Innovate with a Nudge?
Behavioural nudges are clever policy tweaks often used by governments to influence the choices that people make. They are often found to be more effective and less costly than direct actions such as quotas, taxes or subsidies. Here are some simple examples:
- Putting calorie counts on menus encourages people to make healthier choices – salads instead of french fries.
- Changing the default position – e.g. so that everyone is enrolled into a pension scheme unless they deliberately opt out.
- Showing peer reviews e.g. for companies, products, hotels or restaurants
The concept was popularised in the influential book, Nudge, by economists, Cass Sunstein and Richard Thaler, published in 2008. In 2010 the British Government set up a Behavioral Insights Team (BIT), which became known as the ‘Nudge Unit’. Its aim was to save at least ten times its running cost. In fact its innovative actions have saved over 20 times its cost and the approach has been copied in many other countries.
In 2013 the BIT sent out thousands of letters to school students from poor backgrounds, who typically did not apply to top universities. The letter was from a student named Ben at Bristol University and he explained that the top universities often had more financial aid for poorer students and gave better job prospects. The students who received the letter were found to be more likely to apply to and attend prestigious universities.
Ideas42.org is a non-profit group founded at Harvard University whose mission is to use the power of behavioral science to design scalable solutions to some of society’s most difficult problems. You can see examples of their various projects on their website. In 2015 the World Bank established a group to help developing countries use nudge policies.
The behavioral psychology behind nudges can be summed up in a mnemonic used by BIT – EAST. Make things Easy, Attractive, Social and Timely and that will change behavior. As reported in the Economist, in the USA the filling of university application forms for poor students was made easier by pre-filling the forms with data from other sources.
This simple action increased applications from the target group by 25%. The social side is important. Stressing that most other people in their neighborhood paid their taxes on time encourages people to do the same.
Timing the offer can make a big difference. People should not eat before a diabetes test. A medical center in Qatar found that it increased participation rates by offering diabetes screening during Ramadan when people were fasting anyway.
Critics say that nudge policies are patronising or manipulative. But all citizens, customers and employees have to make choices. Why not incentivize them to make better choices? Go east. Encourage people by making the offer easy, attractive, social and timely.
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Paul Sloane writes, speaks and leads workshops on creativity, innovation, and leadership. He is the author of The Innovative Leader and editor of A Guide to Open Innovation and Crowdsourcing, published both published by Kogan-Page. Follow him @PaulSloane