INSTITUTIONAL INNOVATION

Nudging – Possibilities, Limitations and Applications in European Law and Economics

Curated on May 24, 2016August 3, 2018 by Stefaan Verhulst

Book edited by Mathis, Klaus and Tor, Avishalom: “This anthology provides an in-depth analysis and discusses the issues surrounding nudging and its use in legislation, regulation, and policy making more generally. The 17 essays in this anthology provide startling insights into the multifaceted debate surrounding the use of nudges in European Law and Economics.

Nudging is a tool aimed at altering people’s behaviour in a predictable way without forbidding any option or significantly changing economic incentives. It can be used to help people make better decisions to influence human behaviour without forcing them because they can opt out. Its use has sparked lively debates in academia as well as in the public sphere. This book explores who decides which behaviour is desired. It looks at whether or not the state has sufficient information for debiasing, and if there are clear-cut boundaries between paternalism, manipulation and indoctrination. The first part of this anthology discusses the foundations of nudging theory and the problems associated, as well as outlining possible solutions to the problems raised. The second part is devoted to the wide scope of applications of nudges from contract law, tax law and health claim regulations, among others.

This volume is a result of the flourishing annual Law and Economics Conference held at the law faculty of the University of Lucerne. The conferences have been instrumental in establishing a strong and ever-growing Law and Economics movement in Europe, providing unique insights in the challenges faced by Law and Economics when applied in European legal traditions….(More)”

Could a tweet or a text increase college enrollment or student achievement?

Curated on May 23, 2016August 3, 2018 by Stefaan Verhulst

Peter Bergman at the Conversation: “Can a few text messages, a timely email or a letter increase college enrollment and student achievement? Such “nudges,” designed carefully using behavioral economics, can be effective.

But when do they work – and when not?

Barriers to success

Consider students who have just graduated high school intending to enroll in college. Even among those who have been accepted to college, 15 percent of low-income students do not enroll by the next fall. For the large share who intend to enroll in community colleges, this number can be as high as 40 percent….

Can a few text messages or a timely email overcome these barriers? My research uses behavioral economics to design low-cost, scalable interventions aimed at improving education outcomes. Behavioral economics suggests several important features to make a nudge effective: simplify complex information, make tasks easier to complete and ensure that support is timely.

So, what makes for an effective nudge?

Improving college enrollment

In 2012, researchers Ben Castleman and Lindsay Page sent 10 text messages to nearly 2,000 college-intending students the summer after high school graduation. These messages provided just-in-time reminders on key financial aid, housing and enrollment deadlines from early July to mid August.

Instead of set meetings with counselors, students could reply to messages and receive on-demand support from college guidance counselors to complete key tasks.

In another intervention – the Expanding College Opportunities Project (ECO) – researchers Caroline Hoxby and Sarah Turner worked to help high-achieving, low-income students enroll in colleges on par with their achievement. The intervention arrived to students as a packet in the mail.

The mailer simplified information by providing a list of colleges tailored to each student’s location along with information about net costs, graduation rates, and application deadlines. Moreover, the mailer included easy-to-claim application fee waivers. All these features reduced both the complexity and cost in applying to a wider range of colleges.

In both cases, researchers found that it significantly improved college outcomes. College enrollment went up by 15 percent in the intervention designed to reduce summer melt for community college students. The ECO project increased the likelihood of admission to a selective college by 78 percent.

…

When there is no impact

While these interventions are promising, there are important caveats.

For instance, our preliminary findings from ongoing research show that information alone may not be enough. We sent emails and letters to more than one hundred thousand college applicants about financial aid and education-related tax benefits. However, we didn’t provide any additional support to help families through the process of claiming these benefits.

In other words, we didn’t provide any support to complete the tasks – no fee waivers, no connection to guidance counselors – just the email and the letter. Without this support to answer questions or help families complete forms to claim the benefits, we found no impact, even when students opened the emails.

More generally, “nudges” often lead to modest impacts and should be considered only a part of the solution. But there’s a dearth of low-cost, scalable interventions in education, and behavioral economics can help.

Identifying the crucial decision points – when applications are due, forms need to be filled out or school choices are made – and supplying the just-in-time support to families is key….(More).”

Society’s biggest problems need more than a nudge

Curated on May 16, 2016August 3, 2018 by Stefaan Verhulst

Joe Arvai at the Conversation: “So-called “nudge units” are popping up in governments all around the world.

The best-known examples include the U.K.’s Behavioural Insights Team, created in 2010, and the White House-based Social and Behavioral Sciences Team, introduced by the Obama administration in 2014. Their mission is to leverage findings from behavioral science so that people’s decisions can be nudged in the direction of their best intentions without curtailing their ability to make choices that don’t align with their priorities.

Overall, these – and other – governments have made important strides when it comes to using behavioral science to nudge their constituents into better choices.

Yet, the same governments have done little to improve their own decision-making processes. Consider big missteps like the Flint water crisis. How could officials in Michigan decide to place an essential service – safe water – and almost 100,000 people at risk in order to save US$100 per day for three months? No defensible decision-making process should have allowed this call to be made.

When it comes to many of the big decisions faced by governments – and the private sector – behavioral science has more to offer than simple nudges.

Behavioral scientists who study decision-making processes could also help policy-makers understand why things went wrong in Flint, and how to get their arms around a wide array of society’s biggest problems – from energy transitions to how to best approach the refugee crisis in Syria.

When nudges are enough

The idea of nudging people in the direction of decisions that are in their own best interest has been around for a while. But it was popularized in 2008 with the publication of the bestseller “Nudge“ by Richard Thaler of the University of Chicago and Cass Sunstein of Harvard.

A common nudge goes something like this: if we want to eat better but are having a hard time doing it, choice architects can reengineer the environment in which we make our food choices so that healthier options are intuitively easier to select, without making it unrealistically difficult to eat junk food if that’s what we’d rather do. So, for example, we can shelve healthy foods at eye level in supermarkets, with less-healthy options relegated to the shelves nearer to the floor….

Sometimes a nudge isn’t enough

Nudges work for a wide array of choices, from ones we face every day to those that we face infrequently. Likewise, nudges are particularly well-suited to decisions that are complex with lots of different alternatives to choose from. And, they are advocated in situations where the outcomes of our decisions are delayed far enough into the future that they feel uncertain or abstract. This describes many of the big decisions policy-makers face, so it makes sense to think the solution must be more nudge units.

But herein lies the rub. For every context where a nudge seems like a realistic option, there’s at least another context where the application of passive decision support would be either be impossible – or, worse, a mistake.

Take, for example, the question of energy transitions. These transitions are often characterized by the move from infrastructure based on fossil fuels to renewables to address all manner of risks, including those from climate change. These are decisions that society makes infrequently. They are complex. And, the outcomes – which are based on our ability to meet conflicting economic, social and environmental objectives – will be delayed.

But, absent regulation that would place severe restrictions on the kinds of options we could choose from – and which, incidentally, would violate the freedom-of-choice tenet of choice architecture – there’s no way to put renewable infrastructure options at proverbial eye level for state or federal decision-makers, or their stakeholders.

Simply put, a nudge for a decision like this would be impossible. In these cases, decisions have to be made the old-fashioned way: with a heavy lift instead of a nudge.

Complex policy decisions like this require what we call active decision support….(More)”

On Iceland’s Crowdsourced Constitution

Curated on May 14, 2016August 3, 2018 by Stefaan Verhulst

Larry Lessig: “In the history of constitutions across the world, America has had a unique place: Ours was the first constitution ratified by the people in convention. But Iceland has now done something much more significant: For the first time in the history of the world, and using a technology only possible in the21st century, the people of a nation have crafted their own constitution through an open and inclusive crowd-sourcing process. Yet astonishingly,that constitution remains unenforced.

As everyone in [Iceland] knows, after the financial disasters of 2008, the citizens of Iceland began a process to claim back their own sovereignty.Building on the values identified by 1,000 randomly selected citizens,Icelanders launched a process to crowdsource a new constitution. That initiative was then ratified when the Parliament established a procedure for selecting delegates to a drafting commission. More than 500 citizens ran to serve on that 25 person commission. Over four months, the commissioners met to draft a constitution, with their work made available for public comment throughout the process. More than 3600 comments were offered by the public, leading to scores of modifications. The final draft, adopted unanimously, was then sent to the parliament and to the people. More than2/3ds of voters endorsed the document in a non-binding referendum as the basis of a new constitution.

Never in the history of constitutionalism has anything like this ever been done. If democracy is rule by the people — if the sovereignty of a democratic nation is ultimately the people — then this process and the constitution it produced is as authentic and binding as any in the world. Yet the parliament of Iceland has refused to allow this constitution to go into effect. And the question that anyone in the movements for democracy across the world must ask is just this: By what right?

No doubt, the procedure for crafting and ultimately ratifying the constitution included as the final step Parliament’s sanction — just as the procedure for selecting a government in Britain is subject ultimately to theQueen’s sanction. But the Queen understands the limited power that right conveys — if Britain is to call itself a democracy. And the same is true ofIceland. When the people have acted as they have here — by crafting a constitution in the most inclusive and reflective way that has ever, in the history of constitutionalism, happened, and then endorsed that work by a popular vote, by what moral authority does the Parliament now say no? No doubt, there are parts of the constitution that some don’t like. But democracy is not a promise of perfection. And no constitution in the history of the world has ever been loved by everyone it affected — just ask the million African slaves whose freedom was made unconstitutional through1808 by America’s popularly ratified constitution.

The question for Iceland is, who is sovereign? Is it the people or is it not?And if it is the people, will the people demand that their will be respected?…(More)”

Insights On Collective Problem-Solving: Complexity, Categorization And Lessons From Academia

Curated on May 12, 2016May 29, 2019 by Stefaan Verhulst

Part 3 of an interview series by Henry Farrell for the MacArthur Research Network on Opening Governance: “…Complexity theorists have devoted enormous energy and attention to thinking about how complex problems, in which different factors interact in ways that are hard to predict, can best be solved. One key challenge is categorizing problems, so as to understand which approaches are best suited to addressing them.

Scott Page is the Leonid Hurwicz Collegiate Professor of Complex Systems at the University of Michigan, Ann Arbor, and one of the world’s foremost experts on diversity and problem-solving. I asked him a series of questions about how we might use insights from academic research to think better about how problem solving works.

Henry: One of the key issues of collective problem-solving is what you call the ‘problem of problems’ – the question of identifying which problems we need to solve. This is often politically controversial – e.g., it may be hard to get agreement that global warming, or inequality, or long prison sentences are a problem. How do we best go about identifying problems, given that people may disagree?

Scott: In a recent big think paper on the potential of diversity for collective problem solving in Scientific American, Katherine Phillips writes that group members must feel validated, that they must share a commitment to the group, and they must have a common goal if they are going to contribute. This implies that you won’t succeed in getting people to collaborate by setting an agenda from on high and then seeking to attract diverse people to further that agenda.

One way of starting to tackle the problem of problems is to steal a rule of thumb from Getting to Yes, by getting to think people about their broad interests rather than the position that they’re starting from. People often agree on their fundamental desires but disagree on how they can be achieved. For example, nearly everyone wants less crime, but they may disagree over whether they think the solution to crime involves tackling poverty or imposing longer prison sentences. If you can get them to focus on their common interest in solving crime rather than their disagreements, you’re more likely to get them to collaborate usefully.

Segregation amplifies the problem of problems. We live in towns and neighborhoods segregated by race, income, ideology, and human capital. Democrats live near Democrats and Republicans near Republicans. Consensus requires integration. We must work across ideologies. Relatedly, opportunity requires more than access. Many people grow up not knowing any engineers, dentists, doctors, lawyers, and statisticians. This isolation narrows the set of careers they consider and it reduces the diversity of many professions. We cannot imagine lives we do not know.

Henry: Once you get past the problem of problems, you still need to identify which kind of problem you are dealing with. You identify three standard types of problems: solution problems, selection problems and optimization problems. What – very briefly – are the key differences between these kinds of problems?

Scott: I’m constantly pondering the potential set of categories in which collective intelligence can emerge. I’m teaching a course on collective intelligence this semester and the undergraduates and I developed an acronym SCARCE PIGS to describe the different types of domains. Here’s the brief summary:

Predict: when individuals combine information, models, or measurements to estimate a future event, guess an answer, or classify an event. Examples might involve betting markets, or combined efforts to guess a quantity, such as Francis Galton’s example of people at a fair trying to guess the weight of a steer.
Identify: when individuals have local, partial, or possibly erroneous knowledge and collectively can find an object. Here, an example is DARPA’s Red Balloon project.
Solve: when individuals apply and possibly combine higher order cognitive processes and analytic tools for the purpose of finding or improving a solution to a task. Innocentive and similar organizations provide examples of this.
Generate: when individuals apply diverse representations, heuristics, and knowledge to produce something new. An everyday example is creating a new building.
Coordinate: when individuals adopt similar actions, behaviors, beliefs, or mental frameworks by learning through local interactions. Ordinary social conventions such as people greeting each other are good examples.
Cooperate: when individuals take actions, not necessarily in their self interest, that collectively produce a desirable outcome. Here, think of managing common pool resources (e.g. fishing boats not overfishing an area that they collectively control).
Arrange: when individuals manipulate items in a physical or virtual environment for their own purposes resulting in an organization of that environment. As an example, imagine a student co-op which keeps twenty types of hot sauce in its pantry. If each student puts whichever hot sauce she uses in the front of the pantry, then on average, the hot sauces will be arranged according to popularity, with the most favored hot sauces in the front and the least favored lost in the back.
Respond: when individuals react to external or internal stimuli creating collective responses that maintains system level functioning. For example, when yellow jackets attack a predator to maintain the colony, they are displaying this kind of problem solving.
Emerge: when individual parts create a whole that has categorically distinct and new functionalities. The most obvious example of this is the human brain….(More)”

Public Spending, by the People

Curated on May 11, 2016August 3, 2018 by Stefaan Verhulst

Public Agenda: “From 2014 to 2015, more than 70,000 residents across the United States and Canada directly decided how their cities and districts should spend nearly $50 million in public funds through a process known as participatory budgeting (PB). PB is among the fastest growing forms of public engagement in local governance, having expanded to 46 communities in the U.S. and Canada in just 6 years.

PB is a young practice in the U.S. and Canada. Until now, there’s been no way for people to get a general understanding of how communities across the U.S. implement PB, who participates, and what sorts of projects get funded. Our report, “Public Spending, By the People” offers the first-ever comprehensive analysis of PB in the U.S. and Canada.

Here’s a summary of what we found:

Overall, communities using PB have invested substantially in the process and have seen diverse participation. But cities and districts vary widely in how they implemented their processes, who participated and what projects voters decided to fund. Officials vary in how much money they allocate to PB and some communities lag far behind in their representation of lower-income and less educated residents.

The data in this report came from 46 different PB processes across the U.S. and Canada. The report is a collaboration with local PB evaluators and practitioners. The work was funded by the Democracy Fund and the Rita Allen Foundation, and completed through a research partnership with the Kettering Foundation.

You can read the findings in brief below, download a PDF of the executive summary, download the full report or scroll through charts and graphics from the report. This report is also part of an ongoing Public Agenda project on participatory budgeting – you can read about the project here.”

Is behavioural economics ready to save the world?

Curated on May 10, 2016October 10, 2018 by Stefaan Verhulst

Book review by Trenton G Smith of Behavioral Economics and Public Health : “Modern medicine has long doled out helpful advice to ailing patients about not only drug treatments, but also diet, exercise, alcohol abuse, and many other lifestyle decisions. And for just as long, patients have been failing to follow doctors’ orders. Many of today’s most pressing public health problems would disappear if people would just make better choices.

Enter behavioural economics. A fairly recent offshoot of the dismal science, behavioural economics aims to take the coldly rational decision makers who normally populate economic theories, and instil in them a host of human foibles. Neoclassical (ie, conventional) economics, after all is the study of optimising behaviour in the presence of material constraints—why not add constraints on cognitive capacity, or self-control, or susceptibility to the formation of bad habits? The hope is that by incorporating insights from other behavioural sciences (most notably cognitive psychology and neuroscience) while retaining the methodological rigour of neoclassical economics, behavioural economics will yield a more richly descriptive theory of human behaviour, and generate new and important insights to better inform public policy.

Policy makers have taken notice. In an era in which free-market rhetoric dominates the political landscape, the idea that small changes to public health policies might serve to nudge consumers towards healthier behaviours holds great appeal. Even though some (irrational) consumers might be better off, the argument goes, if certain unhealthy food products were banned (or worse, taxed), this approach would infringe on the rights of the many consumers who want to indulge occasionally, and fully understand the consequences. If governments could instead use evidence from consumer science to make food labels more effective, or to improve the way that healthy foods are presented in school cafeterias, more politically unpalatable interventions in the marketplace might not be needed. This idea, dubbed “libertarian paternalism” by Richard Thaler and Cass Sunstein, has been pursued with gusto in both the UK (David Cameron’s Government formed the Behavioural Insights Team—unofficially described as the Nudge Unit) and the USA (where Sunstein spent time in the Obama administration’s Office of Information and Regulatory Affairs).

