Our decisions are constantly shaped by subtle changes in our environment. Even choices that feel deliberate and conscious can be swayed by cues that we may not even notice, such as social norms or the setting of a default option. Behavioral scientists use the phrase “choice architecture” to describe the ways in which the environment influences how we decide.
In the past five years several governments have begun to guide people toward making better choices—for themselves and for society—by using behavioral science research. Scientists refer to choice architecture interventions that push people toward a certain outcome as “nudges.” Since 2010, for instance, the U.K.’s Behavioral Insights Team, or “nudge unit,” has dramatically improved on-time tax payments simply by telling people about the large number of citizens who paid their taxes on time. The team has collected an estimated £210 million in revenue. Recently the World Bank issued an extensive report that highlighted similar behavioral science initiatives around the world, and President Barack Obama has launched a new behavioral unit, which is modeled after the U.K.’s version.
Despite ample evidence showcasing the benefits of such nudges, commentators from both sides of the political spectrum have labeled them unethical. They emphasize that manipulating choice undermines our ability to choose freely, even when nudges are disclosed or implemented with good intentions. As a result, nudge initiatives to improve education, health and safety are encountering increased resistance.
Advocates of choice architecture interventions, such as Cass Sunstein, a leading constitutional scholar and author of several books on nudging, point out that nudges do not force anyone to do anything. They merely reorient decisions, much as a GPS guides but does not forcefully direct travelers.
Yet this defense is insufficient. Although it is true that nudges do not eliminate our freedom to choose, critics are correct to argue that nudges can strongly and sometimes surreptitiously influence our behavior. A stronger defense must begin by acknowledging that nudging is unavoidable. From traffic lanes to the size of the popcorn bucket at the movie theater, we are continuously nudged—intentionally or not—by the government, private companies and other people.
The question, then, is not whether government has the right to nudge—invariably and inevitably, it does—but whether government should redesign the choice architecture to help citizens achieve their goals. A growing body of psychological and economic research is revealing opportunities where government can use the tools of behavioral science to help people make better choices. The findings suggest that when the choice environment significantly undermines the health and financial well-being of citizens, the government has not only the right but the obligation to improve the choice environment.
The Science of Swaying Choices
Take Social Security, for example. Its benefits are available to any U.S. citizen who is at least 62 years old. But the earlier that people claim, the fewer benefits they receive in the long run. People who wait until they reach full retirement age, which depends on when they were born, receive the maximum amount. Delaying is usually the best economic option for people who are in good health and can therefore expect to live longer. Yet most Americans claim early—almost half claim as soon as possible—which often leads to financial problems later on.
This year a team of researchers led by Melissa Knoll, a social scientist then at the Social Security Administration, evaluated how two biases might explain this behavior. The first is present bias, the tendency to opt for immediate short-term gains at the expense of long-term gains. The second is a by-product of query theory, or how the order in which people consider options influences how they decide.
The team gathered 418 participants nearing retirement and split them into two groups. Those in one group generated favorable reasons for why they should claim early, then considered why they might want to claim late. The other group performed the same tasks in reverse. Knoll and her colleagues found that when participants first considered the merits of claiming later, they more easily generated reasons for why it was a better idea than claiming early. As a result, they delayed claiming by about nine months on average, compared with participants who focused on claiming earlier first. This modest shift can mean a difference of tens of thousands of dollars for the beneficiary.
Knoll’s intervention represents a potential win for citizens and government. If people who claim early fall into poverty later, the government must spend even more resources helping these individuals. Considering the number of baby boomers retiring—more than a quarter of a million Americans now turn 65 every month—it is easy to see how Knoll’s intervention could save billions of federal dollars.
Another case study comes from the Affordable Care Act (ACA), which allows millions of Americans to sign up for state and federal health insurance coverage through exchange marketplaces. In 2013 Columbia University business professor Eric Johnson and his colleagues conducted six experiments with more than 1,000 participants and found that most people did not select the most cost-effective policy available in a model based on the current ACA exchanges. Instead people were overwhelmed with options, and consequently, their ability to make smart choices plummeted.
Johnson and his team then dramatically improved participants’ selections in one condition by redesigning the choice architecture. They incorporated an online calculator and implemented a default option that preselected the optimal insurance plan for that individual, helping consumers save, on average, $456 every year. Johnson estimated that these small interventions could save customers and taxpayers approximately $10 billion annually. In addition, by helping people find the right plan, insurance companies can understand their clients’ needs better and design improved plans at more competitive prices.
How to Decide without Deciding
Every day we experience dozens of tiny influences, some of which we have only begun to identify. One of us (Jachimowicz) has uncovered a link between credit card usage and obesity that may reflect the fact that paying with plastic requires less deliberation, and consequently nudges us towards quicker, less cautious decisions. A better-established effect involves the way food options are framed, which can affect dietary choices—such as when a grocery store provides the percentage of fat in packaged meat. It is easy to see, then, how nudges can help citizens make better decisions, prevent waste and save precious resources. One barrier to climate change is bad choice architecture. If we frame a fee as a “carbon offset” instead of a “carbon tax,” we could nudge people to make more environmentally friendly decisions.
And yet this powerful new tool faces a threat. The U.S. House of Representatives recently passed legislation that includes a $140-million cut—about 45 percent—for the Directorate for Social, Behavioral and Economic Sciences, the part of the National Science Foundation that, among other roles, funds behavioral science research specifically designed to reduce government spending. It is a peculiar target for legislators aiming to save federal dollars.
Ultimately the alternative to nudging is not more personal freedom or a less intrusive government. It is bad nudging. A few years ago the Social Security Administration helped prospective beneficiaries calculate when delaying claims would offset total benefits. But by making the option of short-term money more salient, the computation aid inadvertently accelerated early claiming by 15 months.
Instead of relying on ideologically driven laws, we need rigorous experiments to test how people choose in specific situations. Once we know what works and for whom, we should persuade government officials to implement the best interventions.
There is no “neutral” world in which we make our decisions freely, autonomously and rationally. Decades of psychological research reveal that the environment influences and occasionally changes behavior. Why not use what we know about human behavior to promote wiser choices?
- Mindful Judgment and Decision Making. Elke U. Weber and Eric J. Johnson in Annual Review of Psychology, Vol. 60, pages 53–85; January 2009.
- The Power of Hope Is Real. Nicholas Kristof in New York Times; May 21, 2015. www.nytimes.com/2015/05/21/opinion/nicholas-kristof-the-power-of-hope-is-real.html?_r=1
- Misbehaving: The Making of Behavioral Economics. Richard H. Thaler. W. W. Norton, 2015. Behavioral Science & Policy Association: http://behavioralpolicy.org