thoughthe“when”and“what”and“when”areinvaluable in devising nudges, they are oft-generalized and heavily simplified, often ignoringthecognitivebiasesinherentinthebehavioralscientistswhoputforth theseschemes.
Criticism
Thereliabilityoflibertarianandasymmetricpaternalismarisesuponcriticisms of Nudge Theory One may argue that nudges are not paternalistic - i.e., they unequivocallyfailininfluencingbehaviour;or,theyarenotlibertarian-i.e.,the nudgesaretoocoerciveormanipulative.Theseissuescanlargelybealleviated through tweaks in choice architecture. However, two pieces of criticism reign prominentregardingtheunderlyingflawsofNudgeTheory-thefactthatnudges induce negative ethical ramifications, and that they produce over-generalized assumptionsthatfailtobridgethetheory-practicegap.
A major challenge associated with the integration of nudges and behavioral insightsisalackofunderstandingofcontext.Libertarianinterventionsshouldbe madeonacase-specificbasis,asexpoundedinMuramatsuandBarbieri(2017). Alimitedunderstandingofcontextlimitseffectivechoicearchitectureandevaluation.Throughcollaboratingwithstakeholdersinpolicycaseteams,BITscan gathermorerobustframeworksoncreatingaccuraterepresentationsofindividuals'behaviourwhenimplementingpolicy
Typically, a policy unit should start by identifying target behaviours that influence policy issues; taking COVID-19 as an example, policy units identify key behaviours that deter individuals from adhering to proper prevention policies. Diagnostic research is then used to create a sufficient model of societal behaviour,whichstipulateshowbehavioralchangecanbeattained,andtechniquesthat workwellintherespectivecontextwhichfacilitatesthedesignofinterventions. (Dewies,2022)ItisalsoimperativetoreducebarriersthatpreventNudgistsfrom achievingtheirgoalswhendesigningeffectivenudges.Byreducingextraneous factors that complicate policy units' job, also known as “sludge” inThaler and Sunstein'sNudge:TheFinalEdition(2021),stakeholderscanfacilitatethedecision-makingprocess.Akeywayofreducingsludgeisthroughtheclearandspecific stipulation of nudging guidelines. This can be facilitated by adopting the opinionsofbehavioraleconomistsorpeoplewhohavehadfieldexperience.