The Nudge Wars: A Glimpse into the Modern Socialist Calculation Debate


Paper by Abigail Devereaux: “Nudge theory, the preferences-neutral subset of modern behavioral economic policy, is premised on irrational decision-making at the level of the individual agent. We demonstrate how Hayek’s epistemological argument, developed primarily during the socialist calculation debate in response to claims made by fellow economists in favor of central planning, can be extended to show how nudge theory requires social architects to have access to fundamentally unascertainable implicit and local knowledge. We draw parallels between the socialist calculation debate and nudge theoretical arguments throughout, particularly the “libertarian socialism” of H. D. Dickinson and the “libertarian paternalism” of Cass Sunstein and Richard Thaler. We discuss the theory of creative and computable economics in order to demonstrate how nudges are provably not preferences-neutral, as even in a state of theoretically perfect information about current preferences, policy-makers cannot access information about how preferences may change in the future. We conclude by noting that making it cheaper to engage in some methods of decision-making is analogous to subsidizing some goods. Therefore, the practical consequences of implementing nudge theory could erode the ability of individuals to make good decisions by destroying the kinds of knowledge-encoding institutions that endogenously emerge to assist agent decision-making….(More)”

For Whose Benefit? The Biological and Cultural Evolution of Human Cooperation


Book by Patrik Lindenfors: “… takes the reader on a journey, navigating the enigmatic aspects of cooperation; a journey that starts inside the body and continues via our thoughts to the human super-organism.

Cooperation is one of life’s fundamental principles. We are all made of parts – genes, cells, organs, neurons, but also of ideas, or ‘memes’. Our societies too are made of parts – us humans. Is all this cooperation fundamentally the same process?

From the smallest component parts of our bodies and minds to our complicated societies, everywhere cooperation is the organizing principle. Often this cooperation has emerged because the constituting parts have benefited from the interactions, but not seldom the cooperating units appear to lose on the interaction. How then to explain cooperation? How can we understand our intricate societies where we regularly provide small and large favors for people we are unrelated to, know, or even never expect to meet again? Where does the idea come from that it is right to risk one’s life for country, religion or freedom? The answers seem to reside in the two processes that have shaped humanity: biological and cultural evolution….(More)”

Nudging people to make good choices can backfire


Bruce Bower in ScienceNews: “Nudges are a growth industry. Inspired by a popular line of psychological research and introduced in a best-selling book a decade ago, these inexpensive behavior changers are currently on a roll.

Policy makers throughout the world, guided by behavioral scientists, are devising ways to steer people toward decisions deemed to be in their best interests. These simple interventions don’t force, teach or openly encourage anyone to do anything. Instead, they nudge, exploiting for good — at least from the policy makers’ perspective — mental tendencies that can sometimes lead us astray.

But new research suggests that low-cost nudges aimed at helping the masses have drawbacks. Even simple interventions that work at first can lead to unintended complications, creating headaches for nudgers and nudgees alike…

Promising results of dozens of nudge initiatives appear in two government reports issued last September. One came from the White House, which released the second annual report of its Social and Behavioral Sciences Team. The other came from the United Kingdom’s Behavioural Insights Team. Created by the British government in 2010, the U.K. group is often referred to as the Nudge Unit.

In a September 20, 2016, Bloomberg View column, Sunstein said the new reports show that nudges work, but often increase by only a few percentage points the number of people who, say, receive government benefits or comply with tax laws. He called on choice architects to tackle bigger challenges, such as finding ways to nudge people out of poverty or into higher education.

Missing from Sunstein’s comments and from the government reports, however, was any mention of a growing conviction among some researchers that well-intentioned nudges can have negative as well as positive effects. Accepting automatic enrollment in a company’s savings plan, for example, can later lead to regret among people who change jobs frequently or who realize too late that a default savings rate was set too low for their retirement needs. E-mail reminders to donate to a charity may work at first, but annoy recipients into unsubscribing from the donor list.

“I don’t want to get rid of nudges, but we’ve been a bit too optimistic in applying them to public policy,” says behavioral economist Mette Trier Damgaard of Aarhus University in Denmark.

Nudges, like medications for physical ailments, require careful evaluation of intended and unintended effects before being approved, she says. Policy makers need to know when and with whom an intervention works well enough to justify its side effects.

Default downer

That warning rings especially true for what is considered a shining star in the nudge universe — automatic enrollment of employees in retirement savings plans. The plans, called defaults, take effect unless workers decline to participate….

But little is known about whether automatic enrollees are better or worse off as time passes and their personal situations change, says Harvard behavioral economist Brigitte Madrian. She coauthored the 2001 paper on the power of default savings plans.

