2. Nudges Flashcards
What is a nudge?
An intervention using insights from behavioural economics and psychology to achieve behavioural change. It is easy and cheap to avoid so as to maintain freedom of choice
What are the 10 nudges? Sunstein 2014
- Default rules
- Simplification
- Social norms
- Increases in ease and convenience
- Disclosure
- Warnings, graphic or otherwise
- Reminders
- Pre- commitment strategies
- Implementation interventions
- Informing people of nature and consequences of their own past choices
Summarise the “Save more tomorrow” scheme Benartzi & Thaler 2004
-default enrolment in pension saving scheme with automatic investment
-automatic escalation if employees commit now to increase their savings rate later with wage increases
-increased savings rate from 3.5% to 13.6%
Summarise the “behaviouralist as the tax collector” Hallsworth Et al 2017
-Include social norms in HMRC letters saying things such as “9 out of 10 people pay their taxes on time” and extensions of this treatment.
-reminding letters
-£4.9m was accelerated in the first 23 days
Give an example of nudges being cost effective
Carroll Et al 2009
Active decision nudge created a $200 increase in savings plan contributions per employee at a cost of only $2 per employee. This was far more cost effective than any traditional method
What does MINDSPACE stand for?
Messenger
Incentives
Norms
Defaults
Salience
Priming
Affect
Commitment
Ego
Fly experiment
Fly in urinal at Amsterdam airport- 80% reduction in spillage
What are the two categories of social influences?
-Following the crowd because you think it’s best for you. If many people do something or think something, their actions and thoughts convey info about what is best for you.
-Peer pressure: the caring of what other people think about you. You follow the crowd to avoid their wrath
Experiment of people ranking the length of lines in nudge
People often agree with the herd even when they know the herd is wrong, this is especially the case when answers are made public.
Monkey experiment with banana and rain
Shows that the Herd’s opinion often remains even when all numbers have been changed out if the group
Collective conservatism
The tendency of groups to stick to established patterns even as new needs arise
Golden rule of libertarian paternalism
Offer nudges that are most likely to help and least likely to inflict harm
When do people need nudges most?
When decisions are difficult, require scarce attention, when people don’t get prompt feedback and when they have trouble translating aspects of the situation into terms they can easily understand
Required choice
People must select one of the options before moving to next step. E.g conform you agree with terms and conditions
Prompted choice
People are prompted to make a choice but they can choose not to answers and a default will be used instead. E.g. opt out of marketing services