Whatever public health practitioners might think about these developments—or indeed, of economics as a discipline—this turn of events has rather suddenly given scholars at the cutting edge of consumer science an influential voice in the regulatory process, and some of the best and brightest have stepped up to contribute. Behavioral Economics & Public Health (edited by Christina Roberto and Ichiro Kawachi) is the product of a 2014 Harvard University exploratory workshop on applying social science insights to public health. As might be expected in a volume that aims to bring together two such inherently multidisciplinary fields, the book’s 11 chapters offer an eclectic mix of perspectives. The editors begin with an excellent overview of the field of behavioural economics and its applications to public health, and an economic perspective can also be found in four of the other chapters: Justin White and William Dow write about intertemporal choice, Kristina Lewis and Jason Block review the use of incentives to promote health, Michael Sanders and Michael Hallsworth describe their experience working within the UK’s Behavioural Insights Team, and Frederick Zimmerman concludes with a thoughtful critique of the field of behavioural economics. The other contributions are largely from the perspectives of psychology and marketing: Dennis Runger and Wendy Wood discuss habit formation, Rebecca Ferrer and colleagues emphasise the importance of emotion in decision making, Brent McFerran discusses social norms in the context of obesity, Jason Riis and Rebecca Ratner explain why some public health communication strategies are more effective than others, and Zoe Chance and colleagues and Brian Wansink offer frameworks for designing environments (eg, in schools and workplaces) that are conducive to healthy choices.

This collection of essays holds many hidden gems, but the one that surprised me the most was the attention given (by Runger and Wood briefly, and Zimmerman extensively) to a dirty little secret that behavioural economists rarely mention: once it is acknowledged that sometimes-irrational consumers can be manipulated into making healthy choices, it does not require much of a leap to conclude that business interests can—and do—use the same methods to push back in the other direction. This conclusion leads Zimmerman to a discussion of power in the marketplace and in our collective political economy, and to a call to action on these larger structural issues in society that neoclassical theory has long neglected….(More; Book)

Crowdsourced Deliberation: The Case of the Law on Off-Road Traffic in Finland

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

Tanja Aitamurto and Hélène Landemore in Policy & Internet: “This article examines the emergence of democratic deliberation in a crowdsourced law reform process. The empirical context of the study is a crowdsourced legislative reform in Finland, initiated by the Finnish government. The findings suggest that online exchanges in the crowdsourced process qualify as democratic deliberation according to the classical definition. We introduce the term “crowdsourced deliberation” to mean an open, asynchronous, depersonalized, and distributed kind of online deliberation occurring among self-selected participants in the context of an attempt by government or another organization to open up the policymaking or lawmaking process. The article helps to characterize the nature of crowdsourced policymaking and to understand its possibilities as a practice for implementing open government principles. We aim to make a contribution to the literature on crowdsourcing in policymaking, participatory and deliberative democracy and, specifically, the newly emerging subfield in deliberative democracy that focuses on “deliberative systems.”…(More)”

Army looks to outsmart soldiers’ bad habits

Curated on May 3, 2016August 3, 2018 by Stefaan Verhulst

Kyle Jahner at the Army Times: “You wouldn’t think that moving the salad bar to the front of the chow hall and moving the dessert bar back 10 feet would make the Army healthier. But at Fort Campbell, Kentucky, that bumped up salad sales about 24 percent and dessert sales down 10 percent, a nudge toward goals of soldiers eating, exercising and sleeping healthier.

That’s just an example of the kind of change Army Medical Command hopes to inspire and successes it hopes to share across installations through its first annual Health of the Force report.

“I’m pretty proud of what we’ve been able to accomplish with this inaugural report,” said Col. Deydre Teyhen during a recent roundtable at Defense Health Agency headquarters in Falls Church, Virginia. “I think we can’t get to a better state of health unless we inform people of what’s working out there in the field.”

The Army hopes to reduce the figure of 17 percent of soldiers not medically deployable within 72 hours. …The overarching philosophy of these recent MEDCOM efforts is to improve overall health rather than play whack-a-mole with problems as they arise. Teyhen pointed out that the average soldier is a patient at a health care facility for about 100 minutes per year, and the trick is to influence soldier health choices over the other 525,500 minutes, extending influence outside of brick-and-mortar health facilities.It dovetails with the Army’s Performance Triad, the plan to improve readiness through sleep, nutrition and exercise….(More)”