ESThe environment has a powerful influence on the decisions we make. Small changes in context can have a huge impact on our economy, health, and well-being.
Humans are not entirely rational. We want to save money, but we buy things we don’t need. We worry about our health, but we eat industrial pastries for breakfast instead of fruit. We try to be fair, but we systematically discriminate against certain groups of people.
Fortunately, our irrational behaviors are predictable, so we can modify them by acting on the “architecture” of the world around us.
1. What is the choice architecture?
Our environment has a powerful influence on how we behave. If, for example, we grow up in a home filled with books, we are more likely to develop the habit of reading, even if no one asks us to. Context motivates action.
Choice architecture consists of consciously acting on the environment to guide people’s decisions. During the 2020 pandemic, for example, many establishments placed footprints on the floor to help people maintain distance and prevent the spread of the Corona virus. In doing so, they acted as choice architects. With a small environmental change, they got people to adopt safer behaviors.
The nutritional indicators that appear on many food packaging boxes are also an example of decision architecture. By indicating that one product is potentially healthier than another, consumer behavior is subtly and effectively guided.
Another way to influence the context to get a specific action to happen is through text messages that dentists send to their clients the day before an appointment to make sure they don’t forget to show up.
Footprints on the floor, nutritional indicators, and text messages reminding people of medical appointments are all examples of what we call “nudges”.
2. What is a nudge?
Nudges are interventions made to the physical, social, or digital environment to guide people’s decisions and behaviors without restricting their freedom or offering costly economic incentives.
We all constantly design nudges to guide our behavior and that of those around us. For example, when we set an alarm to remind us of a birthday, we act on our environment to encourage ourselves to take action: to congratulate someone. On the other hand, when we call our brother to remind him that it is our mother’s birthday, we intervene so that another person takes action.
For a behavior change intervention to be considered a nudge, it is essential that it respects people’s freedom and that its incentives do not require a large financial outlay.
Let’s imagine that we are the Minister of Agriculture and we want to encourage Spaniards to buy locally grown fruit and vegetables. What can we do?
– We could ban fruits and vegetables from outside the country. It would be an effective measure, but it would be too restrictive.
– Another alternative is to offer economic incentives to radically reduce the price of locally grown fruit and vegetables. This could also work, but it would be a very costly option.
– We can also identify locally sourced fruit and vegetables with a visible sticker indicating the environmental and economic benefits of consuming our products. This could encourage people to buy local fruit and vegetables without restricting their choices and at a lower cost.
The third option is a nudge. The first two options are not. The advantages of nudges over other interventions are precisely that they respect people’s freedom and do not depend on a continuous flow of economic incentives, which means that, in the medium term, they result in significant savings.
Since Richard Thaler and Cass Sunstein introduced the concept in their famous book Nudge, nudges have enjoyed great popularity in the context of behavioral economics.
3. What is behavioral economics?
Traditional economics assumes an unrealistic conception of human beings: that of homo economicus. Homo economicus are ideal human beings with perfect memory, complete knowledge of the world, unshakeable willpower, and impeccable reasoning abilities. Although they obviously do not resemble the real us, for centuries they have been taken as a reference point for most proposals for economic, political, and social intervention.
Over the last few decades, numerous authors, including Herbert Simon, Richard Thaler, and Daniel Kahneman, have challenged traditional economic theory and argued for the need to take real human beings into account when conducting any kind of economic research or intervention.
The economic theory that adopts the concept of the ordinary person and considers how psychological, sociological, and anthropological factors affect us in decision-making processes is called “behavioral economics”.
4. Nudges: an antidote to irrationality
If we were entirely rational, like homo economicus, we would not need to use nudges to shape people’s behavior. We would be exemplary savers, we would take care of our health effortlessly, and we would not discriminate against people for absurd reasons such as race or gender. However, we are not homo economicus.
Nudges make sense because we make systematic mistakes (biases) and our willpower is weak.
In the economic sphere, nudges have served, among many other things, to promote retirement savings programs such as Save More Tomorrow, promoted by Richard Thaler and Shlomo Benartzi. The program asks participants to commit to increasing their savings rate in the future as their salary increases. In this way, people do not perceive a decline in their purchasing power and find it easier to save. The program has improved conditions for more than 15 million American retirees.
In addition to economics, nudges have been successfully employed in many other areas, with the backing and experimental rigor of behavioral science.
5. Nudges and behavioral science
Behavioral science is the set of disciplines that study how humans behave. If we had to define them in a single sentence, we could say that:
Behavioral science is the human and social sciences applied to decision-making processes.
Psychology, sociology, economics, neuroscience, genetics, anthropology… these are some of the best-known behavioral sciences. Each one contributes to our comprehensive understanding of human behavior.
Behavioral science shows us how to design nudges to improve different aspects of people’s lives. They are immensely useful for ordinary people who want to achieve a goal, such as quitting smoking or exercising more, but also for companies and institutions that want to be more prosperous and humane.
The following cases are examples of nudges supported by behavioral science:
– Reducing the size of plates in cafeterias encourages people to serve themselves in smaller portions and reduces food waste.
– Indicating the average energy consumption of a community on bills reduces consumption among those who use the most energy.
– Imposing a 15-cent tax on plastic bags drastically reduced their consumption in Ireland.
6. Is it ethical to use nudges?
Some people criticize the use of nudges with the people we interact with as immoral because these strategies take advantage of people’s emotional and cognitive weaknesses, restrict freedom, and adopt an authoritarian perspective under the guise of an innocent practice. However, none of these objections are valid.
In the introduction to Nudge, Richard Thaler argues that criticism is based on three false beliefs.
The first false belief is that people spontaneously decide what is best for them and therefore do not need anyone to guide their behavior. Clearly, this is not the case, given that most of us act against our own best interests even consciously, for example, when we smoke, eat junk food, or waste our money. We know that these behaviors are harmful to us, but we engage in them anyway.
The second false belief is that, in all cases, we can refrain from interfering with the decisions of the people we interact with. This is untrue because both our actions and our omissions have consequences. If we indicate the average consumption of neighbors on electricity bills, we will encourage certain behaviors, but if we do not indicate it, we will encourage other behaviors. We are often forced to choose how we want to influence people’s decisions, both by action and by omission.
The third false belief is that nudges are a subtle form of coercion, as they “impose” behaviors on people without them being aware of it. The reality is quite different. When plate sizes are reduced to prevent food waste in cafeterias, diners are not prevented from eating as much as they want. They can get up and have seconds as many times as they like. The measure works without any coercion. When people are asked to pay 15 cents for shopping bags, they are not prohibited from using bags. Fifteen cents is a symbolic price that anyone can afford. However, these small frictions influence the bad habits because it makes us more aware of the value of things.
7. Libertarian paternalism
For all the above reasons, Richard Thaler and Cass Sunstein defend a doctrine known as “libertarian paternalism”. Libertarian paternalism asserts that it is legitimate for decision-makers to influence people’s decisions to promote longer, healthier, and better lives. The doctrine does not impose a conception of a good life on people but rather respects the different values and aspirations of individuals. Furthermore, it keeps freedom intact insofar as it does not restrict the number of options available.
Conclusions
– Humans are not entirely rational. Fortunately, our irrationality is predictable, so we can correct it by acting on the world around us.
– Nudges allow us to intervene in the physical, social, or digital environment to guide people’s decisions and behaviors without restricting their freedom or offering costly economic incentives.
– Nudges have proven their effectiveness in the economic, health, and environmental fields, among others.
– The use of nudges is ethical and consistent with the doctrine of libertarian paternalism because they improve people’s lives without restricting their freedom.
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