Michaelsen, Johansson, and Hedesström (2021) on Experiencing Default Nudges

Patrik Michaelsen, Lars-Olof Johansson, and Martin Hedesström, “Experiencing Default Nudges: Autonomy, Manipulation, and Choice-Satisfaction as Judged by People Themselves.” Behavioural Public Policy, First View, 1–22, 19 March 2021. 

• This article examines how people feel about default nudges, especially with respect to their perception of their autonomy and their satisfaction with their ultimate choice. "We present three experiments (total N = 2083) where participants are subjected to opt-out default nudges and compared with participants subjected to opt-in or a no-default active-choice format [pages 3 and 4]."

• Study 1: MTurk folks consider whether to have “green” (and slightly more expensive) appliances in their (imaginary) new flats. There are three conditions: green (environmentally friendly) default (opt out); non-green default (opt-in); and active choice.

• The effect of the default is big, with about twice as many green appliances chosen with opt-out relative to opt-in; active choice leads to more green appliances than opt-in, too, but not as much more as opt-out.

• Participant ratings of their autonomy, satisfaction, and perceived threat to their choice freedom do not differ based on the condition. In particular, the opt-out default, which produces greener choices, does not lead to participant dissatisfaction.  

• Study 2 replicates study 1, but with a twist: now, half of the participants ae told about the default or active choice, and how default nudges are expected to influence choices. How does making the nudge transparent affect its influence on choices and satisfaction?

• It turns out that lots of participants don’t really understand the explanation of how the default nudge is supposed to work.

• The large impact on choosing green appliances from the opt-out default is replicated – and nudge transparency does not change that.  

• The participants give high ratings across-the-board for autonomy, but opt-out folks report slightly higher experienced autonomy and satisfaction than do their opt-in brethren.

• Study 3 aims to raise the stakes (slightly). Participants receive a 20 cent bonus, on top of the 50 cents they are paid to take part.  But they are given an opportunity to donate their bonus to a charity. The opt-out condition is where the bonus is defaulted to the charitable contribution. 

• Defaults continue to have consequences: opt-out folks are more likely to donate than are opt-in; active choice is in the middle; the three conditions have no effect on feelings of autonomy.

• With disclosure (and understanding), opt-in and active choice donations go up. (Again, the number of participants who do not understand the disclosure is fairly staggering.)

• Opt-out folks view the set-up as more threatening to freedom of choice, and full transparency raises everyone's view of such a threat – but despite that threat, people aren't really worked up over it. 

Colby, Li, and Chapman (2020) on Avoiding Healthy Defaults

Helen Colby, Meng Li, and Gretchen Chapman, “Dodging Dietary Defaults: Choosing Away from Healthy Nudges.” Organizational Behavior and Human Decision Processes 161: 50-60, 2020.

• Imagine a burger restaurant that makes carrots the default “side” – as opposed to French fries, say. Are people more likely to choose the carrots than if fries were the default? [Yes]. 

• Note that, unlike some environments with default nudges such as organ donations or pension registration, dining is an ongoing choice; so…

• …would people be less likely to return to a restaurant in which carrots are the default side dish?

• Two real-life(ish) and three hypothetical studies are conducted. In Study 1, university mugs are packaged with either M&Ms or a (healthier) fruit-and-nut bar as defaults. Shoppers know that they can easily override the default by asking the cashier for the alternative filling. 

• The defaults turn out to be almost perfectly sticky (unlike those well-designed M&Ms). But, more mugs are sold when M&Ms are the default. People don't override the healthy default, even though they know they could, but the healthy default seems to put them off the mug purchase altogether.

• If the store elected to employ a healthy default to promote customer health, is it doing the right thing? 

• Study 2 is also a real-life one, involving signing up for meal kit deliveries. What (three) meals will serve as the default for the kit? The experiment compares a default kit of three healthy meals (from one company) with an alternative default of three unhealthy meals (from a different company); once again, it is easy for meal kit purchasers to override the defaults.

• Again, the defaults are sticky, and in particular, the healthy default works in terms of nudging the choice of healthy meals. But, when choosing which company to patronize, there is a significant “dodge” effect: people became more likely to choose the company with the unhealthy default meals. So maybe it is not such a good idea for meal kit companies to set up healthy meals as the default?

