Banerjee and John (2021) on Nudge Plus

Sanchayan Banerjee and Peter John, “Nudge Plus: Incorporating Reflection into Behavioral Public Policy.” Behavioural Public Policy, 1-16, 2021, available at https://doi.org/10.1017/bpp.2021.6.

• Should we embed a prod for people “to reflect” into System 1 nudges? Such a prod is the “plus.” [The authors themselves seem to equate nudges (or perhaps "classic nudges" with System 1 nudges; the "plus" activates a System 2 element in conjunction with a System 1 nudge.]

• Bundling a nudge with a plus makes nudges more salient.

• People need actual reflection, not just “the potential for reflection [p. 2].”

• Thaler and Sunstein consider that a legitimate nudge must be one that would receive wide assent if everyone were informed about its aim and operation. This restriction would rule out manipulating people in ways that harm them. Nonetheless, such a legitimate nudge might, when it is affecting choice, remain hidden, invoking an automatic, System 1 response.

• Nudge plus wants to extend the transparency, so that just about everyone understands what is going on in the choice moment. Actors maintain their autonomy, though without being required to pay extremely close attention or to engage in strenuous cognitive processing. 

• Commitment devices are a nudge plus, because the need to consider whether to sign up for the device spurs the requisite reflection; likewise with cooling-off periods.

• People often choose not to use GPS on familiar routes – they are thinking, they are not being “tricked into using the device heuristically once again [p. 7].” For them, GPS is a nudge plus.

• Adding a regular prompt to set a future fitness goal turns an otherwise ordinary fitness tracker into a nudge plus.

• But… do people really desire this “experiential learning environment [p. 10],” this near necessity to reflect regularly, at least to some extent?

Špecián (2019) on True Preferences

Petr Špecián, “The Precarious Case of the True Preferences.” Society 56(3): 267-272, June 2019.

• Are voluntary trades (with no spillovers) Pareto improving? To assert that they are suggests a belief in coherent preferences. This is the standard economics approach: choices reveal underlying, true preferences.

• Behavioral evidence undermines the belief that choices reveal true preferences. Nonetheless, nudges aim to make people better off “as judged by themselves," so there is an appeal to some underlying true preferences from which those judgments emerge.

• But when can we know that people's un-nudged choices do not reflect their true preferences? How can we determine which preferences should be disregarded or questioned? Signposts of potential irrationality might include rare choices, intertemporal choices, choices involving temptation goods…

• Can we rely upon cold-state (as opposed to hot-state) preferences, or long-run, considered preferences, as somehow being "true" preferences? But maybe these proclaimed "more considered" preferences reflect social norms and are just marketed for public consumption, even as people really want to be Mr. Hyde, not Dr. Jekyll. 

• Perhaps Sugden (2008) is right, perhaps there are no underlying coherent preferences at all.

• Nudgers might believe that their interventions make matters better in practice even if these fundamental questions about how to judge individual welfare remain unresolved. [That's pretty much my view, too -- JL] Nudgers should be humble, and wary of overconfidence.

Benartzi, Beshears, Milkman et al. (2017) on Government Investments in Nudges

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.

Cronqvist, Thaler, and Yu (2018) on Long-Lasting Nudges

Henrik Cronqvist, Richard H. Thaler, and Frank Yu, “When Nudges are Forever: Inertia in the Swedish Premium Pension Plan.” American Economic Association Papers and Proceedings 108: 153-158, 2018.

• Perhaps nudges such as default settings initially are quite powerful, but over time lose their influence as people get around to shifting to a preferred option.

• The Swedish Premium Pension Plan was initiated in 2000, and by 2016, served more than 7 million Swedes. The nudges that accompanied that plan have proven to have long-lasting consequences.

• One nudge concerned the default pension plan that savers were placed into if they didn't explicitly choose one of the hundreds of options. 

• A second nudge involved trying to convince savers that they indeed should make a positive choice themselves, that is, that they should override the default. This second nudge was surprisingly effective, in that 2/3 of the initial pension participants made an explicit choice of their investment portfolio. 

