On September 15th, President Obama issued an executive order that acknowledges something we have known for a long time: Human beings are not rational creatures who reliably fill out tax documents, enroll in savings programs, or apply for loans, as economic models assume they do. Instead, they systematically and predictably make decisions that run counter to their best interests, as centuries of observations suggest and behavioral science research now empirically confirms.
Obama’s order encourages government “to more fully realize the benefits of behavioral insights and deliver better results at a lower cost for the American people,” representing a fundamental shift in not just how we approach public policy but how we understand human nature.
Too often government programs fail because they are designed for Econs, the mythical creatures Richard Thaler and Cass Sunstein describe in their 2008 bestselling book, Nudge. These beings easily assimilate larges amounts of information and, based on that data, make optimal decisions.
The executive order instead assumes the world is filled with actual Humans—creatures who have trouble with complex calculations, opt for the path of least resistance, and are influenced by subtle shifts in how information is relayed and framed. If government programs are to be effective, Obama’s order correctly assumes that they must be designed for these Humans, and not mythical Econs.
For example, in 2008 research by Richard Larrick and Jack Soll at Duke University showed that people confuse miles per gallon with gallons per mile and save less money on gas as a result. So the EPA changed its fuel-mileage stickers on new cars to help people understand fuel economy better: the labels now include estimates of dollars saved (or spent) compared to an average amount. This initiative, and others like it, is promising not just for car owners but for the environment, and shows that behavioral science is more than a mere add on.
The decision to use behavioral science to make federal agencies more efficient also builds on recent work from the White House’s Social and Behavioral Science Team (SBST). In its first year, the SBST produced a number of successes: they doubled the rate of service members signing up for a work place savings plan, increased college enrollment for low-income students, and helped individuals who had signed up but had not yet completed the enrollment application. Such initiatives are particularly impressive because unlike many government programs, they are cheap, relatively easy to implement, and backed by research.
“Programs will never work optimally if they are not designed with people in mind,” SBST chair Maya Shankar told us. “Behavioral science teaches us that when we design programs without people in mind, the consequences can be much larger than one might think. We’re not in the business of conducting new research. We are simply taking research insights backed by strong evidence, bringing them to a government context, and rigorously testing them.”
For example, a few years ago Lisa Shu, then a Postdoctoral Fellow at the Kellogg School of Management, discovered that when participants sign an ethics pledge before taking a test, they cheat less when self-reporting their scores. The SBST put this finding to use to improve the accuracy of sales figures self-reported by vendors selling goods and services to the government. An initial test of the approach—implemented at virtually no cost—saved the government more than 1.5 million dollars in the third quarter of 2014 alone.
In 2003, Eric Johnson and Dan Goldstein at Columbia University observed that by making organ donation a default choice, several European countries benefited from dramatically higher numbers of donors, compared to the US. Earlier this year, the SBST partnered with the Department of Defense (DOD) to design a cover sheet to prompt service members to enroll in the Thrift Savings Plan. The redesigned cover sheet, which was partially based on Johnson and Goldstein’s research, increased enrollment rates by nearly 10 percent.
The SBST has also used “planning prompts” to increase healthcare enrollment. Previous research suggests that we are more likely to follow through on an action if we visualize ourselves doing it. Based on this insight, the SBST created a number of letters to prompt people who had signed up for, but had not completed enrolling in, a healthcare plan, significantly increasing participation rates.
Although these improvements might seem relatively small—especially considering that last year the US government spent over three trillion dollars—they illustrate a much broader achievement. Until recently, behavioral science was treated as an alternative to the neoclassical economic model of human decision-making. In this view, a cognitive bias is an occasional error or temporary lapse in judgment.
With Obama’s order, it appears government is warming up to the idea that smart policy should begin with behavioral science and its more accurate view of human nature. Just as smart designers have accounted for accidentally deleted word documents by incorporating an undo option instead of blaming the user, policy makers are beginning to design around our cognitive tendencies—to opt for the default or to base our behavior on what our neighbors seem to be doing—instead of ignoring them.
The United States is not the first government to take this sort of approach. Teams throughout Europe and around the world have also been applying behavioral insights with promising results. Notably, conservative leaders established both the U.K.’s Behavioral Insights Team and the German team, suggesting that behavioral science can help governments become more efficient regardless of political ideology. Though they might disagree on which policies to enact, liberals and conservatives should be able to agree that making existing policy work more effectively benefits everybody.
While President Obama’s executive order and the impressive findings of the SBST are major wins for the behavioral science community, the standard economic model of human nature is still the default. Until that changes, officials will continue to design things like tax forms and health care exchanges as if users know how to compute each variable and can correctly assess dozens of confusing options.
In the last 40 years behavioral science has grown from a few publications proving that people deviate from standards of rationality to one of the most promising areas of research in academia and private business. Now, the next generation of scholars and policy makers need to use its principles to help design governments that serve Humans not Econs.