behavioral science

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

Curated on November 27, 2016August 3, 2018 by Stefaan Verhulst

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

Curated on November 20, 2016August 3, 2018 by Stefaan Verhulst

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.

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

Curated on November 12, 2016August 3, 2018 by Stefaan Verhulst

An Edge Conversation With 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)”

Beyond nudging: it’s time for a second generation of behaviourally-informed social policy

Curated on November 10, 2016August 20, 2018 by Stefaan Verhulst

Katherine Curchin at LSE Blog: “…behavioural scientists are calling for a second generation of behaviourally-informed policy. In some policy areas, nudges simply aren’t enough. Behavioural research shows stronger action is required to attack the underlying cause of problems. For example, many scholars have argued that behavioural insights provide a rationale for regulation to protect consumers from manipulation by private sector companies. But what might a second generation of behaviourally-informed social policy look like?

Behavioural insights could provide a justification to change the trajectory of income support policy. Since the 1990s policy attention has focused on the moral character of benefits recipients. Inspired by Lawrence Mead’s paternalist philosophy, governments have tried to increase the resolve of the unemployed to work their way out of poverty. More and more behavioural requirements have been attached to benefits to motivate people to fulfil their obligations to society.

But behavioural research now suggests that these harsh policies are misguided. Behavioural science supports the idea that people often make poor decisions and do things which are not in their long term interests. But the weakness of individuals’ moral constitution isn’t so much the problem as the unequal distribution of opportunities in society. There are circumstances in which humans are unlikely to flourish no matter how motivated they are.

Normal human psychological limitations – our limited cognitive capacity, limited attention and limited self-control – interact with environment to produce the behaviour that advocates of harsh welfare regimes attribute to permissive welfare. In their book Scarcity, Sendhil Mullainathan and Eldar Shafir argue that the experience of deprivation creates a mindset that makes it harder to process information, pay attention, make good decisions, plan for the future, and resist temptations.

Importantly, behavioural scientists have demonstrated that this mindset can be temporarily created in the laboratory by placing subjects in artificial situations which induce the feeling of not having enough. As a consequence, experimental subjects from middle-class backgrounds suddenly display the short-term thinking and irrational decision making often attributed to a culture of poverty.

Tying inadequate income support to a list of behavioural conditions will most punish those who are suffering most. Empirical studies of welfare conditionality have found that benefit claimants often do not comprehend the complicated rules that apply to them. Some are being punished for lack of understanding rather than deliberate non-compliance.

Behavioural insights can be used to mount a case for a more generous, less punitive approach to income support. The starting point is to acknowledge that some of Mead’s psychological assumptions have turned out to be wrong. The nature of the cognitive machinery humans share imposes limits on how self-disciplined and conscientious we can reasonably expect people living in adverse circumstances to be. We have placed too much emphasis on personal responsibility in recent decades. Why should people internalize the consequences of their behaviour when this behaviour is to a large extent the product of their environment?…(More)”

Nudges for Privacy and Security: Understanding and Assisting Users’ Choices Online

Curated on October 29, 2016August 3, 2018 by Stefaan Verhulst

Paper by Alessandro Acquisti et al: “Advancements in information technology often task users with complex and consequential privacy and security decisions. A growing body of research has investigated individuals’ choices in the presence of privacy and information security trade-offs, the decision-making hurdles affecting those choices, and ways to mitigate those hurdles. This article provides a multi-disciplinary assessment of the literature pertaining to privacy and security decision making. It focuses on research on assisting individuals’ privacy and security choices with soft paternalistic interventions that nudge users towards more beneficial choices. The article discusses potential benefits of those interventions, highlights their shortcomings, and identifies key ethical, design, and research challenges….(More)”

‘Good Nudge Lullaby’: Choice Architecture and Default Bias Reinforcement

Curated on October 27, 2016August 3, 2018 by Stefaan Verhulst

Thomas De Haan and Jona Linde in The Economic Journal: “Because people disproportionally follow defaults, both libertarian paternalists and marketers try to present options they want to promote as the default. However, setting certain defaults and thereby influencing current decisions, may also affect choices in later, similar decisions. In this paper we explore experimentally whether the default bias can be reinforced by providing good defaults. We show that people who faced better defaults in the past are more likely to follow defaults than people who faced random defaults, hurting their later performance. This malleability of the default bias explains certain marketing practices and serves as an insight for libertarian paternalists….(More)”

Nudging Health

Curated on October 18, 2016August 3, 2018 by Stefaan Verhulst

Book edited by I. Glenn Cohen, Holly Fernandez Lynch, and Christopher T. Robertson: “Behavioral nudges are everywhere: calorie counts on menus, automated text reminders to encourage medication adherence, a reminder bell when a driver’s seatbelt isn’t fastened. Designed to help people make better health choices, these reminders have become so commonplace that they often go unnoticed. In Nudging Health, forty-five experts in behavioral science and health policy from across academia, government, and private industry come together to explore whether and how these tools are effective in improving health outcomes.

Behavioral science has swept the fields of economics and law through the study of nudges, cognitive biases, and decisional heuristics—but it has only recently begun to impact the conversation on health care.Nudging Health wrestles with some of the thorny philosophical issues, legal limits, and conceptual questions raised by behavioral science as applied to health law and policy. The volume frames the fundamental issues surrounding health nudges by addressing ethical questions. Does cost-sharing for health expenditures cause patients to make poor decisions? Is it right to make it difficult for people to opt out of having their organs harvested for donation when they die? Are behavioral nudges paternalistic? The contributors examine specific applications of behavioral science, including efforts to address health care costs, improve vaccination rates, and encourage better decision-making by physicians. They wrestle with questions regarding the doctor-patient relationship and defaults in healthcare while engaging with larger, timely questions of healthcare reform.

Nudging Health is the first multi-voiced assessment of behavioral economics and health law to span such a wide array of issues—from the Affordable Care Act to prescription drugs….(More)”

Participatory Budgeting in the United States: A Guide for Local Governments

Curated on October 11, 2016October 24, 2018 by Stefaan Verhulst

Book by Victoria Gordon, Jeffery L. Osgood, Jr., Daniel Boden: “Although citizen engagement is a core public service value, few public administrators receive training on how to share leadership with people outside the government.Participatory Budgeting in the United States serves as a primer for those looking to understand a classic example of participatory governance, engaging local citizens in examining budgetary constraints and priorities before making recommendations to local government. Utilizing case studies and an original set of interviews with community members, elected officials, and city employees, this book provides a rare window onto the participatory budgeting process through the words and experiences of the very individuals involved. The central themes that emerge from these fascinating and detailed cases focus on three core areas: creating the participatory budgeting infrastructure; increasing citizen participation in participatory budgeting; and assessing and increasing the impact of participatory budgeting. This book provides students, local government elected officials, practitioners, and citizens with a comprehensive understanding of participatory budgeting and straightforward guidelines to enhance the process of civic engagement and democratic values in local communities….(More)”

Nudge Theory in Action: Behavioral Design in Policy and Markets

Curated on October 4, 2016August 3, 2018 by Stefaan Verhulst

Book edited by Sherzod Abdukadirov: “This collection challenges the popular but abstract concept of nudging, demonstrating the real-world application of behavioral economics in policy-making and technology. Groundbreaking and practical, it considers the existing political incentives and regulatory institutions that shape the environment in which behavioral policy-making occurs, as well as alternatives to government nudges already provided by the market. The contributions discuss the use of regulations and technology to help consumers overcome their behavioral biases and make better choices, considering the ethical questions of government and market nudges and the uncertainty inherent in designing effective nudges. Four case studies – on weight loss, energy efficiency, consumer finance, and health care – put the discussion of the efficiency of nudges into concrete, recognizable terms. A must-read for researchers studying the public policy applications of behavioral economics, this book will also appeal to practicing lawmakers and regulators…(More)”

Behavioral Economics and Fed Policymaking

Curated on September 27, 2016October 23, 2018 by Stefaan Verhulst

Essay by Mark A. Calabria in Cato Journal: “Behavioral economics has continued to gain momentum in challenging the standard rational actor model in economics. With a few exceptions, the emphasis has been on the cognitive failure of individuals outside of government. Niclas Berggren (2013: 200) estimates that 95.5 percent of behavioral economics articles in the leading economics journals do not contain an analysis of the cognitive ability of policymakers. In this article, I offer a preliminary analysis of potential cognitive failures in the Federal Reserve’s conduct of monetary policy. Proposals to “debias” monetary policymaking are offered, along with a discussion of how the Fed’s existing institutional structure ameliorates or exasperates potential biases…(More)”