Nudge, Fun Theory and the role of incentives in libertarian paternalism

Recently Richard Thaler featured with the Op. ed. in the New York Times:  Making Good Citizenship Fun. In this he mentions the Piano Stairs of Volkswagen sponsored Fun Theory as a prominent example of how government may include positive reinforcement as an effective tool to encourage citizens to engage in civic behavior.

As readers of this blog are likely to have noticed we have our qualms and concerns with the validity of the Piano Stairs of Volkswagen Sponsored Fun Theory as well as with the place of Fun Theory within the nudge approach to behavioral change.

On the first node, there is little evidence of (if any at all), and we have little reason to believe that the piano stairs work outside touristic settings. On the second node, the piano stairs introduces incentives and thus breaks with the definition of a nudge.

Still, in our outreach work (lectures, workshops, etc.) we constantly experience how strongly attracted decision and policy makers are to Fun Theory - even when the arguments are put forth and the missing validity is pointed out....

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Nudging traffic safety by visual illusions

Can you count the black spots? Traffic is fast and dangerous, and often it's fractions of a second that matters. While regulation and incentives are already in place, it's impossible to cover any situation and keep these structures in mind all the time. Using optical illusions like this one seems to be the perfect way to nudge traffic safety on the spot. Here follows some great examples for reflection.

READ THE IMPROVED AND REVISED VERSION OF THIS TEXT

By Pelle Guldborg Hansen & Andreas Maaløe Jespersen

Nudging by visual illusions

Traffic is fast, furious and dangerous....

Nudge - By Definition

By Pelle Guldborg Hansen & Andreas Maaløe Jespersen

Confusing confusion


"The definition of nudge is vague and more work should be done on clarifying this before we can consider..." 

"Nudging is basically about controlling incentives - penalties and rewards..."


These are just some of the remarks we are often confronted with - even by Academics, including people who sit on boards and committees who's function is to hand out money and thus invest and direct future research.

(PLEASE VISIT AND SUBSCRIBE TO OUR NEW SITE)

What is most disturbing about this, isn't that these remarks are plain wrong. Rather, it's that they seem to result from people confusing their own confusion with regard to some simple facts and concepts that may quite easily be checked.

Nudge - by definition
On page 6 in both the US and UK version of Thaler & Sunstein's Nudge: Improving Decisions about Health, Wealth & Happiness (2008) it is written that:  

A nudge, as we will use the term, is any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid.

Now superficially, this may seem as a straight-forward definition liable for vagueness. However, what one has to remember, that this definition is coined against the background of behavioral economics. 

If you don't have the time or patience to sit down and work through the literature in this field, this is the rule of thumb: any intervention that would influence an unbounded, unrestricted rational agent, is not a nudge. Hence, a nudge does not invoke incentives - positive or negative.

At a more abstract level, a direct consequence of this is that 'a nudge' is defined as effecting a deviation from mathematically well-defined baseline models. Hence, saying that the definition of nudge is vague is straight-forwardly wrong.

A problem with the original definition   

However, the attentive reader will by now have discovered a flaw in Thaler & Sunstein's original definition (we think it is an unfortunate simplification). 

The payoff-functions of rational agents are affected by other things than mere economic variables. For instance, the expectation of cake, electric shock or social ostracism. Hence, restricting the definition to economic incentives seems wrong. For this reason we usually adopt the definition provided by Hausman & Welch (2010):

Nudges are ways of influencing choice without limiting the choice set or making alternatives appreciably more costly in terms of time, trouble, social sanctions, and so forth. They are called for because of flaws in individual decision-making, and they work by making use of those flaws. 

(Hausman & Welch 2010:126)

God and evil nudges
However, while Thaler & Sunstein as well as Hausman & Welch extends the notion of 'a nudge' to cover any attempt of influencing behavior - well- or ill-intended (in fact, Thaler & Sunstein's notion is even broader) - we suggest limiting the notion to only well-intended for several important conceptual reasons of conistency.*

Nudge - US paperback version 

Nudge US hardcover version

Nudge UK paperback version

This post draws on points from a forthcoming journal article of ours. Thus, if you intend to cite or use points from the above, please contact us.  

Nudge: when knowledge becomes a Democratic challenges

By Pelle Guldborg Hansen & Andreas Maaløe Jespersen

Some days ago we were asked by the leading Danish forum for communication professionals to write something up about the nudge-doctrine. You may find the result HERE.

While it's in Danish, Google translate shoudl be able to do the job.

Why nudging is better than the fat tax and other tools of the trade

By Andreas Maaløe Jespersen & Pelle Guldborg Hansen

"We do not first see, then define,
we define first and then we see."
              - Walter Lippmann (cited in Plous 1993)

Taxation and regulation are the traditional tools of the trade in policy-making. Thus, we've just seen here in Denmark how policy-makers have tried to prevent people from eating unhealthy foods: the fat tax. 