Although automatic plans increase savings for those who otherwise would have squirreled away little or nothing, others may lose money because they would have contributed more to a self-directed retirement account, Madrian says. In some cases, having an automatic savings account may encourage irresponsible spending or early withdrawals of retirement money (with penalties) to cover debts. Such possibilities are plausible but have gone unstudied.

In line with Madrian’s concerns, mathematical models developed by finance professor Bruce Carlin of the University of California, Los Angeles and colleagues suggest that people who default into retirement plans learn less about money matters, and share less financial information with family and friends, than those who join plans that require active investment choices.

Opt-out savings programs “have been oversimplified to the public and are being sold as a great way to change behavior without addressing their complexities,” Madrian says. Research needs to address how well these plans mesh with individuals’ personalities and decision-making styles, she recommends….

Researchers need to determine how defaults and other nudges instigate behavior changes before unleashing them on the public, says philosopher of science Till Grüne-Yanoff of the Royal Institute of Technology in Stockholm….

Sometimes well-intentioned, up-front attempts to get people to do what seems right come back to bite nudgers on the bottom line.

Consider e-mail prompts and reminders. ….A case in point is a study submitted for publication by Damgaard and behavioral economist Christina Gravert of the University of Gothenburg in Sweden. E-mailed donation reminders sent to people who had contributed to a Danish anti-poverty charity increased the number of donations in the short term, but also triggered an upturn in the number of people unsubscribing from the list.

People’s annoyance at receiving reminders perceived as too frequent or pushy cost the charity money over the long haul, Damgaard holds. Losses of list subscribers more than offset the financial gains from the temporary uptick in donations, she and Gravert conclude.

“Researchers have tended to overlook the hidden costs of nudging,” Damgaard says….(More)”

Analytics Tools Could Be the Key to Effective Message-Driven Nudging


 in Government Technology: “Appealing to the nuances of the human mind has been a feature of effective governance for as long as governance has existed, appearing prominently in the prescriptions of every great political theorist from Plato to Machiavelli. The most recent and informed iteration of this practice is nudging: leveraging insights about how humans think from behavioral science to create initiatives that encourage desirable behaviors.

Public officials nudge in many ways. Some seek to modify people’s behavior by changing the environments in which they make decisions, for instance moving vegetables to the front of a grocery store to promote healthy eating. Others try to make desirable behaviors easier, like streamlining a city website to make it simpler to sign up for a service. Still others use prompts like email reminders of a deadline to receive a free checkup to nudge people to act wisely by providing useful information.

Thus far, examples of the third type of nudging — direct messaging that prompts behavior — have been decidedly low tech. Typical initiatives have included sending behaviorally informed letters to residents who have not complied with a city code or mailing out postcard reminders to renew license plates. Governments have been attracted to these initiatives for their low cost and proven effectiveness.

While these low-tech nudges should certainly continue, cities’ recent adoption of tools that can mine and analyze data instantaneously has the potential to greatly increase the scope and effectiveness of message-driven nudging.

For one, using Internet of Things (IoT) ecosystems, cities can provide residents with real-time information so that they may make better-informed decisions. For example, cities could connect traffic sensors to messaging systems and send subscribers text messages at times of high congestion, encouraging them to take public transportation. This real-time information, paired with other nudges, could increase transit use, easing traffic and bettering the environment…
Instantaneous data-mining tools may also prove useful for nudging citizens in real time, at the moments they are most likely to partake in detrimental behavior. Tools like machine learning can analyze users’ behavior and determine if they are likely to make a suboptimal choice, like leaving the website for a city service without enrolling. Using clickstream data, the site could determine if a user is likely to leave and deliver a nudge, for example sending a message explaining that most residents enroll in the service. This strategy provides another layer of nudging, catching residents who may have been influenced by an initial nudge — like a reminder to sign up for a service or streamlined website — but may need an extra prod to follow through….(More)”

Digital Nudging: Altering User Behavior in Digital Environments


Tobias Mirsch,Christiane Lehrer, and Reinhard Jung in Wirtschaftsinformatik: “Individuals make increasingly more decisions on screens, such as those on websites or mobile apps. However, the nature of screens and the vast amount of information available online make individuals particularly prone to deficient decisions. Digital nudging is an approach based on insights from behavioral economics that applies user interface (UI) design elements to affect the choices of users in digital environments. UI design elements include graphic design, specific content, wording or small features. To date, little is known about the psychological mechanisms that underlie digital nudging. To address this research gap, we conducted a systematic literature review and provide a comprehensive overview of relevant psychological effects and exemplary nudges in the physical and digital sphere. These insights serve as a valuable basis for researchers and practitioners that aim to study or design information systems and interventions that assist user decision making on screens….(More)”

#Republic: Divided Democracy in the Age of Social Media


Book by Cass Sunstein: “As the Internet grows more sophisticated, it is creating new threats to democracy. Social media companies such as Facebook can sort us ever more efficiently into groups of the like-minded, creating echo chambers that amplify our views. It’s no accident that on some occasions, people of different political views cannot even understand each other. It’s also no surprise that terrorist groups have been able to exploit social media to deadly effect.

