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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Yes! We are on CNN.com!

I promised to say when it would happen.

Richard Thaler, Robert Cialdini, and David Halpern... they are definitely on the top 5 list of my intellectual heroes. Needless to say, I'm very proud to see my name next to theirs... and then it's on CNN.com.  Now I've said it and tomorrow will be one of those days where our hard work will feel a little less hard.

Remember to follow us by subscribing on WWW.INUDGEYOU.COM and then check out:

http://edition.cnn.com/2012/02/08/tech/innovation/green-nudge-environment-persuasion/index.html

Sincerely yours, Pelle

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.

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By Pelle Guldborg Hansen & Andreas Maaløe Jespersen

Nudging by visual illusions

Traffic is fast, furious and dangerous....

Green nudges: saving trees by default

Credit: David Castillo Dominici

Computers and the Internet could save us millions of trees as well as dollars each year. Still, we stick to our habits and keep on harming the environment because of the status quo bias. In this post we give you a neat little trick to help you save the environment as well as your money - nudging the default.    

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Teaching and preaching
Though, we now read books on our iPad's and Kindles, research papers on our laptops and buy train tickets on our smart phones there is still one place where we use a great amount of paper – our educational institutions and our workplaces.

I remember when I was just a little girl our teacher used to preach about how there wouldn’t be any trees to climb, if we weren’t careful with the paper we used. Usually, these sermons were more like prayers since it would only take a short while before we had slipped into our usual habits for using paper - after all, it seemed that no matter how much paper we used, the trees were always there in the school yard the next day.

Obviously, it isn’t only children who are immune to these kinds of preaches. Adults are as well. So how do we nudge people to save paper, short of providing the feedback by cutting down trees outside their windows?

Handing in your paper assignment

Each semester millions of students hand in their essays and assignments on printed paper. Multiply these millions of assignments with the number of the pieces of papers and you could probably reach the moon.

Credit: Salvatore Vuono

For instance, a very conservative estimate for Denmark would be that there are approx. 200.000 students. If each hand in 20 pages twice a year (very very conservative estimate), that makes 8.000.000 pieces of paper. A piece of paper weight 4,8 gr. Thus, the total weight would be 38.400 KG paper. According to some websites it takes 1 tree to produce 2,6 KG of paper. That makes 14.769 trees!... just for the number of university assignments handed in! 

By the way 2,6 KG is what one of those boxes of office paper weights - so it seems that you're cutting a tree down for every box that you open.

(We would be very happy if anyone out there has more precise numbers)

Saving trees by default

While most of us already think of the world in a sustainable perspective by default, few of us have truly aligned our behavior and decisions with this. We mostly do our work and business as usual, and only activate our environmental perspective when prompted.

However, Rutgers University decided to nudge themselves by having their printers switched to printing double sided by default. This saved 7 million sheets of paper in just one semester!

Status Quo bias
Studies as well as real interventions thus show that just by installing printers with the standard option of printing doubled-sided as a default makes us much more likely to use this option.

Why? Because of the status quo bias.

You, or let's say a friend of yours, is probably familiar with buying a magazine subscription because it came with a free gift. But your friend probably also used an unplanned amount of money on the magazine subscription afterwards, because he didn’t make the necessary phone call to cancel the subscription again. Or perhaps your screen saver is still the same as when you received your computer? Or, you still haven't signed up for organ-donation, although you would be willing to donate your organs if the relevant worst case scenario should arise.

Credit: digitalart

You can blame all of this on the status quo bias. The status quo bias keeps us from changing how things are, and instead leaves us floating with the stream.

But as well as magazine companies can take advantage of this bias, it can also be nudged to work in our favor. By installing doubled-sided print as the default, you have to be prompted by a special reason to print one-sided papers before you care about switch the print option back to one-sided prints.

This is an easy change, with a massive beneficial result to help our environment.

How about you - what is your printer set up to?

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By Katrine Lund Skov 
with Pelle G. Hansen (since he was never a little girl)

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.

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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 in business: mission impossible or win-win?

By Andreas Maaløe Jespersen & Pelle Guldborg Hansen

The nudge-doctrine is primarily developed as a strategy for creating smarter public solutions in health, economy and citizenship. But as the idea has evolved and disseminated, private companies and non-profit organizations have shown a keen interest in adopting nudge-like strategies as well. 

Credit to Xedos4

Businesses in the private market have a long history of using behavioral strategies when engaging with their customers, and they definitely have a lead on the public institutions when it comes to knowledge about their customers behavior and how to affect it. 

In the private market this has traditionally been referred to as marketing strategies, and it covers everything from fancy "buy one get one for free" offers to the supermarket's space-management that always makes us buy more than we thought we needed. 

At just a quick glance marketing and nudge could easily be confused as being the same thing - they both shape behavior by adjusting the context in which we choose or our perception thereof, and they both aim at actual behavior change rather than just information change. But in fact, there is especially one key factor that separates nudging from marketing, and prompts the question “is nudge really a viable strategy for businesses?” 

The key to unlocking the answer is found in the observation that in traditional marketing, there is no real need for the concept 'nudge'.

This crucial element for this difference is that a nudge by definition aims at making people better of: according to their own reflected judgment. This means, that when we nudge people, we have to make certain that we nudge them in a direction they themselves would have taken if they had thought things through and following had unlimited energy to constantly monitor their preferences, without restricting those who reach different conclusions than then one nudged for. 

Credit to Xedos4

Marketing usually aims at increasing profits, and usually does this without considering what people would actually prefer if given the time to think things through. As a result increasing profits often make people worse off according to their own judgment. No one thinks that leaving a supermarket having spend 30 pct more than they initially planned actually leaves better them off (especially not when the 30 pct is spend on items that will also ruin their desire to loose weight), and who is really satisfied by watching money disappear every month for a fitness subscription they no longer use?

Of course, when it has already happened, we are rarely willing as consumers to admit our own failure, and to resolve the resulting cognitive dissonance we come up with reasons that rationalize our actions to save our self-image as rational and responsible decision makers.  

The difference between nudge and marketing comes down to which end we aim to satisfy - the customer's or the business? Unsurprisingly these elements are not as incompatible as they initially seem - take a company like Apple - who have made a hefty profit of supplying their customers with gadgets that are user friendly and intuitive, or a company like Amazon how have revolutionized customer service from something that used to be painful and slow to a pleasant hassle free process.


In fact, a hall-mark of paying proper attention to the nudge-doctrine and getting acquainted with insights from behavioral economics, cognitive psychology and marketing is that it open up new alleys for identifying win-win strategies in the interaction between marketing and consumer welfare. Why not sell more mineral water instead of more softdrinks? And why not sell more whole wheat bread instead of bad white toast bread?   

If businesses are serious about nudge - we hope that the future will bring supermarkets that make you healthier by default, fitness subscriptions that automatically goes on time-out when you're not using them and plane tickets that actually state the full costs before you buy them - only by then can the market truly be said to be nudgers.

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.