Day: October 7, 2020

In 2017, the Nobel Prize in economics went to Richard Thaler who was once not considered as an economist because of his heterodox approach. He then managed to open up a new field called behavioral economics. Over the years, many other scholars participated in his call of questioning key assumptions of conventional economics. I would like you to read the following two articles and reflect on the following questions:

(Why) do you think we need nudging?
Generally speaking, Are you in favor of or against the use of nudging? why?
Give one example from your personal life how nudging help you to do better in your life?
Give one example of good nudging to bring a positive behavioral change in your workplace/society?
Do you think that nudging can help us to better handle the COVID-19 pandemic? Have you seen the use of nudging by the Saudi government in the fight against COVID-19?

Article 1:

What is nudge theory and why should we care? Explaining Richard Thaler’s Nobel economics prize-winning concept
How subtle policy shifts can be in everyone’s best interest

Ben Chu Economics Editor
Monday 9 October 2017 11:40 BST
The Independent Online
organdonor.jpgOpting in or out: Organ donation is an example of an area where nudge policy has worked PA

Richard Thaler, the father of nudge theory, has been awarded the Nobel economics prize.

But what is nudge theory? Does it actually work? And why should we care?

What is a nudge?
The concept is a relatively subtle policy shift that encourages people to make decisions that are in their broad self-interest.

Its not about penalising people financially if they dont act in certain way.

Its about making it easier for them to make a certain decision.

By knowing how people think, we can make it easier for them to choose what is best for them, their families and society, wrote Richard Thaler and Cass Sunstein in their book Nudge, which was published in 2008.

For example?
A good recent example can be found in UK pension policy.

In order to increase worryingly low pension saving rates among private sector workers the Government mandated employers to establish an ‘automatic enrolment’ scheme in 2012.

This meant that workers would be automatically placed into a firms scheme, and contributions would be deducted from their pay packet, unless they formally requested to be exempted.

The theory was that many people actually wanted to put more money aside for retirement but they were put off from doing so by the need to make what they feared would be complicated decisions.

The idea was that auto-enrolment would make saving the default for employees, and thus make it easier for them to do what they really wanted to do and push up savings rates.

Has it worked?
Very much so.

Since auto enrolment was introduced by the Government in 2012, active membership of private sector pension schemes has jumpedfrom 2.7 million to 7.7 million in 2016.

autoenrolment.jpg
Anything else?
Organ donation is another example of an area where nudge policy has worked.

Spain operates an opt-out system, whereby all citizens are automatically registered for organ donation unless they choose to state otherwise.

This is different from the UK where donors have to opt in.

The Spanish opt-out system is one of the reasons Spain is a world leader in organ donation.

France also switched to an opt-out regime this year. Theresa May said at the Tory Party conference that the UK would do the same.

The theory is the same as relates to pensions: deep down most people want to be donors if they die in an accident and their organs could be used to save someone elses life but for various reasons never get around to registering.

The opt-out system makes it easier for them to do what they really want to do.

However, Mr Thaler actually prefers a system of prompted choice on organ donations to opt out.

This would prompt people to register at various points, such as when they apply for, or renew, a driving licence.

Doesnt this nudging infringe civil liberties?
The concept has certainly been criticised as paternalistic.

Yet its hard for libertarians to make a persuasive cases against such policy nudges in relation to pensions and organ donation because the opt-out option always remains available for people.

So politicians are all using nudge now?
It is proving increasingly popular.

The previous US president Barack Obama recruited Cass Sunstein as an adviser and exhorted US government departments to adopt behavioural economic concepts such as nudge.

In 2010 the UK Government set up a Behavioural Insights Team, commonly dubbed a nudge unit, to develop policies.

Administrations in Denmark, Australia, Canada and the Netherlands have also shown an interest

source:  http://www.independent.co.uk/news/business/analysis-and-features/nudge-theory-richard-thaler-meaning-explanation-what-is-it-nobel-economics-prize-winner-2017-a7990461.html

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Article 2:

Questions for Cass Sunstein: Can We Nudge to a Better Pandemic Policy?
He thinks behavioral science offers one solution to the pandemic.
WRITTEN BY BENJAMIN WOFFORD

| PUBLISHED ON JULY 13, 2020
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Photo provided by the author.
For the past several weeks, Americans have been greeted daily with agonizing news about the coronavirus pandemic. Not simply from the anguish of the countrys spiraling cases and death tolls, but the incompetence of much of its political culture, too: Governors who flip-flop on mask-wearing, local officials who cave to pressure on public health measures, and a President who long ago stopped attending his pandemic meetings in favor of heaping abuse on his own public health agencies.

But some thinkers are exploring how the country could still craft an effective pandemic policy, even in the absence of a federal one. Cass Sunstein is one of those thinkers, a longtime professor at Harvard Law School who has written extensively on the exploding area of cognitive science known as behavioral economics, and its implications for government policy.

In 2008, Sunstein published the book Nudge along with co-author Richard Thaler, another leading scholar in behavioral economics. Together, Sunstein and Thaler envisioned a marriage of cognitive science and policy at various levels of American government that they dubbed libertarian paternalism. To take an example: If the cognitive bias toward loss aversion dictates that humans react less often to the prospect of reward than they do to the prospect of losing something they already have, such an insight could be applied to myriad aspects of policyfrom opt-out schemes for organ donation at the DMV, to the Armys interactions with the Taliban in Afghanistan.

Fittingly, Sunstein ended up doing exactly that, serving in the Obama administrations Office of Information and Regulatory Affairs from 2009 to 2012, where he sought out creative applications of behavioral economics to the White House policy portfolio. Lately, Sunstein has been advising foreign governments and other organizations on their own behavioral framework for addressing the pandemic, too.

In an interview edited for length and clarity, Sunstein tells Washingtonian why pandemics are particularly suited to manipulating human biases, why New Zealand has tapped the cognitive power of fun, and what Texas might be able to teach the country after all.

Washingtonian: Weve arrived at a moment when covid-19 is out of control. The feeling is basically national despair over what seems like a complete lack of strategy. But whats struck me is how eerily similar this feels to an observation from Camus, who wrote that the main weakness a plague exploits is a lack of imagination. We hear a lot of technocratic anguishgovernor so-and-sos idiotic behavior on mask policybut I dont think we hear a lot of imagination right now.

Cass Sunstein: Put it this way, I guess. Its a big world, and a number of countries have done well with the pandemic. New Zealand, Taiwan, Australia have all done wellDenmark and Germany have had considerable success. And so if you look globally, were doing less well than some countries which are in many ways similar to usin many important ways different too. And the fact that were where we are is a result of policy failures, and not a result of anything inevitable.

In terms of policy problems that lend themselves to behavioral science and nudgeschallenges of economics, or conducting warwhere does a pandemic fall on the scale? Say, on a scale of one to ten.

Ive worked a lot on Covid-19, both in terms of public writing and in terms of talking to officials in various places. And theres no question that human behavior is at the heart of it. Right around the corner from where were speaking, there are stores that have social distancing nudgesmarkers on the floor that say maintain six feet, and theyve got precision about what six feet is. So the idea that behavior is at the heart of it is self-evident. So it would be a ten on the scaleas much as any problem that governments encounter as a behavioral problem.

In places where the pandemic is very severe, mandating mask wearing in certain places is a very thinkable option. But even when those things are done, to make the mandate effective, or to encourage behavior that isnt mandated, a mandate would be best accompanied by nudgeswhich might be simple communications about what most people are doing.

What are the cognitive biases that matter most in a pandemic? Youve written about present bias, for example.

Right. Present bias is where today and tomorrow matter, [but] next year not so much. I think thats not the primary problem here.

Whats the primary problem?

Its unrealistic optimism. So, 90 percent of drivers think theyre better than the average driver and less likely to be in a serious accident. One-hundred percent of people think their sense of humor is better than normal. [Laughs] People typically think theyre immune to risks that others are subject to, or relatively more immune. I worry that unrealistic optimism is problem number one for getting the death rate as low as we want it to be.

Lets talk about New Zealand, a country that has gotten its cases down to near-zero. Youve argued that New Zealands success is explained by actions that go deeper than policy edicts alone.

In New Zealand, the watchword during Covid has been, Be Kind. Which is pretty good, to think of protecting others against the harm. So kindnessthats potentially, lets say, very effective.

Youve also said that New Zealand made fun a part of its behavioral framework. How have they done that?

The [message from] Prime Minister Jacinda Ardern has been a sense that the country is going to get through it, and is going to laugh even as it deals with something that isnt especially funny. But human beings need to laugh. It might be the absurdity of doing all your work from home. It might be the silliness of [how] were all wearing masks now. It might be the question of Santa Clausis he going to be able to come to Christmas, or is he going to get Covid? Not the funniest thing imaginable, but its something that people can laugh about.

And of course a pandemic is very serious. But one behavioral finding is that often people are more likely to change their behavior if they consider it something that is consistent with hope and optimisma smile, rather than cowering in terror. And New Zealand has been smart about that. If you look at the communications coming out of there, the signage and information disclosures, they dont have grimness in the them. They have a kind of lightness in them. And New Zealand is a place where nudging and behavioral economics are very well known, its part of their government. Clearly what theyve done is informed by a good working understand of behavioral science.

So Ardern, who in many ways is a model of a leader under crisis, said [the government] considered both the Tooth Fairy and the Easter Bunny to be essential workers, in an otherwise very serious report to at a news conference. And she said with a degree of gravity to the children of New Zealand that if the Easter Bunny doesnt make it to your household, then please understand it might be difficult at the moment for the bunny to get everywhere. And if youre locked down and your leader is talking in those terms, then you feel, This is gonna be fine. Okay, Im going to stay at home. Rather than thinking, Shes against me, or, Were doomed.

That kind of fun only emerges from a sound policy architecture, of course. Are those in tension? If governments want people to be cheery, theyll have to promote cheer without stoking the unrealistic optimism bias, right?

This is one of the amazing things about the human mindyou can be smiling while you are taking steps that protect your family. So people can stay home, and have a great time as a family. I go out with my daughter to CVS most days. Shes eight years old, and we have a great time. And were wearing masks the whole time. So its not as if were not keenly alert to the fact that theres a pandemic. But we have such fun, and its almost every day

In Taiwan, theres been an explicit reference to fun from the highest level officials. After I [helped work on their framework,] I discovered that high level officials actually speak publicly about fun, as a way of making people smile and laugh a little bit while theyre dealing with things. Through humor, through a sense that you can have a mask, or an app, that has some charm in it.

Taiwan, of course, they have a distinctive culture. But theyve had a kind of a wit, and a sense of [what they call] Humor over Rumor. Audrey Tang [a minister in the government] emphasizes fun. I dont know whether shes a student of behavioral science, but I can say that Ive been to Taiwan and talked to the nations leaders, who are extremely smart. So it may be that they have some expertise. 

Youve also written about identity as a key ingredient for nudging behavior. Talk about the story of Texas, which had an environmental campaign, and what it can teach other states.

This is from the 1980s, where in Texas, there was grave concern about littering on the streets. And the question [was] what do you do. And if in a state like Texaspeople who love freedom and love their state, and dont like elites ordering them aroundyoure told, Litterbug, litterbug, shame on you! you might think, Yeah, right. It might be even counterproductiveIm going to throw the plastic out of the window, just because they said that.

And instead, the Dont Mess With Texas campaign [which was invented as an anti-littering slogan] was a way of linking peoples pride and identity with not littering. Meaning, youre messing with Texas if you throw stuff out! And that has been successfulnot perfectly successful, but its made things a lot better than they otherwise would be. And it has been accompanied by trusted people like Willie Nelson, as part of the Dont Mess With Texas campaign. And thats smart. You could easily imagine stuff like that on Covid-19. This is not a simple problem. But it is something on which some places in the world have done really well. And some places in our own country have done at least well. And theres no reason that [other] places cant use the same strategies that have been useful elsewhere.

Have there been cases studies like that during the pandemic?

In Montana, theres a recent effort to connect precautionary steps with ones identity as a citizen of Montana: Montanans Do This. And thats behaviorally smart. Its like the Texas program. And so behavioral science has many faces, one of which is clear information, one of which is reminders, one of which is warnings, one of which is social norms, another of which is making things simple, another of which is connecting with peoples identity. I would think that in Texas, where the pandemic is not going well these days, to use the Dont Mess with Texas campaign directly as a way of attacking Covid-19 is thinkable.

An image from Montanas ongoing public campaign during the pandemic.
Theres some controversial data that leads some to argue that during the Battle of Britain, Hitlers bombing campaign had the opposite of its intended effectbecause Londoners who saw their neighbors house reduced to rubble actually felt more impervious to threat as a result. Do you think thats part of whats going on here, when we see photos of overcrowded beaches and such in the midst of the reopening?

Id be very careful about that. I wouldnt want to generalize that if someone near you dies, you feel imperviousits more likely to run exactly the opposite way. The availability heuristic suggests that risk judgements are affected by what readily comes to mind. So if youre in a neighborhood and someone gets burgled, your sense of imperviousness will not increase, on averageyoure likely to feel youre going to get burgled.

With respect to some of the crowding, lets say, there is a well-established phenomenon called reactance. Reactance is a behavioral phenomenon where people are told not to do something, and sometimes theyll do it because theyve told been told not to do it. Theyre mad, they feel their agency has been taken away. And so for leaders who are either encouraging certain behaviors, or mandating certain behaviors, to be alert to the risk of reactance is a good idea. 

Where else have you seen behavioral nudges at work?

In the United Kingdom, the EAST frameworkEasy, Attractive, Social, and Timelyevery one of those letters you can see in a grocery store, for example, which puts right there, Wear a mask, or Not allowed without a mask, and has repeated social distancing reminders. The Behavioural Insights Team in the UK is doing a lot of work in trying to figure out what works. So they are studying intensely whats the most effective way to get people to wear a mask or to engage in social distancing, to wash your hands. Theyre doing empirical workin 31 countries, last I checked. So what Ive been describing are things that behavioral science predicts would be successful. But theyre actually testing whats the most successful [in the pandemic]. 

Are there uses for this approach in the coming months ahead? What about reopening college campuses and schools, which has a lot of people feeling anxious?

I suspect well see a lot of creativity with apps both for educational institutions and large employers, apps that will allow disclosures of various kinds, like: Are you healthy today? When were you tested? Have you been in contact with anyone sick? And of course, there are privacy issues there. And then thats going to be challenging.

What about for parents? Suppose that in September, policymakers start urging parents to avoid playdates. Youll have parents desperate to get their kids out of the house, and trapped in a scenario where a lot hinges on mutual accountability between parents, along with a lot of temptation to break the rules.

For diminishing playdates? Theres some preliminary data suggesting that if you want people to engage in healthy behavior, its more effective to tell them they need to do that so that they dont make other people sick, than to do it to ensure they themselves dont get sick. Its really interesting data. It suggests that people dont want to endanger or kill others. That gets their juices flowing. They also dont want themselves to get sick, of course, but its even more effective to do that. So to clarify to parents, If they do X, [and] X is a risky thing to do, they are threatening their sons grandmothers life. And saying it in a way that doesnt have excessive sternness. But instead, something that says, Please, be kind.

source: https://www.washingtonian.com/2020/07/13/questions-for-cass-sunstein-can-we-nudge-to-a-better-pandemic-policy/