Welcome to the age of #Republic.

In this revealing book, Cass Sunstein, the New York Times bestselling author of Nudge and The World According to Star Wars, shows how today’s Internet is driving political fragmentation, polarization, and even extremism—and what can be done about it.

Thoroughly rethinking the critical relationship between democracy and the Internet, Sunstein describes how the online world creates “cybercascades,” exploits “confirmation bias,” and assists “polarization entrepreneurs.” And he explains why online fragmentation endangers the shared conversations, experiences, and understandings that are the lifeblood of democracy.

In response, Sunstein proposes practical and legal changes to make the Internet friendlier to democratic deliberation. These changes would get us out of our information cocoons by increasing the frequency of unchosen, unplanned encounters and exposing us to people, places, things, and ideas that we would never have picked for our Twitter feed.

#Republic need not be an ironic term. As Sunstein shows, it can be a rallying cry for the kind of democracy that citizens of diverse societies most need….(More)”

Why We Misjudge the Nudge


Paper by Adam Hill: “Critics frequently argue that nudges are more covert, less transparent, and more difficult to monitor than traditional regulatory tools. Edward Glaeser, for example, argues that “[p]ublic monitoring of soft paternalism is much more difficult than public monitoring of hard paternalism.” As one of the leading proponents of soft paternalism, Cass Sunstein, acknowledges, while “[m]andates and commands are highly visible,” soft paternalism, “and some nudges in particular[,] may be invisible.” In response to this challenge, proponents of nudging argue that invisibility for any given individual in a particular choice environment is compatible with “careful public scrutiny” of the nudge. This paper offers first of its kind experimental evidence that tests whether nudges are, in fact, compatible with careful public scrutiny. Using two sets of experiments, the paper argues that, even when made visible, nudges attract less scrutiny than their “hard law” counterparts….(More)”

Special issue on “the behavioural turn in public policy: new evidence from experiments”


Introduction to the special issue in Economia Politica by Francesco Bogliacino, Cristiano Codagnone and Giuseppe A. Veltri: “Since the publication of the best seller Nudge (Thaler and Sunstein 2008), the growth in the relevance of ‘Behavioural Economics’ (BE) and ‘Nudging’ has been exponential, both in terms of the adoption of behavioural perspectives in policy making and of ongoing academic research. With some simplification three strands can be singled out. First, the widespread application and institutionalisation of behaviourally inspired policy-making beyond the two initial cases of the US and the UK (Lunn 2014; Sousa Lourenço et al. 2016). Second, a discussion within the field of economics as to the place and contribution of BE toward ‘Evidence Based Economics’ (Chetty 2015; Thaler 2016). Third, the explosion between 2010 and 2016 of a multidisciplinary and multi-domain meta-literature of commentaries and essays for and against ‘Nudging’ that deal with its conceptual, theoretical, and philosophical underpinnings, as well as with its political and ethical implications…

In this editorial we briefly consider the three trends outlined above (diffusion of behavioural policy-making, evidence-based economics, and the meta-literature on nudging) and argue in favour of a fruitful dialogue, which is currently missing. In doing this, we sketch the policy triangle of politics, value and evidence as a potential guidance…(More).

Playing politics: exposing the flaws of nudge thinking


Book Review by Pat Kane in The New Scientist: “The cover of this book echoes its core anxiety. A giant foot presses down on a sullen, Michael Jackson-like figure – a besuited citizen coolly holding off its massive weight. This is a sinister image to associate with a volume (and its author, Cass Sunstein) that should be able to proclaim a decade of success in the government’s use of “behavioural science”, or nudge theory. But doubts are brewing about its long-term effectiveness in changing public behaviour – as well as about its selective account of evolved human nature.

influence

Nudging has had a strong and illustrious run at the highest level. Outgoing US President Barack Obama and former UK Prime Minister David Cameron both set up behavioural science units at the heart of their administrations (Sunstein was the administrator of the White House Office of Information and Regulatory Affairs from 2009 to 2012).

Sunstein insists that the powers that be cannot avoid nudging us. Every shop floor plan, every new office design, every commercial marketing campaign, every public information campaign, is an “architecting of choices”. As anyone who ever tried to leave IKEA quickly will suspect, that endless, furniture-strewn path to the exit is no accident.

Nudges “steer people in particular directions, but also allow them to go their own way”. They are entreaties to change our habits, to accept old or new norms, but they presume thatwe are ultimately free to refuse the request.