But honestly, in the months that have past we are yet to actually observe someone saying "ooohh, my Danish pastry costs 9 cents more than a couple of months ago. I better cut down!" Is someone actually expecting this tax to change behavior? We doubt it, but let's play along.  


Tools of the trade
What the fat tax seems to confirm is the old saying: "If all you have is a hammer, everything looks like a nail." (and additionally: if everyone expect you to use a hammer, they'll accept it, no matter how stupid the idea). 

credit to africa

In our jurney outside of Academia we've started to learn that this not only holds true in research, but also in the worlds of policy-making, marketing and advertisement as well. Seeking to influence behavior, policy-makers readilly opt for taxation and regulation, doctores opt for medicine, intellectuals opt for talking and teaching, and the advertising and marketing industry opt for hillariously expensive campaigns featuring material or events with half-naked women or celebreties (and often cutting expenses by finding someone who is both). 


We've also been confirmed in our belief that when policy-makers learn that their attempts to influence behavior by taxation and regulation fails, or when they find these meaures to be too invasive, they have for a long time turned to the advertisement and marketing industry - perhaps because it seems to be the most fun alternative. 


Measuring success
Yet, how is success usually measured in these branches? Well, the success of a new tax often seems to be measured by the tax collected, talk and teaching by the number of people who listens, and advertisements by the number of people who remembers to have seen the half-naked celebrety. 


The most recent plague in this business seems to the success meassured by the number of people signing up to a facebook group, or the number of people that have clicked a video on youtube - after all, numbers are objective, right?


However, notice that none of these approaches actually measures behaviour change! 


Self-fulfilling prophecies
When the rare occassion do happen and impact is actually measured on behavior or parameters closely associated with this, the tools of the trade are often given a biased evaluation. When these tools are seen to work (even the slightest), it is usually taken to confirm that we are using the right tools, but when they don't, it is just taken to confirm that we have not applied them with enough force. In sum: raise the taxes, harsher punishment, more information, more education, and more... well, half-naked celebreties.


Depending on one's point of view, this may be seen as (1) a reaction to sunk costs based on loss-aversion, (2) a reaction to the cognitive dissonance arising from being wrong, while at the same time believing oneself to be flawless, or (3) confirmation bias.

However, the most interesting reaction are the rare occasion where the tools of the trade are recognized to fail. In these cases, the people responsible for the behavior targeted are blamed.  Had they just been super-rational economic beings - as we all would like to be - they would have reacted in the way intended and according to their own interests. They're to blame! Not us!


Nudge
Readers of this blog will know that Nudge offers a different set of tools aimed at influencing the same behavior as usually targeted by the tools of the trade. However, it is important that we remember not to make the same mistake as the more "experienced players" in the game of behavioral change. 

Thus, it is important to remember that the nudge-doctrine is not a catch-all strategy that completely wipes out the need for more traditional policy measures (a). Nor does signs of success imply with necessity that we should always be restricted to keeping within the nudge-doctrine. There might be cases where stronger interventions are needed.

Instead Nudge should be seen as an addition to the already existing toolbox.

Still, the nudge-doctrine does possess one strict advantage over other tools of the trade. It expands the perception of what is constitutive of the behavior targeted and requires a good account of this behavior.

When we fail, we're to blame - not them.

Report no.1: ISSP Public Lecture w. Richard Thaler

By Pelle Guldborg Hansen, Andreas Maaløe Jespersen & Katrine Lund Skov

On October 21 the long anticipated ISSP Public Lecture 2011 was given by Richard Thaler at the Metropolitan University College in Copenhagen. 


More than 200 citizens, business representatives, academics, and policy makers had decided to use the Friday of the Danish one week "potato-holiday" to attend Prof. Thaler's lecture on Nudging.


The lecture
The lecture was arranged through the Danish Nudging Network in collaboration between ISSP, the Metropolitan University College, University of Southern Denmark, Trygfonden, the Danish Cancer Society, MindLab, DEA, and Aalborg University with the aim of giving anyone with an interest in our general 'health, wealth and happiness' a first hand encounter with the nudge-doctrine and one of its 'founding fathers'. The encounter became both intimate, deliberative and entertaining.

Throughout the lecture Prof. Thaler stayed close to the main tenets of the underlying book Nudge: Improving Decisions about Health, Wealth and Happiness (2008) thereby truly respecting the fact that the idea of nudging is new to most people in Denmark. As a result the audience got an impression of the original motives underlying the writing of the book as well as its core ideas.

The lecture covered several 'high-impact' examples of nudging such as schemes for private pension systems and sign up procedures for organ donation. But it also presented some concrete examples from the world of design, architecture, and law, such as badly designed stoves, school lunch rooms, and mobile calling plans.