• Study 3 is an internet-mediated "lab" experiment about which (hypothetical) restaurants people are likely to patronize. A subject is asked to order food from two competing burger restaurants. One burger restaurant uses turkey burgers as the default (this is the relatively healthy version, though not for the turkey), and the other burger place has been hamburgers as the default. (A similar comparison is run between two pizza places, and two sandwich shops). 

• Once again, (hypothetical) patrons tend to stick with the default, whether it is heathy or unhealthy. But they also are asked which of the restaurants they would return to, and in the case of burger joints, for the most part they would return to the unhealthy default version. People stay away from burger joints with a healthy default – turkey instead of beef burger – even though when at the "healthy" place, they generally go with the default. (It turns out that people are not so reluctant to return to pizza or sandwich shops that offer healthy defaults.)

• Study 4 looks at what happens if potential customers see an ad that lets them know in advance that turkey is the default burger meat. People become more enamored of the alternative restaurant that offers a beef default, and also suspect that ordering will be more of a hassle with the healthy default.

• Study 5 looks at healthy versus unhealthy defaults in a familiar setting, a McDonalds. There is a line, and a subject observes that the five people ahead of him or her in the line each stick with the default burger, where it is healthy or unhealthy. Does this social confirmation influence subsequent orders? 

• Once again, people tend to stick with default – but less so when the default is a turkey burger, when a third of folks request an override. Nonetheless, people indicate that they would dodge the healthy default restaurant in the future – but the dodgers were primarily folks who did not bother to override the healthy default!

• So, defaults can be quite sticky. Set up a health default, and you can expect that it will increase the percentage of customers who choose the healthy option. But there is a partial offset: some customers will dodge the restaurant with the healthy default, reducing the effectiveness of the healthy nudge by some 25%.

de Ridder, Kroese, and van Gestel (2022) on Nudgeability

Denise de Ridder, Floor Kroese, and Laurens van Gestel, “Nudgeability: Mapping Conditions of Susceptibility to Nudge Influence.” Perspectives on Psychological Science 17(2): 346–359, 2022.

• What conditions might influence the extent to which people are susceptible to a nudge? The authors look (primarily) at three issues: (1) awareness of the nudge and/or its purpose; (2) pre-existing preferences; and, (3) are the subjects employing System 1 or System 2 thinking?

• In this article, transparency involves making subjects aware of the presence and purpose of a nudge; this is a stricter condition than Thaler and Sunstein’s publicity principle, that asks if nudges, were they publicly known, would garner public support.

• Default nudges tend to maintain their effectiveness under transparent conditions; further, when nudged opaquely, people informed after the fact don’t seem to view those nudges as an affront to their autonomy. (Though when an ex ante inquiry is made, people often indicate that they will feel their autonomy threatened by an opaque nudge; that is, they forecast a higher level of concern than they will actually experience.) 

• Nudges will be “ineffective” at altering choices if the nudge counsels behavior to which they hold a negative view, or if the nudge counsels behavior to which they already are strongly attached! That is, we needn't be too concerned with nudging people into behaviors that their pre-existing preferences do not endorse.

• If people lack clear preferences, a nudge might “impose” preferences – though starting with a request that people discuss their preferences (a plus!) might undermine any perceived manipulation.

• There is not much evidence suggesting that people are nudged more when they are employing System 1 thinking (through ego depletion, say). That is, the effectiveness of a nudge is not tied to the extent that it prompts unthinking responses.

• People with lower cognitive capacity do not appear to be more susceptible to nudges.

• The final sentence of the text succinctly summarizes the article: "Nudges do allow people to act in line with their overall preferences, nudges allow for making autonomous decisions insofar as nudge effects do not depend on being in a System 1 mode of thinking, and making the nudge transparent does not compromise nudge effects [p. 355]."

Steffel, Williams, and Tannenbaum (2019) on Presumed Consent for Organ Donations

Mary Steffel, Elanor F. Williams, and David Tannenbaum, “Does Changing Defaults Save Lives? Effects of Presumed Consent Organ Donation Policies.” Behavioral Science and Policy 5(1): 69–88, 2019 [pdf here].

• The chief source of kidneys for transplants come from deceased (cadaveric) donors – approximately one-quarter of kidney transplants involve a living donor. (A cadaveric donor, of course, is often able to donate two kidneys.) 

• There is a kidney shortage. More than 90,000 Americans are on the waiting list for kidney transplants, and thousands of them die from conditions that a timely transplant would have averted.

• Many people who survive the wait list nevertheless wait for years (often more than five years) for their new kidney. During their wait, they are maintained (to some extent) by dialysis. 

• Most Americans, it seems, favor a presumed consent system – an opt-out system – for cadaveric organ donations. [FWIW, I do not, nor do nudgers Thaler and Sunstein.]

• No US state uses a presumed consent system; rather, opt-in (explicit consent) or active choice mechanisms are employed.

• Presumed consent does, at least, “make it easy” for (what is apparently) the majority of the population that wants to be on the organ donor list. Nonetheless, presumed consent can seem, well, presumptuous.

• With presumed consent, family members (next of kin) of potential donors might be unsure of their deceased relative’s wishes, given that there is likely not to be an explicit indicator of those wishes.

• Donor lists tend to grow (markedly) when presumed consent becomes the rule – although many of the new additions to the donor roster did not get there through an active choice.

• The procurement of organs for transplant, and the number of transplants, also seem to be enhanced (though not so markedly) by a presumed consent system.

• Active choice is where people are encouraged to explicitly say yes or no (or perhaps yes or later) to a query about whether they would like to be an organ donor.

• Mandated choice is where the encouragement to answer is somewhat more forceful.

• An active choice system where the choice easily can be postponed or avoided does not seem to enhance donor lists.

• Surviving family members generally get to make the call on donations, even when the deceased opted into the donor list. It might be sensible to nudge family members, if the goal is more donations. 

Berman, Ariely, Gosnell, et al. (2020), “Reframing the Loneliness Epidemic”

Kristen Berman, Dan Ariely, Evelyn Gosnell, et al., “Reframing the Loneliness Epidemic.” Pages 123-131 in The Behavioral Economics Guide 2020, edited by Alain Samson. 

• Loneliness involves a dearth of satisfying relationships 

• Some 20% of Americans report not having any close friends 

• Loneliness undermines subjective well-being and health – and there is no widely available, effective “treatment” 

• Nearly half of loneliness can be traced to one’s genes 

• People tend to get lonelier as they age 

• Women, on average, are lonelier than men 

• Unemployment and retirement both increase loneliness 

• Loneliness can be a sort of self-fulfilling trap 

• How to deal with the loneliness epidemic? Reframing!: instead of treating loneliness, perhaps we can prevent it. In particular, can we nudge friendship? 

• An old study found that a 45-minute meaningful conversation made people feel as close with their (previously unknown) conversation partner as they felt in their more established relationships. 

• But people are risk averse, and (perhaps) they shy away from conversations that could result in rejection. 

• One approach is to change the default, to make deep conversation the expected behavior.

• Experiment 1: A Conference Networking Study. At the beginning of a conference for finance sector workers, Conversation Cards were distributed that contained probing questions participants would answer in conversing with each other. Other conditions included a "just network as usual" command and an "avoid small talk" suggestion. 

• The subjects responded well to the Conversation Cards – but they still weren’t all that interested in following up to build friendships. (The "avoid small talk" folks were sort of frustrated, at a bit of a loss to break the ice.)

• Experiment 2: Nudging Deep Conversation in a Social Setting (Friday night happy hours)  

• The conditions were (1) conversation about the future v. (2) conversation about the past v. (3) an ice-breaker activity with no conversational guidance 

 • The conversational prompts both worked! More talking sessions, and more desire to build the connections... 

• Should we rethink social architecture to encourage deep conversations, without exposing people to large social risks? (And do the conversations really have to be deep?) 

• You can acquire the Conversation Cards at the cost of production and transfer (see p. 129).

Leitzel (2021) on Regulating Cocaine

Jim Leitzel, “Double Defaults: Behavioral Regulation of Cocaine.” Journal of Behavioral Economics for Policy 5(1): 7-12, 2021 [pdf here]. 

• Can we protect against the dangers of excessive or highly risky cocaine use without imposing the huge costs that accompany cocaine prohibition? 

• Yes, we can! We can offer some protection against diseased or impulsive decision-making, without posing a large barrier to “rational” cocaine use. 

• We can manage the supply side like alcohol, perhaps, or prescription drugs, but… we also can “nudge” people towards rational cocaine-related behavior. 

• We can take advantage of the surprising power of default options. 

• The First Default: You are Not Eligible to Purchase Cocaine. 

• If you are of age, you can choose to override this default of ineligibility.

• Pass a test, pay a fee, acquire a cocaine buyer’s license; behave well or you will lose your cocaine buyer’s license!

• The Second Default(s): You Can Only Purchase Cocaine in Moderate Doses.

• Prices, Quantities, Waiting Periods – the default settings on all of these are aimed at enforcing modest consumption. The waiting period involves ordering your cocaine purchases in advance, by three days, say. 

• At some cost (time, money), you can override these default terms for more liberal access to cocaine (if you have a record of unproblematic cocaine-related behavior); alternatively, you can opt-in to more stringent rules, at low cost or even some subsidization. Want to only be allowed to purchase cocaine on weekends? – great, you can impose this restriction, and the suppliers will enforce it.  Want to have a cocaine-free February? Great, you can put in a no-purchases-during-February rule, and the sellers will enforce it.

Goldin and Reck (2018) on Normative Ambiguity

Jacob Goldin and Daniel Reck, “Rationalizations and Mistakes: Optimal Policy with Normative Ambiguity.” American Economic Association Papers and Proceedings 108: 98–102, 2018. 

• Choices often look like they involve frictions, such as a psychic cost associated with considering more options. 

• But though choices look “as if” they are affected by such costs, are the costs themselves “real,” or, to use the authors’ term, “normative”? 

• If the costs are normative, then (all else equal) you want to avoid them, such costs detract from welfare. But if the costs are not normative (that is, if they are “behavioral” in the authors’ terminology) then it would promote welfare to ignore those costs, to willingly incur them by, say, considering more options or requiring active choices – as the costs are not real, no one will end up bearing those costs. 

• Initial health care choices have a tendency to become defaults, and hence have some (undeserved?) staying power. 

• But perhaps it is optimal to stick with even clearly dominated health care plans, because the costs of switching or of just to paying attention to more options are normative and significant. 

• That is, do we really want to encourage people to switch health care plans to ones that are better suited to their health care needs and preferences, given the potential for normative switching costs? 

• Costs of trying to qualify for the Earned Income Tax Credit (EITC): the need to file taxes; record-keeping; mental exertion and attention; increased risk of being audited. 

• Note that most of the costs of establishing EITC eligibility take place in the present, with the benefits delayed. Present biased people will find this temporal distribution of costs and benefits to be unattractive. Should we encourage EITC take-up among present-biased people? 

• Other “mistakes” (or behavioral features) that dissuade applying for the EITC could be procrastination or inattention. 

• Moving to a new residence is costly both financially and otherwise, and again, the costs often are immediate whereas the benefits are delayed. Do people move enough, or do the “not real” but behavioral costs discourage beneficial relocations? Public programs that promote moving will be less valuable to the extent that these costs are normative.

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.]

Sunstein (2018) on "Misconceptions About Nudges"

Cass R. Sunstein, “Misconceptions about Nudges.” Journal of Behavioral Economics for Policy 2(1): 61-67, 2018.

• Professor Sunstein examines seven mistaken or misleading – but frequently voiced – complaints about nudges. 

• (1) “Nudges are an insult to human agency” But…compared to what?; how can the provision of information, for example, be such an insult?; try active choosing if defaults make you nervous – but people often prefer a default!

• (2) “Nudges are based on excessive trust in government” But…compared to what?; governments must nudge; nudges, by definition, have low “error” costs; the private sector engages in lots of nefarious nudging; nudges can (and should) be made transparent.

• (3) “Nudges are covert” But…aren’t GPS devices and warning labels transparent?; is this misconception based on concerns about randomized field experiments?; transparency doesn’t seem to undermine the effectiveness of nudges.

• (4) “Nudges are manipulative” But…how is a reminder manipulative?; maybe a graphic warning is a little manipulative, ok?; but in general, manipulation should be made of sterner stuff. 

• (5) “Nudges exploit behavioral biases” But…do GPS and other technologies that improve navigability exploit a bias in a nefarious way?; many nudges counteract behavioral biases, such as inertia; nonetheless, defaults might indeed work because of inertia.

• (6) “Nudges wrongly assume that people are irrational” But…well, let’s say boundedly rational; nudging is inevitable; we needn’t resolve every philosophical issue to make pragmatic progress. 

• (7) “Nudges work only at the margins; they cannot achieve a whole lot” But…millions of additional school meals consumed?; billions in increased savings?; sigh.

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.

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?

Banker et al. (2017) on Sticky Anchors

Sachin Banker, Sarah E. Ainsworth, Roy F. Baumeister, Dan Ariely, and Kathleen D. Voh, “The Sticky Anchor Hypothesis: Ego Depletion Increases Susceptibility to Situational Cues.” Journal of Behavioral Decision Making 30(5): 1027-1040, December 2017 [pdf here].

• “Ego Depletion”: Exerting self-control undermines self-control in slightly later situations. 

• Is ego depletion a thing? Maybe, maybe not (pdf here); like many behavioral concepts (for example, grit [pdf here]), ego depletion has its detractors. 

• In a dictator game-type setting, does less altruistic behavior (from ego depletion) come about because self-controls over selfishness are undermined, or because people are more inclined to follow salient situational cues? This latter possibility is the sticky anchor hypothesis: depleted people are more suggestible or manipulable. 

• Some dictator game experiments show that depleted people do indeed keep more of the monetary stake for themselves. 

• Are the dictator game findings due to unleashed selfishness or to sticking with the default? To test between the two mechanisms, the authors switch the default: they conduct reverse dictator games. The other (anonymous) party is endowed with the full stake, but you, as the dictator, can choose to take some or all of it. The default, now, is the unselfish setting, so if depleted people have a hard time overcoming defaults, they will leave more of the cash with the other player (relative to the amount left by undepleted folks). Alternatively, if depletion makes you selfish, depleted folks will take more of the endowment from the other player. 

• The depletion manipulation (in Experiment 1, with overall N=54) involves writing some text without using the letters A or N. (Those in the “undepleted” camp write without using the letters X and Z. Incidentally, this reminds me of the singular novel Ella Minnow Pea.) That is, it is attention control that is the source of ego depletion within this experiment.

• On average, those in the depleted condition take less money for themselves ($2.62) than do those in the undepleted condition ($3.69). So, ego depletion does not seem to increase selfishness; rather, it makes it harder to overcome the influence of environmental cues: defaults become more sticky. Notice that neither group is particularly generous. 

• But maybe the attention control manipulation means that the depleted also feel like failures, because they perform poorly at writing without A’s or N’s: they don’t deserve the money in the reverse dictator game. Vicarious depletion [pdf here] to the rescue! A waiter is really hungry…(alternatively, not so hungry…) 

• Once again, the depleted folks (that is, the now vicariously depleted folks, who feel no shame) stick more closely to the anchor: it doesn’t seem to be a lack of desert that causes them to take less money (or fewer lottery tickets) for themselves. 

• But maybe it isn’t general environmental cues at work, maybe it is just our old friend, the status quo effect. So now (Experiment 3) the authors offer either a high or a low anchor before subjects decide how much money to take. Note that the default (the anonymous other gets all the cash) is unchanged, but there is a new situational cue, the anchor. (Subjects are first asked whether they want to take more or less than the anchor; only then are they asked for the precise amount they want to take.) Will depleted people respond to the anchor (more than non-depleted people do), or just to the default? 

• Both depleted and non-depleted subjects respond to the anchor. But the depleted respond more, particularly in the low-anchor treatment. The influence of environmental cues, and not the status quo per se, is what leads to different behavior by depleted folk relative to the undepleted.

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.

Zarghamee et al. (2017) on Nudging Charitable Giving

Homa S. Zarghamee, Kent D. Messer, Jacob R. Fooks, William D. Schulze, Shang Wu, and Jubo Yan, “Nudging Charitable Giving: Three Field Experiments.” Journal of Behavioral and Experimental Economics 66: 137- 149, February 2017 [abstract here].

• Study 1: Students had earned money over the duration of the semester by taking part in experiments; this study asked them if they wanted to donate some or all of their earnings to charity. 

• Envelopes were provided such that students could either donate some of their earnings (opting in to charity, n=69), or, request a refund from the contribution of their money (opting out of charity, n=118). 

• The opt-out version increases contributions by some 25%. 

• Study 2 (n at most 59) looks at whether some cheap talk and a vote prior to deciding to contribute to charity – and potentially to keep donating for 10 months – can induce more giving than without the chitchat and vote. The cheap talk does the (cheap) trick, inducing higher donations by some 47%.

• Study 3 (n=70) involves one treatment where the charity mentions HIV, whereas the other treatment does not. The treatment makes no difference to donations, but changes to positive and negative affect during the experiment do influence giving. A lower positive affect decreases giving, but an increase in negative affect increases giving.

Sunstein (2016) on (Mild) Preferences for System 2 Nudges

Cass R. Sunstein, “People Prefer System 2 Nudges (Kind Of),” July 19, 2016. Duke Law Journal, Vol. 66, 2016. [The outline here is based on an earlier version, that of February 19, 2016.]

• In Kahneman’s terminology, System 1 is the automatic, intuitive part of our decision making, whereas System 2 represents our more considered (though not necessarily better) thoughts. 

• Some types of nudges, such as graphic labels on cigarette packages or the selection of defaults, tend to be aimed at affecting System 1 responses. Other nudges, such as the provision of better information on nutrition, engage with System 2. System 2 nudges help people “exercise their own agency [p. 5],” that is, make better considered decisions. 

• Sunstein arranges for a survey to be administered to seven groups of Americans, with more than 400 people in each group; they are paid for their participation. 

• The participants are presented with four issues -- savings, smoking, clean energy, water -- and two alternative approaches, one System 1 nudge and one System 2 nudge, for each of the issues. The majority tends to prefer System 2 nudges, but a sizeable minority feels the other way. Democrats seem slightly more likely than Republicans to support System 1 nudges. 

• If told that the System 1 nudge is significantly more effective, about 12% of folks switch to preferring the System 1 nudge; precise quantitative evidence of superior effectiveness does not seem to increase any further the attractiveness of System 1 nudges. When folks are told that System 2 nudges are more effective, that information has no effect on overall preferences between the options.

• Sunstein also explores a second set of three, more ideologically charged issues: voter registration, childhood obesity, and abortion. For voter registration and anti-obesity, a majority favor System 1 nudges. For dissuading abortions, most people prefer System 2 nudges, even when System 1 (show fetus photos) is said to be more effective. 

• Alternatively, some people like System 1 nudges, even when they are told that those nudges are less effective. It seems that when people feel strongly about an issue, they support System 1 nudges that push their side of the issue. 

• Sunstein makes a meta-observation, that perhaps our brain's System 1 likes System 2 nudges, but sometimes System 2 overrides that preference. Note that often System 1 nudges are fairly easy to implement, such as by setting a default, for instance.

Datta and Mullainathan (2014) on “Behavioral Design”

Saugato Datta and Sendhil Mullainathan, “Behavioral Design: A New Approach to Development Policy.” Review of Income and Wealth 60(1): 7–35, March 2014.

• Behavioral economics can help us design development policies that will work. There are no guarantees, of course – much of what we have learned comes from small-scale field experiments, and their external validity and ability to scale are not yet proven. 

• The poor are like the rest of us, though their poverty adds to their psychological burdens. 

• A farmer’s failure to use fertilizer might not arise from an underlying preference not to use it; indeed, it can happen even where there is a desire to use fertilizer. People procrastinate, and they do so repeatedly; people also lack self-control to resist temptations, including temptations to use resources for things other than fertilizer. As a result, the timely provision of fertilizer at a small subsidy can have significant impacts on usage; likewise, a commitment savings plan can spur fertilizer use. 

• Four types of mental resources are scarce: (1) self-control; (2) attention; (3) cognitive capacity; and (4) understanding. More information or even financial subsidies may not resolve the problems created by these scarce resources. 

• Datta and Mullainathan argue that development problems might be fairly situation-specific, and that the binding constraint or constraints might implicate behavioral issues. (Compare with Dani Rodrik's work (with co-authors) on "growth diagnostics".) Datta and Mullainathan suggest a behavioral mapping of problems that reveals where these constraints (bottlenecks) might bind. Commitment savings accounts, steady income flows, appropriate defaults, reward lotteries, and reminders: these are some strategies that can help to overcome behavioral bottlenecks.