• But this second nudge only operated at and near the inception of the plan, in which the large initial cohort (4.4 million people) entered the pension scheme. The annual flow of new entrants then became much smaller, with less than 200,000 entering in 2016. As a result, the public and private advertising which constituted the second nudge dissipated within a few years. The percentage of enrollees choosing their own portfolio in subsequent cohorts fell to less than 10 percent by 2003, and after 2007 has always been four percent or below. 

• Those in the initial, large cohort who stayed with the default tended to continue with the default, though more than one-quarter of them did eventually choose a different portfolio. Of those who initially chose to make their own portfolio choice, less than three percent later decided just to go with the default. They also displayed quite a bit of attachment to their initial portfolio choice, even though they could alter it more or less continuously if they so chose. 

• The features of the default fund changed markedly in 2010 and 2011, removing a bias towards investments in Swedish companies (2010) and increasing the amount of leverage significantly (2011). These major reforms did not seem to alter the attractiveness of the default, few people opted out even though the financial characteristics of their pension plan were significantly changed.

• A 2017 corruption scandal at one of the leading pension funds also was not met with the huge abandonment of that fund that might have been expected.

• The Swedish pension nudges have had very significant, long-term effects! Nudge wisely!

Duckworth, Milkman, and Laibson (2019) on Willpower and Beyond

Angela L. Duckworth, Katherine L. Milkman, and David Laibson, “Beyond Willpower: Strategies for Reducing Failures of Self-Control.” Psychological Science in the Public Interest 19(3): 102-129, 2019.

• Higher self-control is associated with many good things -- but people struggle with self-control.

• Various models (such as dynamically inconsistent preferences) have been proposed to try to capture the workings (and failures) of self-control, and many strategies are deployed to try to bolster self-control. Exhortations to show more willpower, to just say no, are not that effective. That is, relying on willpower alone, as opposed to other strategies, is almost to give the game away.

• Strategies that try to make willpower more effective can usefully be categorized. In particular, some try to alter the situation (Situational strategies), and some try to target how the decision maker thinks about a given situation (Cognitive strategies). Further, some are undertaken by the decision maker herself (Self-Deployed strategies) and others are enacted by various outside actors, choice architects, including employers and regulators (Other-Deployed strategies). Self-Deployed strategies require that the decision maker understand, at least to some extent, her self-control shortcomings -- in the usual terminology, she must be somewhat sophisticated (not naive) about her intertemporal inconsistencies.

• Four categories of self-control strategies emerge within this two-dimensional framework, then: Self-Deployed Situational Interventions; Self-Deployed Cognitive Interventions; Other-Deployed Situational Interventions; and, Other-Deployed Cognitive Interventions. The authors list and discuss various strategies within each of these categories.

• Self-Deployed Situational Interventions attempt to manage the environment to reduce the need for self-control; such strategies include: deleting a game from your phone or employing other commitment devices (or commitment contracts) that reduce temptations or raise their effective prices; temptation bundling; removing temptations from view (which is one way to raise their effective price); and behavior therapy, such as removing "cues" from your environment when fighting an addiction.

• Self-Deployed Cognitive Interventions include: goal setting (which might be undertaken in public or in private); dividing the goal into bite-sized subgoals, and allowing for small wins along the way; explicit planning and implementation intentions (developing a detailed map of how a goal will be achieved); intensive self-monitoring (such as weighing yourself every day); psychological distancing from temptations or from interpersonal problems; mindfulness and cognitive therapy (generally provided in the form of Cognitive Behavioral Therapy).

• Other-Deployed Cognitive Interventions (which might not be recognized by the targets) include: descriptive social norms (like energy use by others in your neighborhood); social labeling (which might motivate you to live up to your identity, as a green consumer, say); age-processed renderings or other techniques to make one's own future self more relatable; and fresh-start framing, as with new year's resolutions.

• Other-Deployed Situational Interventions include: hard paternalism (e.g., social security, high sin taxes); microenvironments (healthy food placed at eye level); default settings or active choice mandates; requirements for choices to be made in advance; and planned interruptions (such as a mandated break on a slot machine, say).[Incidentally, as Loewenstein points out, hard paternalism does not bolster self-control but eliminates the need for self-control.]

Dai and Luca (2018) on Restaurant Hygiene Scores

Weijia (Daisy) Dai and Michael Luca, “Digitizing Disclosure: The Case of Restaurant Hygiene Scores.” Harvard Business School, Working Paper 18-088, 2018 [pdf of 2019 version here].

• San Francisco does not mandate that restaurants post their hygiene scores – which are public information generated by unannounced inspections – but is willing to facilitate the posting of the scores on Yelp. (The scores already are available on the City's Department of Public Health website -- but people don't usually go there to order food online!) The (common) reluctance to require disclosure by the restaurants themselves might draw in part from restaurant industry opposition.

• Two interventions are examined: (1) Yelp posts the hygiene scores on its restaurant webpages; and (2) Yelp makes low scores salient via a “hygiene alert” box (which covers the customer reviews part of the Yelp listing)

• A “Poor” restaurant hygiene score (70 or below) results from multiple high-risk violations

• The hygiene alert box informs the webpage visitor that food safety is the point of the hygiene score, and that the score is based on government inspection; further, the alert reveals that the restaurant received a Poor rating in its most recent review, which puts it in the bottom 5% of hygiene ratings.

• Prior to the Yelp interventions, less hygienic restaurants see slightly lower consumer purchasing intentions than do their more hygienic counterparts. Those purchasing intentions are measured via Yelp page visits, “leads,” and the number of Yelp reviews. A "lead" is tallied through various behaviors by online shoppers, such as calling the restaurant, seeking directions to the restaurant, or checking out the restaurant's own webpage (as opposed to its Yelp listing).

• Leads and Yelp reviews respond in the expected direction to Yelp posting of the hygiene scores; Yelp (star) ratings do not

• “Poor” restaurants see a 12% decline in leads compared to the non-Poor

• The salience intervention enhances the posting effect: take-out orders for Poor restaurants fall 12.8%. That is, how information is disclosed seems to matter, along with the disclosure itself.

• Poor restaurants seem to be (somewhat) motivated to clean up their act after Yelp posts the alert

Cooke, Diop, Fishbane, et al. (2018) on Failure to Appear in Court

Brice Cooke, Binta Zahra Diop, Alissa Fishbane, et al., “Using Behavioral Science to Improve Criminal Justice Outcomes: Preventing Failures to Appear in Court.” ideas42 and the University of Chicago Crime Lab, January 2018 [pdf].

• In NYC in 2014, about 41% of summons to appear in court for minor infractions went unheeded.

• Missed court hearings are costly to the court and to the defendants, who have a warrant issued for their arrest.

• But perhaps behavioral factors, not preferences, are at the root of many missed court dates; maybe people forget, or fail to plan to miss work, or don’t understand the consequences, or just aren’t paying adequate attention. (Court dates can be months after the offense.)

• Perhaps present bias leads to failures-to-appear (FTAs): the benefits of skipping a court date are immediate and the (uncertain) costs are in the possibly distant future.

• “Mental models” (such as the belief that minor offenses do not warrant a court appearance) and perceived social norms (a belief that most people don't show up at court for minor matters) might also lead to FTAs.

• The researchers redesigned the summons form, to: (1) increase the clarity of the message that the form constitutes a summons to court; (2) highlight date, time, location for the court appearance; and to (3) foreground the consequence (an arrest warrant) for failing to appear. 

• The researchers also instituted a series of text message reminders about the court date. Some reminders focus on consequences of a missed court date, and some on planning. The sample size for this intervention is about 20,000. 

• Both interventions are analyzed as randomized trials. 

• The new summons forms reduce FTAs by 13%. 

• The most effective text messages reduce FTAs by 26%; and, when a further text message is sent to those who miss their court dates, the end result is a 32% reduction in warrants issued. 

• The researchers estimate that the two interventions (redesigned form and text reminders), combined, could have reduced FTAs in 2014 by 20,000 to 31,000 or so. 

• Incidentally, text messages are really cheap to send, but most arrestees currently do not provide a cell phone number.

Professor Thaler’s Nobel Prize Speech (2018)

Richard H. Thaler, “From Cashews to Nudges: The Evolution of Behavioral Economics.” American Economic Review 108(6): 1265–1287, June 2018.

• "In the beginning there were stories [p. 1265]." Those stories were of anomalies with respect to the standard economic model of rational choice. For instance, the "cashews" in the title refer to an incident where guests thanked then-graduate-student Richard Thaler for rendering inaccessible the pre-dinner snacks: the guests seemed to believe that the loss of the option to eat cashews made them better off.

• A key development in behavioral science was the work of Kahneman and Tversky, which indicated that departures from fully rational behavior are systematic. This non-randomness suggests that modifications of the rational model could do a better job at explaining behavior. Further, Kahneman and Tversky's prospect theory offers a simple explanation for some of these systematic departures.

• Standard economic theory often is presented as a descriptive theory of how people choose as well as a normative theory of how people should choose. It is better at the latter (normative) task than at the former (descriptive) task. 

• Thaler and Shefrin propose a planner/doer model of intrapersonal (or intra-firm) conflict; the planner component of a decision maker can alter the doer's incentives by employing commitment strategies or deploying the (payoff-compromising) induction of guilt. 

• Economics typically assumes that dollars are fungible, that the best way to spend them is independent of where the dollars originated. But people assign income to different "mental accounts" according to its origin. Some income might be allocated to a mental checking account, so it is psychologically available for spending, whereas other funds might be assigned to mental savings, and therefore, are psychologically unavailable for quotidian consumer purchases. Dollars, in practice, are not fungible -- as anyone who has ever "played with house money" knows. 

• Is it fair to raise prices just because demand increases, as when a snowstorm makes snow shovels highly sought after? Many people (but not many economists!) think that such price increases are unfair, and might punish businesses that engage in such behavior. 

• The endowment effect is when mere “ownership” of an object (like a coffee mug) seems to raise the valuation that the “owner” places on the object. Endowment effects reduce the willingness-to-trade of owned objects, and some of Professor Thaler's work shows that endowment effects are common even when decision makers operate in markets, and when they have opportunities to learn over time.

• Even in financial markets, with their ongoing nature, high stakes, and sophisticated participants, security prices are not always right: for instance, parts of a firm can bizarrely be deemed more valuable in financial markets than is the entire firm (even though the complementary parts are not themselves of negative value). 

• Draft picks in the National Football League are mispriced: the best value for teams seems to lie in draft picks in the early part of the second round. The people making the draft picks might be excessively optimistic about their ability to identify winners when making first round picks.

• In the standard rational choice model, nudges (aspects of the choice architecture that don't affect standard payoffs or incentives) would not have much influence on choices -- but they often do. 

• Some firms try to use nudges to take advantage of those systematic departures from rational behavior on the part of their consumers; Professor Thaler calls this nefarious sort of choice architecture "sludge."

Schwartz and Cheek (2017) on Choice, Freedom, and Well-Being

Barry Schwartz and Nathan N. Cheek, “Choice, Freedom, and Well-Being: Considerations for Public Policy.” Behavioural Public Policy 1(1): 106-121, 2017.

• A (misleading?) syllogism: more freedom means higher well-being; more choice means more freedom; therefore… 

• Nudges constrict freedom of choice 

• Should we maintain free choice (possibly even force people to make choices, as opposed to setting a default, for instance), or promote better choices? 

• The availability of options is increasing in much of the world. But more options can: (1) paralyze; (2) spur regret and dissatisfaction; and (3) undermine the (objective) quality of decisions. 

• Choices can (1) satisfy our preferences; (2) serve as utilitarian means to our ends; and, (3) express something about us. Pleasure (1) and utility (2) both can be undermined by large choice sets. 

• Expanded choice sets provide new options for (3) self-definition. This seems desirable. But they also can increase the expressive stakes for trivial decisions, and those increased stakes need not be beneficial. [Who wants to be judged on what brand of soda they buy?]

• Further, large choice sets might divert increased attention to decisions about material goods, to the detriment of social connections. 

• [Warning!: broad-brush cultural commentary to follow:] Western cultures tend to understand people as individuals, and believe that good societies give wide scope to individualism. Large choice sets, then, are requisite for self-realization. More collectivist societies (including working-class America?) might focus on the interdependencies among people, so that a person’s relations are more important than individuality. People in such societies might prefer reduced choice sets. 

• Older people seem more comfortable with fewer choices, while younger people prefer large choice sets in domains in which they are confident that they can make competent choices. 

• A perceived lack of competence more generally detracts from the desirability of large choice sets – and the competence shortfall might concern knowledge of one's own preferences. 

• Large choice sets can involve a cognitive burden, and might be worse for people already facing resource scarcity. 

• Perhaps the right policy intervention is to encourage people to think through when they are most interested in making careful choices.

Sugden v. Sunstein on Nudging, Round 3: Sugden's Rejoinder

Robert Sugden, “‘Better Off, as Judged by Themselves’: A Reply to Cass Sunstein.” International Review of Economics 65(1): 9-13, March, 2018.

[Round 1 here; Round 2 here]

• Sunstein suggests that welfare is the goal, but that a person’s own preferences might not be the best metric of that goal. This interpretation allows pursuit of the nudger’s interests. 

• The key isn’t preferences before or after the nudge, but rather, when preferences are or aren’t context dependent. If they are context dependent, then those preferences can’t be used to judge what context should be adopted. For "as judged by themselves" (AJBT) to be useful, it must “adjudicate between the judgements that the chooser makes in different contexts.” 

• The acknowledged self-control cases are those in which AJBT seems to work. Are they rare? Sunstein’s survey itself involved a nudge that would lead people to admit to a self-control problem. (Though admittedly, people do take up options that are presented as helping overcome self-control problems.)

• Approving of nudges is not the same as wanting to be nudged, as the first is about a policy that applies generally. 

• AJBT really is part of the defense to objections from anti-paternalists, despite Sunstein’s claim. Why else would one refer to voluntarily installed GPS devices as involving a form of paternalism?

Sugden v. Sunstein on Nudging, Round 2: Sunstein's Turn

Cass R. Sunstein, “’Better Off, as Judged by Themselves’: A Comment on Evaluating Nudges.” International Review of Economics 65(1): 1-8, March 2018.

[Round 1 here; Round 3 here]

• In trying to improve wellbeing, individuals’ judgments of their own welfare are a central metric. This metric is complicated, however, if people have different judgments before and after a nudge, say. 

• Sugden argues that two potential interpretations of “as judged by themselves” (AJBT) are flawed, one by applying only to relatively rare self-control issues, and the second by allowing individual preferences to be sacrificed to the whims of nudgers. 

• Sugden's title asks if people really want to be nudged towards healthier living. The empirical answer is “yes.” 

• AJBT is not our method to rule out charges of paternalism, but rather, to limit the coercive element of paternalistic acts – like a GPS, we want to improve “navigability,” so people can better serve their own interests. Nudges are about means, not ends. 

• Reminders (such as text messages) serve people’s pre-nudge preferences -- likewise with information provision, as with calorie counts. Other nudges can change behaviors in a manner that the nudged individual endorses after-the-fact, but not before, such as a mechanism to dissuade texting while driving. 

• With self-control problems (akrasia), nudges might help to bolster Dr. Jekyll (planner) at Mr. Hyde’s (doer) expense. Sunstein asked folks online if they had a self-control problem: the majority said yes. And programs to ends addictions are quite popular. 

• Yes, preferences can be formed in the process of elicitation; for instance, people might stick with, and endorse, any of various default settings. Then nudgers are forming preferences, but AJBT limits what nudgers can do. 

• To summarize, some nudges serve ex ante preferences when they increase navigability; some help with (widespread!) self-control shortcomings; and some contribute to preference formation, but in a manner that still respects after-the-fact preferences.

Loewenstein and Chater (2017) Put Nudges in Perspective, and Thaler Responds

George Loewenstein and Nick Chater, “Putting Nudges in Perspective.” Behavioural Public Policy 1(1): 26-53, 2017

• Nudging is popular, but perhaps its unintended consequences are worrisome; perhaps, for instance, nudges have crowded out better policies.

• The standard nudge involves a response to a problem that itself is a result of a behavioral issue, a rationality shortfall. But there is no reason that the best type of policy response – whether traditional, behavioral, or a hybrid – should match the condition that gives rise to the problem. Some rationality shortfalls might best be handled with taxes or regulations, not nudges…

 • …though behavioral ideas can help package those taxes or regulations in ways that can maximize their impact.

• One important area of concern involves how to counter the nudging undertaken by profit-maximizing firms, often aimed at taking advantage of consumer rationality shortfalls.

• Many social problems can’t be explained by behavioral issues that should be roughly constant over time and in different areas. These problems perhaps require a structural response, not a nudge. The recent increase in obesity cannot really be due to an increase in present bias; nor will it be fixed by better placement of healthy products in stores.

• Don’t let nudges distract you from seeking more comprehensive solutions. Loewenstein and Chater go on to examine three policy areas from their "perspective."

• Smoking: externalities, internalities, and depredations by sellers all motivate policy responses. Those responses include high taxes, advertising and marketing controls, product placement controls, graphic warnings, public smoking bans – and the combination is effective.

• Obesity: internalities, budgetary externalities, and the behavior of those profit-motivated sellers provoke policy responses. The main response is of the “traditional economics” variety, information provision, and it is not very helpful for what is after all a structural problem, not a big change in behavioral biases or time discounting. Perhaps bans on non-linear pricing are called for?

• Retirement Savings: Internalities, and the behavior of firms like payday loan companies, exacerbate the extreme savings shortfalls that exist. Successful interventions have been behavioral, especially defaults and automatic escalation of savings. Tax breaks are not very helpful, but much more needs to be done.

• Consider big issues, such as inequality, climate change,and employment overhauls: all of these problems need traditional economic responses,and perhaps some hard paternalism – but there still are plenty of contributions that behavioral science can make.

Professor Thaler responds with “Much Ado About Nudging,” on the Behavioural Public Policy Blog, June 2, 2017

• No one really believes that nudges are a panacea. In Nudge, we just want to inform policy with behavioral insights. 

• Likewise, everyone agrees that present bias is not the sole cause of obesity. 

• Don’t undersell the cumulative impact of many small behavioral interventions, including when applied to big problems like climate change. “My own approach to thinking about such problems is to conduct what I call a ‘choice architecture audit’, the goal of which is to find the most critical decisions various actors have to make, as well as the potential levers (behavioral and economic) that policy makers can use to improve outcomes.” 

• There is much to be said for nudging (soft paternalism) over hard paternalism when it comes to dealing with internalities. Either type of policy will push some subset of people in an inappropriate direction: how hard do we want that push to be? 

• We know bureaucrats are biased and often mistaken: do we want them to be hard or soft paternalists?

Arad and Rubinstein (2015) on the People’s Perspective on Nudges

Ayala Arad and Ariel Rubinstein, “The People’s Perspective on Libertarian-Paternalistic Policies,” July 2015. This outline draws on the July, 2015 version of the paper, but a later version (October, 2017) of the paper is available here, as a pdf.

• Two online studies (each n>1000) are conducted with university students in Israel, Germany, and the US.

• In Study 1, subjects either are presented with an opt-in employee savings plan, or a government-mandated opt-out version with an 8% savings default. 

• A large percentage (28-53% across the three countries) of subjects have a negative view of the opt-out version (especially if they are aware of the opt-in alternative), even if they intend to save 8% monthly. Indeed, fewer people indicate that they will take up the 8% savings rate when it is presented as the default than would take it up on an opt-in basis. 

• Study 2 concerns attempts to decrease the consumption of fatty foods. Some measures (taxes, one-day-per-week ban) are hard paternalism, one is a System 1 nudge (shifting the placement of food items on menus), and two are System 2 nudges involving information provision (media campaign, smartphone app).

• The effectiveness of each of the measures in reducing consumption of fatty foods is presented to the subjects, with seven variations. 

• Up to 25% of subjects think that government shouldn’t be in the business of trying to change diets. 

• Most subjects (among those who do not object to the government being involved) seem to prefer whatever measure is most effective. 

• But 19 to 54% of subjects prefer the info provision, even when it is less effective than the System 1 nudge. 

• The “hard” interventions attract little support.

• The October 2017 version of the paper includes these two sentences in the abstract: "The opposition to soft interventions appears to be driven by concerns about manipulation and the fear of a 'slippery slope' to non-consensual interventions. Opposition to soft interventions is reduced when they are carried out by employers rather than the government."

Jung and Mellers (2016) Look at US Attitudes Towards Nudges

Janice Y. Jung and Barbara A. Mellers, “American Attitudes toward Nudges.” Judgment and Decision Making 11(1): 62-74, January 2016.

• System 1 nudges are those that take advantage of our relatively automatic, unthinking mechanism for making decisions – canny default settings are an example of a System 1 nudge.

• System 2 nudges enhance our cognitive abilities, perhaps by providing more information – calorie counts on food items are an example of a System 2 nudge. 

• Study 1 conducted by Jung and Mellers looks at nine System 1 nudges and four System 2 nudges, in an internet-based survey (n=250). Subjects are asked if they are for or against nudges, and then rate the intensity of their feelings on the subject. (If you are unsure, you will be asked to explain why!) Subjects also rate nudges on various scales, such as whether they are a threat to autonomy. 

• Jung and Meller's Study 2 manipulates the “framing” of the nudges, sometimes emphasizing individual effects, sometimes social effects; sometimes highlighting the benefits, sometimes highlighting the avoidance of costs. Attitudes also are collected about companies that institute nudges. 

• System 2 nudges receive more support than System 1 nudges – but one System 2 nudge, where government provides a website that tracks people’s expenditures on food, energy, and so on, is disliked in a System 1-like manner. 

• Also disliked are opt-out organ donation lists, those misleading white lines on Lake Shore Drive, one-click charitable donation opportunities at store check-outs, and credit card online payment mechanisms that default to fully paying off the debt. 

• Empathic folks tend to support System 1 and System 2 nudges; conservatives and individualists tend to oppose both types of nudges. (“Reactant” people oppose System 1 nudges.) System 2 nudges are viewed as more effective, though evidence generally supports the superior effectiveness of System 1 nudges. 

• Framing doesn’t matter much on average, but does matter with some sub-groups; for instance, “reactant” people oppose nudges more strongly when the frame points out the individual costs of not going along. Feelings about companies that nudge basically track the feelings about the nudges the companies implement.

Schulz, Thiemann, and Thöni (2016) on Nudging Generosity

Jonathan F. Schulz, Petra Thiemann, and Christian Thöni, “Nudging Generosity: Choice Architecture and Cognitive Factors in Charitable Giving,” USC-INET Research Paper No. 16-26, September 13, 2016.

• The subjects (n=869) are students at a Swiss university, who are asked at the end of a pen-and-paper study if they would like to donate to charity some of any winnings they make from the experiment.

• In one treatment, the students who indicate that they want to donate to charity must write in a charity name in a blank space. In the alternative treatment, the students are given a list of five well-known charities which they can choose among, along with a blank space in case they want to indicate another charity.

• The one-line summary of the results is that providing a short list of recommended charities, along with a “choose your own” option, doubles the number of donors relative to just having the “choose your own” option.

• The average donation per donor is unchanged, so the “list” treatment also doubles total contributions. Most donations in the "list" treatment go to listed charities; other charities are "crowded out" by not being listed.

• Females donate significantly more than males.

Sugden (2008) on Incoherent Preferences and Paternalism; or, Let Me See Cake

Robert Sugden, “Why Incoherent Preferences Do Not Justify Paternalism.” Constitutional Political Economy 19(3): 226–248, September 2008.

• Standard economics takes individual preferences as sacred; hence, revealed preferences are respected and interference in individual choices, absent externalities, is disparaged.

• Behavioral economics questions whether choices reflect preferences, and whether preferences are stable, context-independent, and rational; as a result, behavioral economics seems to undermine the pre-disposition against paternalistic interventions.

• From the point of view of behavioral economics, nudges are forms of paternalism that are respectful of the deeper concerns about influencing individual choices that traditional economics reflects. Behavioral researchers sometimes argue that because choices are not context-independent, influencing choice is inevitable, so we might as well be paternalistic about it.

• The incoherent preferences that behavioral economists highlight look like a sort of “corrupted data [p. 229]” from the point of view of a welfare-maximizing planner. But if we take Hayek’s approach, we can dispense with the planner, and note that incoherent preferences provide little bits of information about preferences, and that markets can still use these bits of information in socially productive ways, and perhaps help to form more regular preferences.

• Voluntary exchange and mutual advantage are hallmarks of market exchange. Further, Sugden argues, these features are not compromised by incoherent preferences: for the version of a person who makes the trade, at least, these exchanges are welfare improving. Competitive markets will still exhaust all such mutually advantageous exchanges, even with incoherent preferences.

• Can a planner do better than mutual, voluntary exchange? How can a soft paternalist know that he or she is serving the interests of the nudged individual if preferences are incoherent?

• In the “arranging food in a cafeteria” example, why not task the choice architect with the pursuit of profit maximization? Profit maximization leads to a “customer is always right” bias, which doesn’t seem bad for customers.

• The profit-maximizing cafeteria owner doesn’t care about the coherence of customer preferences, only about the willingness-to-pay of the acting version of actual customers. A person with incoherent preferences nevertheless understands his interests.

• The cafeteria example, as well as others, suffers from the initial set-up, that there is some choice architect (planner) who will give the people what they really want: control is vested in the planner from the start. This hardly captures the crux of the argument against paternalism.

• Which approach, a choice architect aiming to maximize customer well-being, or entrepreneurs wanting to maximize profits, will best serve social welfare? Shouldn’t we, like the profit-maximizing cafeteria owner, privilege the acting self, too?

• Perhaps cafeteria managers don’t so much serve preferences as create them. But how is that a problem? Do people have preferences for fashion designs before they are produced? Doesn’t profit maximization do a good job in this incoherent setting to get desirable designs produced and exchanged, even without knowledge of consumer preferences?

• “…I would rather have my willpower challenged by tempting cakes than license cafeteria managers to compromise on the attractiveness of their products so as to steer me towards the ones that they think best for me [p. 247].”

Thaler, Sunstein, and Balz (2013), "Choice Architecture"

Richard H. Thaler, Cass R. Sunstein, and John P. Balz, “Choice Architecture.” Chapter 25 in Eldar Shafer, ed., The Behavioral Foundations of Public Policy, Princeton University Press, 2013. 

·  Choice architects are people who arrange the context in which other people make decisions. Contextual details, even seemingly innocuous ones, can have significant effects on choices. “A well-designed system expects its users to err and is as forgiving as possible [p. 7].”

·  Default settings matter; sometimes a mandated choice (as opposed to a default setting with an override option) might be a good idea. Alerts and checklists help to prevent errors.

·  The provision of feedback helps people to overcome mistakes.

·  Do people know the relationship between their choices and their welfare? Do people know the costs of using a credit card? Perhaps standardized disclosures – Record, Evaluate, and Compare Alternative Prices (RECAP) – would lead to better decision making.

·  Can choice be structured so as to facilitate learning? Do you want all your book recommendations to be based on what people similar to you have enjoyed?

·  The salience of a choice dimension goes a long way to determining its impact. Do people make optimal taxi v. car ownership decisions?