Common to all of the various examples Prof. Thaler presented was that they each showed in one way or another, how accepting and respecting the psychology of human decision making in the way we arrange the details of the physical, social, and juridical structures that underpin our decisions and behavior may make a significant difference on society and our individual well-being.

Questions and answers
After 1½ hour the ISSP Lecture concluded with a relaxed Q&A. The questions reflected the broad variety of interest represented in the audience. "Will nudging make us less capable of handling choices in the future?"  and "What separates nudging from manipulation?" were some of the questions asked thereby showing that the ISSP Lecture served its purpose of allowing people first-hand interaction and engagement with Nudging and one of its founding fathers.

In the picture you can see Prof. Richard Thaler (sitting), Co-Director of ISSP Pelle Guldborg Hansen (standing), Anders Hede (Trygfonden, back to camera), Science Journalist Peter Hesseldahl (background to the right) Credit: Tobias Egmose

However, to find out what Prof. Thaler answered to these question you have wait a little while...


While waiting you might want to read about the perfect way to nudge yourself to freedom.

Interview with Richard Thaler and Guldborg Hansen

By Pelle Guldborg Hansen

Yesterday, The Engineer - a newspaper with approx. 60.000 subscribers (mostly engineers for some odd reason!) - featured a long article about nudging. The article incorporates and is based on an interview with Prof. Richard Thaler (Chicago Booth) and Pelle Guldborg Hansen (Co-Director of ISSP and Chairman of the Danish Nudging Network) given Oct. 22 - the day after Prof. Thaler's ISSP Public Lecture about nudging held at Metropol.

The article is written by Robin Engelhard who is a highly respected science journalist in Denmark. The interview shows why Robin Engelhardt is highly respected - it is both sound, critical and balanced.

If you know how to read Danish (or just how to use google translate), but don't subscribe to The Engineer you may read the unedited edition of the article at Robin's Depot.

Public Lecture: Richard Thaler in Copenhagen

ISSP and Danish Nudging Network are proud to present professor Richard Thaler on 21 October in Copenhagen.

Thaler is a Ralph and Dorothy Keller Distinguished Service Professor in Behavioural theory and-economics at Chicago Booth, but most notably renowned for, together with Cass Sunstein, having written the book Nudge – Improving decisions about health, wealth and happiness (2008).

On 21 October (The Autumn holiday Friday) at 10:00-12:00 we are able to present a large public lecture with Thaler.

The event will be held at:

Professionshøjskolen Metropol, Campus Rådmandsmarken, Sigurdsgade 26, 2200 København N.

The purpose of Thaler’s visit is to increase awareness about the Nudge paradigm amongst the public and policy makers, especially in regards to the preliminary results, the future potentials and the immediate reservations in relation to this.

The Nudge paradigm has already gathered a large following and prevalence in the US and UK. Sunstein is advisor for president Obama’s administration, while Thaler has been special advisor for the British ”Nudge-Unit”, which in recent years has worked on integrating insights from behavioural economics into British health policy.

Sign up for the event

The event is coordinated by Danish Nudging Network, with ISSP, Kræftens Bekæmpelse, TrygFonden, Mind-Lab, Metropol, University of Southern Denmark, Aalborg University and DEA as leading forces.


Next post: Why the piano-stairs are not a case of nudging

2nd meeting in the Danish Nudging Network

By Pelle Guldborg Hansen & Andreas Maaløe Jespersen

September 21 is approaching fast - the date that ought to be in your calendar if you're considering having your institution or organization incorporate nudging in its approach to behavioral change.  

Since our first meeting in the Danish nudging network in January 2011, interest as well as members in the network have been rising fast - as well as the number of talks that Andreas and I have been giving throughout Denmark.

Thus, we couldn't have been happier, when Richard Thaler said he would come to Denmark October 21 to help us raise awareness about the potentials that the Nudge approach offers to decision and policy makers.

So what's so special about September 21?
Well, since we know that a lot of you would like to know a bit more about nudging and prepare yourself properly for Prof. Thaler's visit, we've decided - in the true spirit of the nudging paradigm - to have the 2nd meeting of the nudging network EXACTLY one month prior to October 21. That should be easy to remember!

At the meeting new as well as old members will be introduced to the basic ideas behind the nudge paradigm, some of the major societal challenges that nudging may offer a new approach to engage with, as well as some lessons from the recent debate on nudging in the UK.

You may find the programme on page 3 of the Network's most recent newsletter HERE.

The meeting will be held at 

Metropolitan City University in Copenhagen

Pustervigvej 8, 2. sal, 

1126 Copenhagen

You may sign up by writing an e-mail to Andreas Maaløe Jespersen: anmaje@ruc.dk.

But do also remember to register for the Public Lecture by Richard Thaler October 21 HERE.

Also - please remember to share this post with interested collegaues and friends! 

The meeting is organized in collaboration by: