ideas42: “People are presented with many choices throughout their day, from what to have for lunch to where to go on vacation to how much money to save for emergencies. In many situations, this ability to choose enhances our lives. However, having too many choices can sometimes feel like a burden, especially if the choices are complex or the decisions we’re making are important. In these instances, we often make poor decisions, or sometimes even fail to choose at all. This can create real problems, for example when people fail to save enough for retirement or don’t make the right choices when it comes to staying healthy.
So why is it that so much effort has been spent trying to improve decision-making by giving people even more information about the choices available – often complicating the choice even further?
In a new paper by ideas42, ideas42 co-founder Antoinette Schoar of MIT’s Sloan School of Management, and ideas42’s Saugato Datta argue that this approach of providing more information to help individuals make better decisions is flawed, “since it does not take into account the psychological or behavioral barriers that prevent people from making better decisions.” The solution, they propose, is using effective rules of thumb, or ‘heuristics’, to “enable people to make ‘reasonably good’ decisions without needing to understand all the complex nuances of the situation.” The paper explores the effectiveness of heuristics as a tool to simplify information during decision-making and help people follow through on their intentions. The authors offer powerful examples of effective heuristics-based methods in three domains: financial education, agriculture, and medicine….(More)”
Nudge Concept App Hopes To Point Pre-Diabetics Toward A Healthier Lifestyle
Addy Dugdale at FastCompany: “A new concept app from the London office of design and innovation consultancy Smart Design aims to improve the health of a large portion of the world’s population, a segment for whom weight loss can be a matter of life and death: diabetics.
Nudge is a concept app aimed at pre-diabetics—people with a high risk of developing type 2 diabetes—to change their eating habits. Described as a “personal nutritionist disguised as a shopping assistant,” the app keeps track of a user’s weekly grocery shopping using a phone’s camera to scan products on store shelves. The app looks for purchasing patterns that can be improved, and suggests healthy alternatives—like substituting red rice for white rice, or maybe even quinoa—to nudge the individual toward making better decisions. The idea is to help pre-diabetics make small, incremental changes.
…(More)”
The Trouble With Disclosure: It Doesn’t Work
Jesse Eisinger at ProPublica: “Louis Brandeis was wrong. The lawyer and Supreme Court justice famously declared that sunlight is the best disinfectant, and we have unquestioningly embraced that advice ever since.
All this sunlight is blinding. As new scholarship is demonstrating, the value of all this information is unproved. Paradoxically, disclosure can be useless — and sometimes actually harmful or counterproductive.
“We are doing disclosure as a regulatory move all over the board,” says Adam J. Levitin, a law professor at Georgetown, “The funny thing is, we are doing this despite very little evidence of its efficacy.”…
Of course, some disclosure works. Professor Levitin cites two examples. The first is an olfactory disclosure. Methane doesn’t have any scent, but a foul smell is added to alert people to a gas leak. The second is ATM. fees. A study in Australia showed that once fees were disclosed, people avoided the high-fee machines and took out more when they had to go to them.
But to Omri Ben-Shahar, co-author of a recent book, ” More Than You Wanted To Know: The Failure of Mandated Disclosure,” these are cherry-picked examples in a world awash in useless disclosures. Of course, information is valuable. But disclosure as a regulatory mechanism doesn’t work nearly well enough, he argues.
First, it really works only when things are simple. As soon as transactions become complex, disclosure starts to stumble. Buying a car, for instance, turns out to be several transactions: the purchase itself, the financing, maybe the trade-in of old car and various insurance and warranty decisions. These are all subject to various disclosure rules, but making the choices clear and useful has proved nigh impossible.
In complex transactions, we then must rely on intermediaries to give us advice. Because they are often conflicted, they, too, become subject to disclosure obligations. Ah, even more boilerplate to puzzle over!
And then there’s the harm. Over the years, banks that sold complex securities often stuck impossible-to-understand clauses deep in prospectuses that “disclosed” what was really going on. When the securities blew up, as they often did, banks then fended off lawsuits by arguing they had done everything the law required and were therefore not liable.
“That’s the harm of disclosure,” Professor Ben-Shahar said. “It provides a safe harbor for practices that smell bad. It sanitizes every bad practice.”
The anti-disclosure movement is taking on the ” Nudge” school, embraced by the Obama administration and promoted most prominently by Cass R. Sunstein, a scholar at Harvard, and Richard H. Thaler, an economist at the University of Chicago. These nudgers believe that small policies will prod people to do what’s in their best interests.
The real-world evidence in favor of nudging is thin. …
The ever-alluring notion is that we are just one or two changes away from having meaningful disclosure. If we could only have annual Securities and Exchange Commission filings in plain English, we could finally understand what’s going on at corporations. A University of San Diego Law School professor, Frank Partnoy, and I called for better bank disclosure in an article in The Atlantic a few years ago.
Professor Ben-Shahar mocks it. ” ‘Plain English!’ ‘Make it simple.’ That is the deus ex machina, the god that will solve everything,” he said.
Complex things are, sadly, complex. A mortgage is not an easy transaction to understand. People are not good at predicting their future behavior and so don’t know what options are best for them. “The project of simplification is facing a very poor empirical track record and very powerful theoretical problem,” he said.
What to do instead? Hard and fast rules. If lawmakers want to end a bad practice, ban it. Having them admit it is not enough. (More)”
“We are doing disclosure as a regulatory move all over the board,” says Adam J. Levitin, a law professor at Georgetown, “The funny thing is, we are doing this despite very little evidence of its efficacy.”…
Of course, some disclosure works. Professor Levitin cites two examples. The first is an olfactory disclosure. Methane doesn’t have any scent, but a foul smell is added to alert people to a gas leak. The second is ATM. fees. A study in Australia showed that once fees were disclosed, people avoided the high-fee machines and took out more when they had to go to them.
But to Omri Ben-Shahar, co-author of a recent book, ” More Than You Wanted To Know: The Failure of Mandated Disclosure,” these are cherry-picked examples in a world awash in useless disclosures. Of course, information is valuable. But disclosure as a regulatory mechanism doesn’t work nearly well enough, he argues.
First, it really works only when things are simple. As soon as transactions become complex, disclosure starts to stumble. Buying a car, for instance, turns out to be several transactions: the purchase itself, the financing, maybe the trade-in of old car and various insurance and warranty decisions. These are all subject to various disclosure rules, but making the choices clear and useful has proved nigh impossible.
In complex transactions, we then must rely on intermediaries to give us advice. Because they are often conflicted, they, too, become subject to disclosure obligations. Ah, even more boilerplate to puzzle over!
And then there’s the harm. Over the years, banks that sold complex securities often stuck impossible-to-understand clauses deep in prospectuses that “disclosed” what was really going on. When the securities blew up, as they often did, banks then fended off lawsuits by arguing they had done everything the law required and were therefore not liable.
“That’s the harm of disclosure,” Professor Ben-Shahar said. “It provides a safe harbor for practices that smell bad. It sanitizes every bad practice.”
The anti-disclosure movement is taking on the ” Nudge” school, embraced by the Obama administration and promoted most prominently by Cass R. Sunstein, a scholar at Harvard, and Richard H. Thaler, an economist at the University of Chicago. These nudgers believe that small policies will prod people to do what’s in their best interests.
The real-world evidence in favor of nudging is thin. …
The ever-alluring notion is that we are just one or two changes away from having meaningful disclosure. If we could only have annual Securities and Exchange Commission filings in plain English, we could finally understand what’s going on at corporations. A University of San Diego Law School professor, Frank Partnoy, and I called for better bank disclosure in an article in The Atlantic a few years ago.
Professor Ben-Shahar mocks it. ” ‘Plain English!’ ‘Make it simple.’ That is the deus ex machina, the god that will solve everything,” he said.
Complex things are, sadly, complex. A mortgage is not an easy transaction to understand. People are not good at predicting their future behavior and so don’t know what options are best for them. “The project of simplification is facing a very poor empirical track record and very powerful theoretical problem,” he said.
What to do instead? Hard and fast rules. If lawmakers want to end a bad practice, ban it. Having them admit it is not enough. (More)”
Nudging and Choice Architecture: Ethical Considerations
New paper by Cass Sunstein at Yale Journal on Regulation (via SSRN): “Is nudging unethical? Is choice architecture a problem for a free society? This essay defends seven propositions: (1) It is pointless to object to choice architecture or nudging as such. Choice architecture cannot be avoided. Nature itself nudges; so does the weather; so do customs and traditions; so do spontaneous orders and invisible hands. The private sector inevitably nudges, as does the government. It is reasonable to worry about nudges by government and to object to particular nudges, but not to nudging in general. (2) In this context, ethical abstractions (for example, about autonomy, dignity, manipulation, and democratic self-government) can create serious confusion. To make progress, those abstractions must be brought into contact with concrete practices. Nudging and choice architecture take highly diverse forms, and the force of an ethical objection depends on the specific form. (3) If welfare is our guide, much nudging is actually required on ethical grounds, even if it comes from government. (4) If autonomy is our guide, much nudging is also required on ethical grounds, in part because some nudges actually promote autonomy, in part because some nudges enable people to devote their limited time and attention to their most important concerns. (5) Choice architecture should not, and need not, compromise either dignity or self-government, but it is important to see that imaginable forms could do both. It follows that when they come from government, choice architecture and nudges should not be immune from a burden of justification, which they might not be able to overcome. (6) Some nudges are objectionable because the choice architect has illicit ends. When the ends are legitimate, and when nudges are fully transparent and subject to public scrutiny, a convincing ethical objection is less likely to be available. (7) There is ample room for ethical objections in the case of well-motivated but manipulative interventions, certainly if people have not consented to them; such nudges can undermine autonomy and dignity. It follows that both the concept and the practice of manipulation deserve careful attention. The concept of manipulation has a core and a periphery; some interventions fit within the core, others within the periphery, and others outside of both….(More)”
Helping the Poor in Education: The Power of a Simple Nudge
The New York Times: “There are enormous inequalities in education in the United States. A child born into a poor family has only a 9 percent chance of getting a college degree, but the odds are 54 percent for a child in a high-income family. These gaps open early, with poor children less prepared than their kindergarten classmates.
How can we close these gaps?….
Yet as these debates rage, researchers have been quietly finding small, effective ways to improve education. They have identified behavioral “nudges” that prod students and their families to take small steps that can make big differences in learning. These measures are cheap, so schools or nonprofits could use them immediately.
Let’s start with college. At every step of the way, low-income students are more likely to stumble on the path to higher education. Even the summer after high school is a perilous time, with 20 percent of those who plan to attend college not actually enrolling — a phenomenon known as “summer melt.” Bureaucratic barriers, like the labyrinthine process of applying for financial aid, explain some of the drop-off.
While they were graduate students at Harvard, two young professors designed and tested a program to help students stick to their college plans. Benjamin L. Castleman, now at the University of Virginia, and Lindsay C. Page, at the University of Pittsburgh, set up a system of automatic, personalized text messages that reminded high school students about their college deadlines. The texts included links to required forms and live counselors.
The result? Students who received the texts were more likely to enroll in college: 70 percent, compared with 63 percent of those who did not get them. Seven percentage points is a big increase in this field, similar to the gains produced by scholarships that cost thousands of dollars. Yet this program cost only $7 per student.
The same researchers also tested a texting program to keep students from dropping out of college….(More)”
Governing the Embedded State: The Organizational Dimension of Governance
By drawing upon this research, the volume will explain how recent developments such as globalization, Europeanization, the expansion of managerial ideas, and the fragmentation of states, have influenced the state’s capacity to govern.
The result is an account of contemporary governance which shows the societal constraints on government but also the significance of close interaction and cooperation between the political leadership and the senior civil servants in addressing those constraints.”
People around you control your mind: The latest evidence
in the Washington Post: “…That’s the power of peer pressure.In a recent working paper, Pedro Gardete looked at 65,525 transactions across 1,966 flights and more than 257,000 passengers. He parsed the data into thousands of mini-experiments such as this:
If someone beside you ordered a snack or a film, Gardete was able to see whether later you did, too. In this natural experiment, the person sitting directly in front of you was the control subject. Purchases were made on a touchscreen; that person wouldn’t have been able to see anything. If you bought something, and the person in front of you didn’t, peer pressure may have been the reason.
Because he had reservation data, Gardete could exclude people flying together, and he controlled for all kinds of other factors such as seat choice. This is purely the effect of a stranger’s choice — not just that, but a stranger whom you might be resenting because he is sitting next to you, and this is a plane.
By adding up thousands of these little experiments, Gardete, an assistant professor of marketing at Stanford, came up with an estimate. On average, people bought stuff 15 to 16 percent of the time. But if you saw someone next to you order something, your chances of buying something, too, jumped by 30 percent, or about four percentage points…
The beauty of this paper is that it looks at social influences in a controlled situation. (What’s more of a trap than an airplane seat?) These natural experiments are hard to come by.
Economists and social scientists have long wondered about the power of peer pressure, but it’s one of the trickiest research problems….(More)”.
Just say no to digital hoarding
Dominic Basulto at the Washington Post: “We have become a nation of digital hoarders. We save everything, even stuff that we know, deep down, we’ll never need or be able to find. We save every e-mail, every photo, every file, every text message and every video clip. If we don’t have enough space on our mobile devices, we move it to a different storage device, maybe even a hard drive or a flash drive. Or, better yet, we just move it to “the cloud.”….
If this were simply a result of the exponential growth of information — the “information overload” — that would be one thing. That’s what technology is supposed to do for us – provide new ways of creating, storing and manipulating information. Innovation, from this perspective, can be viewed as technology’s frantic quest to keep up with society’s information needs.
But digital hoarding is about something much different – it’s about hoarding data for the sake of data. When Apple creates a new “Burst Mode” on the iPhone 5s, enabling you to rapidly save a series of up to 10 photos in succession – and you save all of them – is that not an example of hoarding? When you save every e-book, every movie and every TV season that you’ve “binge-watched” on your tablet or other digital device — isn’t that another symptom of being a digital hoarder? In the analog era, you would have donated used books to charity, hosted a garage sale to get rid of old albums you never listen to, or simply dumped these items in the trash.
You may not think you are a digital hoarder. You may think that the desire to save each and every photo, e-mail or file is something relatively harmless. Storage is cheap and abundant, right? You may watch a reality TV show such as “Hoarders” and think to yourself, “That’s not me.” But maybe it is you. (Especially if you still have those old episodes of “Hoarders” on your digital device.)
Unlike hoarding in the real world — where massive stacks of papers, books, clothing and assorted junk might physically obstruct your ability to move and signal to others that you need help – there are no obvious outward signs of being a digital hoarder. And, in fact, owning the newest, super-slim 128GB tablet capable of hoarding more information than anyone else strikes many as being progressive. However, if you are constantly increasing the size of your data plan or buying new digital devices with ever more storage capacity, you just might be a digital hoarder…
In short, innovation should be about helping us transform data into information. “Search” was perhaps the first major innovation that helped us transform data into information. The “cloud” is currently the innovation that has the potential to organize our data better and more efficiently, keeping it from clogging up our digital devices. The next big innovation may be “big data,” which claims that it can make sense of all the new data we’re creating. This may be either brilliant — helping us find the proverbial needle in the digital haystack — or disastrous — encouraging us to build bigger and bigger haystacks in the hope that there’s a needle in there somewhere… (More).”
