Shlomo Benartzi, John Beshears, Katherine L. Milkman, Cass R. Sunstein,
Richard H. Thaler, Maya Shankar, Will Tucker-Ray, William J. Congdon,
and Steven Galing, “Should Governments Invest More in Nudging?”
Psychological Science 28(8): 1041–1055, 2017.
• Government nudge units have thrived since the British showed the way in 2010; these units have set up canny defaults or streamlined paperwork or otherwise looked to make presumably desirable behavior easy for individuals to implement.
• But nudges, with their definitionally-low impact on "standard" (monetary, say) incentives, are not the only way to alter behavior, nor necessarily the cheapest. They do, however, tend to be cheap, so even a small behavioral impact might be well worth the nudge expense.
• An e-mail nudge aimed at inducing US military personnel to enroll in a retirement plan increased enrollments in one month from a baseline just above 1 percent to somewhere in the 1.6 to 2.1 percent range; this nudge cannot be said to be wildly effective, but it was so inexpensive that the increased retirement savings per dollar invested were quite large (and orders of magnitude larger than with traditional monetary incentives targeted at inducing savings).
• "To be maximally informative, future policy-oriented behavioral science research should measure the impact per dollar spent on behavioral interventions in comparison with more traditional interventions [p. 1042]."
• The authors identify policy outcomes such as the amount of retirement savings and then scour the academic literature (highly-ranked journals) for relevant studies of both nudge and non-nudge policy interventions, for the purpose of calculating impact (on the chosen outcome variable) per dollar spent. In addition to retirement savings, the outcome variables include energy conservation, college enrollment, and influenza vaccination.
• For each outcome measure, the oomph-per-dollar ratio is highest (easily) with a nudge intervention as opposed to a traditional policy lever aimed at, for instance, monetary incentives. (This is not to say that all nudge interventions are comparative winners, just that the most cost-effective policies are nudges.) Automatic enrollment in retirement plans, for instance, is better at increasing savings (per dollar spent) than is a subsidy such as providing a 50% match for individual contributions.
• Nudges seem to be particularly cost effective when the problem that is being addressed implicates shortfalls in the rationality of individual decisionmaking. In these settings, small changes in the choice architecture can have large effects, whereas monetary interventions to improve the benefit-cost calculus that presumably underlies those individual decisions are both expensive and rather ineffective.
• In some circumstances, nudges and traditional policy interventions might be effective in combination.
• The evidence suggests that the current investment in nudge interventions is suboptimal.
• Government nudge units have thrived since the British showed the way in 2010; these units have set up canny defaults or streamlined paperwork or otherwise looked to make presumably desirable behavior easy for individuals to implement.
• But nudges, with their definitionally-low impact on "standard" (monetary, say) incentives, are not the only way to alter behavior, nor necessarily the cheapest. They do, however, tend to be cheap, so even a small behavioral impact might be well worth the nudge expense.
• An e-mail nudge aimed at inducing US military personnel to enroll in a retirement plan increased enrollments in one month from a baseline just above 1 percent to somewhere in the 1.6 to 2.1 percent range; this nudge cannot be said to be wildly effective, but it was so inexpensive that the increased retirement savings per dollar invested were quite large (and orders of magnitude larger than with traditional monetary incentives targeted at inducing savings).
• "To be maximally informative, future policy-oriented behavioral science research should measure the impact per dollar spent on behavioral interventions in comparison with more traditional interventions [p. 1042]."
• The authors identify policy outcomes such as the amount of retirement savings and then scour the academic literature (highly-ranked journals) for relevant studies of both nudge and non-nudge policy interventions, for the purpose of calculating impact (on the chosen outcome variable) per dollar spent. In addition to retirement savings, the outcome variables include energy conservation, college enrollment, and influenza vaccination.
• For each outcome measure, the oomph-per-dollar ratio is highest (easily) with a nudge intervention as opposed to a traditional policy lever aimed at, for instance, monetary incentives. (This is not to say that all nudge interventions are comparative winners, just that the most cost-effective policies are nudges.) Automatic enrollment in retirement plans, for instance, is better at increasing savings (per dollar spent) than is a subsidy such as providing a 50% match for individual contributions.
• Nudges seem to be particularly cost effective when the problem that is being addressed implicates shortfalls in the rationality of individual decisionmaking. In these settings, small changes in the choice architecture can have large effects, whereas monetary interventions to improve the benefit-cost calculus that presumably underlies those individual decisions are both expensive and rather ineffective.
• In some circumstances, nudges and traditional policy interventions might be effective in combination.
• The evidence suggests that the current investment in nudge interventions is suboptimal.
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