Alemanno (2015) on “Nudging Healthier Lifestyles”

Alberto Alemanno, “Nudging Healthier Lifestyles: Informing the Non-communicable Diseases Agenda with Behavioural Insights.” Chapter 14 in A. Alemanno and A. Garde, eds., Regulating Lifestyle Risks: The EU, Alcohol, Tobacco and Unhealthy Diets, Cambridge University Press, 2015.

• The European section of the World Health Organization has begun an initiative to combat “lifestyle” non-communicable diseases: those associated with tobacco, alcohol, and goods high in salt, sugar, and fat. 

• Regulations that commonly are applied to lifestyle goods include mandatory information disclosure; marketing limitations; taxes and other devices to reduce availability. 

• Behavioral economics-style nudges fit well with lifestyle issues. They tend to be low cost and preserve individual choice. Lifestyle nudges might include disclosure rules; default settings; and, simplification. For instance, the extremely graphic photos required on cigarette packs, and nutrition fact panels, are nudges of a sort. 

• The European Union (oddly) is requiring that cigarette packs not disclose tar, nicotine, and carbon monoxide content. The rationale is that such information might lead smokers to think that some cigarettes are less harmful than others. (There is some evidence that consumers smoke low tar and nicotine cigarettes more intensely, undoing any relative health benefits.) 

• Thaler and Sunstein’s “publicity principle” (borrowed from John Rawls, building on Kant) is that governmental nudges must be supportable if everyone is informed about them. If people will be upset if they were misled, even if the misleading resulted in better choices for them, then the misleading is wrong. 

• Much of the evidence for nudges comes from the laboratory, and might not work in the real world. Or, a nudge might work at first, but then become less effective over time. Notice that marketing experts think that nudges work, however.

Sunstein on Choosing Not to Choose

Cass R. Sunstein, “Choosing Not to Choose.” Duke Law Journal 64(1): 1-52, October, 2014.

• This article essentially responds to a critique of one common behavioral economics-style policy intervention, the strategic use of default settings. The critique is that using default settings to nudge people is an affront to their autonomy, even if it is easy to choose something other than the default. 

• Sunstein’s response is to suggest that a failure to provide a default could just as easily be an affront to autonomy: often, people do not want to choose, they want a well-chosen default in place so that they can avoid choosing. 

• Therefore, mandating an active choice (as opposed to setting up a default) can itself be paternalistic, and maybe not even in a libertarian fashion. Sunstein calls it “choice-requiring paternalism” (page 7).
  
• A compromise between using a default and requiring an active choice would be to ask people if they want to choose, knowing that if they do not, they can “opt out” of choosing and receive a default choice (which they could alter) instead; this approach is called “simplified active choosing” (page 8).

• Of course, the question of whether you want to choose might itself be an unwelcome query. 

• If you can’t trust the default, there is much to be said for active choosing. But if the situation is unfamiliar, then why choose, if the default setters can be trusted?

• Active choice might make more sense in situations where you can learn about choices over time, or develop your preferences. 

• The rise of big data means that sellers might know better than consumers what the consumers want. 

• One reason not to want to choose is to deflect responsibility. Also, people have plenty of decisions to make (200 a day for food, we are told) and might prefer to focus their autonomy on an important but manageable subset of decisions. 

• Sometimes active choice is to protect third parties, or to provide credible proof that a choice was made in a deliberate fashion. This might be the case with organ donation, for instance. 

• Is GPS undermining our ability to navigate? Does Pandora hinder learning about different types of music? Jane Jacobs noted that cities bring about unwelcome but nevertheless consciousness-expanding encounters, by providing an architecture of serendipity. 

• People seem to value more highly options they have chosen than options they have been assigned, that is, they have a bias in favor of choice. 

• Would you be willing to have your book purchases chosen by big data? How would you feel about being defaulted into a regime where big data chose your books and charged your bank account? (You could return the books for a refund.) Would you feel differently if we were talking not about books but about household goods like paper towels or detergent? 

• In summary, choice can sometime be a curse, undermining your autonomy and your welfare. 

• This article later spawned a book with the same title.