Wiser: Getting Beyond Groupthink to Make Groups Smarter
New publication by Reid Hastie and Cass Sunstein: “Why are group decisions so hard? Since the beginning of human history, people have made decisions in groups–first in families and villages, and now as part of companies, governments, school boards, religious organizations, or any one of countless other groups. And having more than one person to help decide is good because the group benefits from the collective knowledge of all of its members, and this results in better decisions. Right? Back to reality. We’ve all been involved in group decisions–and they’re hard. And they often turn out badly. Why? Many blame bad decisions on “groupthink” without a clear idea of what that term really means. Now, “Nudge” coauthor Cass Sunstein and leading decision-making scholar Reid Hastie shed light on the specifics of why and how group decisions go wrong–and offer tactics and lessons to help leaders avoid the pitfalls and reach better outcomes. In the first part of the book, they explain in clear and fascinating detail the distinct problems groups run into: They often amplify, rather than correct, individual errors in judgment; They fall victim to cascade effects, as members follow what others say or do; They become polarized, adopting more extreme positions than the ones they began with; They emphasize what everybody knows instead of focusing on critical information that only a few people know. In the second part of the book, the authors turn to straightforward methods and advice for making groups smarter. These approaches include silencing the leader so that the views of other group members can surface, rethinking rewards and incentives to encourage people to reveal their own knowledge, thoughtfully assigning roles that are aligned with people’s unique strengths, and more. With examples from a range of organizations–from Google to the CIA–and written in an engaging and witty style, “Wiser” will not only enlighten you; it will help your team and your organization make better decisions–decisions that lead to greater success.”
Look to Government—Yes, Government—for New Social Innovations
Paper by Christian Bason and Philip Colligan: “If asked to identify the hotbed of social innovation right now, many people would likely point to the new philanthropy of Silicon Valley or the social entrepreneurship efforts supported by Ashoka, Echoing Green, and Skoll Foundation. Very few people, if any, would mention their state capital or Capitol Hill. While local and national governments may have promulgated some of the greatest advances in human history — from public education to putting a man on the moon — public bureaucracies are more commonly known to stifle innovation.
Yet, around the world, there are local, regional, and national government innovators who are challenging this paradigm. They are pioneering a new form of experimental government — bringing new knowledge and practices to the craft of governing and policy making; drawing on human-centered design, user engagement, open innovation, and cross-sector collaboration; and using data, evidence, and insights in new ways.
Earlier this year, Nesta, the UK’s innovation foundation (which Philip helps run), teamed up with Bloomberg Philanthropies to publish i-teams, the first global review of public innovation teams set up by national and city governments. The study profiled 20 of the most established i-teams from around the world, including:
- French Experimental Fund for Youth, which has supported more than 554 experimental projects (such as one that reduces school drop-out rates) that have benefited over 480,000 young people;
- Nesta’s Innovation Lab, which has run 70 open innovation challenges and programs supporting over 750 innovators working in fields as diverse as energy efficiency, healthcare, and digital education;
- New Orleans’ Innovation and Delivery team, which achieved a 19% reduction in the number of murders in the city in 2013 compared to the previous year.
How are i-teams achieving these results? The most effective ones are explicit about the goal they seek – be it creating a solution to a specific policy challenge, engaging citizenry in behaviors that help the commonweal, or transforming the way government behaves. Importantly, these teams are also able to deploy the right skills, capabilities, and methods for the job.
In addition, i-teams have a strong bias toward action. They apply academic research in behavioral economics and psychology to public policy and services, focusing on rapid experimentation and iteration. The approach stands in stark contrast to the normal routines of government.
Take for example, The UK’s Behavioural Insights Team (BIT), often called the Nudge Unit. It sets clear goals, engages the right expertise to prototype means to the end, and tests innovations rapidly in the field, to learn what’s not working and rapidly scales what is.
One of BIT’s most famous projects changed taxpayer behavior. BIT’s team of economists, behavioral psychologists, and seasoned government staffers came up with minor changes to tax letters, sent out by the UK Government, that subtlety introduced positive peer pressure. By simply altering the letters to say that most people in their local area had already paid their taxes, BIT was able to boost repayment rates by around 5%. This trial was part of a range of interventions, which have helped forward over £200 million in additional tax revenue to HM Revenue & Customs, the UK’s tax authority.
The Danish government’s internal i-team, MindLab (which Christian ran for 8 years) has likewise influenced citizen behavior….”