However, our freedom is easily constrained by “cognitive biases”. Our brains, say the nudgers, are lazy, energy-conserving mechanisms, often overwhelmed by information. So a good way to ensure that people pay into their pensions, for example, is to set payment as a “default” in employment contracts, so the employee has to actively untick the box. Defaults of all kinds exploit our preference for inertia and the status quo in order to increase future security….

Sunstein makes useful distinctions between nudges and the other things governments and enterprises can do. Nudges are not “mandates” (laws, regulations, punishments). A mandate would be, for example, a rigorous and well-administered carbon tax, secured through a democratic or representative process. A “nudge” puts smiley faces on your energy bill, and compares your usage to that of the eco-efficient Joneses next door (nudgers like to game our herd-like social impulses).

In a fascinating survey section, which asks Americans and others what they actually think about being the subjects of the “architecting” of their choices, Sunstein discovers that “if people are told that they are being nudged, they will react adversely and resist”.

This is why nudge thinking may be faltering – its understanding of human nature unnecessarily (and perhaps expediently) downgrades our powers of conscious thought….(More)

See The Ethics of Influence: Government in the age of behavioral science Cass R. Sunstein, Cambridge University Press

The Cost of Cooperating


David Rand: “…If you think about the puzzle of cooperation being “why should I incur a personal cost of time or money or effort in order to do something that’s going to benefit other people and not me?” the general answer is that if you can create future consequences for present behavior, that can create an incentive to cooperate. Cooperation requires me to incur some costs now, but if I’m cooperating with someone who I’ll interact with again, it’s worth it for me to pay the cost of cooperating now in order to get the benefit of them cooperating with me in the future, as long as there’s a large enough likelihood that we’ll interact again.

Even if it’s with someone that I’m not going to interact with again, if other people are observing that interaction, then it affects my reputation. It can be worth paying the cost of cooperating in order to earn a good reputation, and to attract new interaction partners.

There’s a lot of evidence to show that this works. There are game theory models and computer simulations showing that if you build these kinds of future consequences, you can get either evolution to lead to cooperative agents dominating populations, and also learning and strategic reasoning leading to people cooperating. There are also lots of behavioral experiments supporting this. These are lab experiments where you bring people into the lab, give them money, and you have them engage in economic cooperation games where they choose whether to keep the money for themselves or to contribute it to a group project that benefits other people. If you make it so that future consequences exist in any of these various ways, it makes people more inclined to cooperate. Typically, it leads to cooperation paying off, and being the best-performing strategy.

In these situations, it’s not altruistic to be cooperative because the interactions are designed in a way that makes cooperating pay off. For example, we have a paper that shows that in the context of repeated interactions, there’s not any relationship between how altruistic people are and how much they cooperate. Basically, everybody cooperates, even the selfish people. Under certain situations, selfish people can even wind up cooperating more because they’re better at identifying that that’s what is going to pay off.

This general class of solutions to the cooperation problem boils down to creating future consequences, and therefore creating a self-interested motivation in the long run to be cooperative. Strategic cooperation is extremely important; it explains a lot of real-world cooperation. From an institution design perspective, it’s important for people to be thinking about how you set up the rules of interaction—interaction structures and incentive structures—in a way that makes working for the greater good a good strategy.

At the same time that this strategic cooperation is important, it’s also clearly the case that people often cooperate even when there’s not a self-interested motive to do so. That willingness to help strangers (or to not exploit them) is a core piece of well-functioning societies. It makes society much more efficient when you don’t constantly have to be watching your back, afraid that people are going to take advantage of you. If you can generally trust that other people are going to do the right thing and you’re going to do the right thing, it makes life much more socially efficient.

Strategic incentives can motivate people to cooperate, but people also keep cooperating even when there are not incentives to do so, at least to some extent. What motivates people to do that? The way behavioral economists and psychologists talk about that is at a proximate psychological level—saying things like, “Well, it feels good to cooperate with other people. You care about others and that’s why you’re willing to pay costs to help them. You have social preferences.” …

Most people, both in the scientific world and among laypeople, are of the former opinion, which is that we are by default selfish—we have to use rational deliberation to make ourselves do the right thing. I try to think about this question from a theoretical principle position and say, what should it be? From a perspective of either evolution or strategic reasoning, which of these two stories makes more sense, and should we expect to observe?

If you think about it that way, the key question is “where do our intuitive defaults come from?” There’s all this work in behavioral economics and psychology on heuristics and biases which suggests that these intuitions are usually rules of thumb for the behavior that typically works well. It makes sense: If you’re going to have something as your default, what should you choose as your default? You should choose the thing that works well in general. In any particular situation, you might stop and ask, “Does my rule of thumb fit this specific situation?” If not, then you can override it….(More)”