Will we Become Immune to Nudges as a Policy Tool?

Economics, Medium Reads
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Nudges are an aspect of choice architecture, where positive reinforcement or indirect cues are used to influence decisions. Unlike legislation or education, it is designed to alter behaviour without forbidding certain things or vastly changing incentives. Popularised by Thaler and Sunstein’s book Nudge, it has since been adopted by governments across the globe, with the Behavioural Insights Team in the UK and the Sunstein running the Office of Information and Regulatory Affairs in the USA. However, there is a fear that nudges are simply cheap ‘tricks’ that will not work in the long run, either because they are only applicable in a small set of situations, or because increased recognition will limit its effect. Although both of these are legitimate concerns, the research suggests that these drawbacks are relatively small, and can be mitigated with well-designed nudges.

Firstly, it is worth understanding what nudges generally do. Humans can be irrational, and Thaler and Sunstein describe two ways of decision making to explain this: system 1 and system 2. The former is a more automatic one that is easily influenced by external conditions, while the latter involves more deliberation. Because of the need to make many decisions, system 1 often takes over and uses imperfect heuristics, thus producing irrational decisions. Nudges alter this system 1 thinking, for example by changing the default option, using the effects of social pressure or increasing salience and making the desired choice more noticeable. 

Because of their subtlety, nudges are by no means perfect, and face several limitations. Most obviously, even the best nudges that are based on randomised controlled trials involve self-selecting subjects that know they are being observed, and have little stake in what happens. This makes it difficult to extrapolate from their actions, since in the real world, the population is much broader, people aren’t always supervised, and the stakes actually matter. Furthermore, different groups have different heuristics, and it would be a mistake to assume that class or background did not have an effect on how one’s cognitive biases developed. For example, the Behavioural Insights Team famously used social norms to pressure tax debtors to pay 15% more than they otherwise would[1]. However, further research suggested that this approach was much less effective when used in Poland, where a harsher, rather than a conciliatory tone was 20.8% more successful in terms of the money paid[2].

Looking at specific nudges and their failings, nudges based upon changing the default work because of three mechanisms: the implied endorsement[3], the inertia that makes it harder to switch to the less desirable option[4], and the fact that people are loss-adverse and fear changes from the reference point of the default[5]. A prominent example is the policy in the Netherlands to make organ donation an opt-out process, where the default is to donate. Although it should have increased donations, it actually decreased donations, dropping from 86% of those registering choosing to donate to a mere 24%. This is explained by the fact that it was a particularly overt change, with lots of media coverage regarding the vote, and consequently, the incentives behind the scenes were abundantly clear. As such, many who distrusted the government actively chose not to donate, causing a backlash that meant the nudge didn’t work. Similarly, a plan to get people to pre-commit to future savings backfired when implemented at 4 US universities[6], because the choice to save later suggested that it was not particularly important to commit now. This shows how sometimes defaults can send the wrong message. However, another plan called Save More Tomorrow worked as expected, because it only targeted this choice at those who had already chosen not to save, making the implicit message unimportant. Furthermore, the same research showed that if the pre-commitment was linked to a salient date, such as one’s birthday, the framing of a fresh start actually counteracted all of the wrong message. In this way, another nudge technique can be packaged together to ensure its effectiveness.

The most important impact of these drawbacks is that there might be a risk that knowing about a nudge would reduce its impact, and that over time, as nudges become common, our awareness would make us immune to nudges. For example, an energy conservation nudge that compared one’s electricity usage with the average in their street only worked among liberals, and for politically conservative individuals, entirely backfired[7]. In fact, the politically conservative families that had below average electricity consumption actually increased usage. People act as a social sensemakers, and when the conservatives felt like the project was promoting a liberal agenda, they worked against it. 

However, there has also been research to suggest that information provided on the influence of the nudge do not affect the effectiveness of the default[8]. Interestingly, this was also regarding carbon emissions, and suggests that the backlash induced is negligible because of the low stakes in a research environment. This means there are some limitations on what issues known nudges might be effective for. For a less invasive and more universally palatable choice, to position healthy food near the cash register as to increase salience, a similar experiment produced the same result i.e. the disclosure of the nudge had no measurable impact on its efficacy, and more people bought more healthy snacks[9]. Another way to mitigate the drawbacks of awareness is to deal with the discontent created. In a nudge for farmers to use better farming practices near the Great Barrier Reef, many farmers felt that the government was trying to shame them and resisted[10]. In this case, the creation of the ‘Setting the Record Straight’ campaign mitigated a lot of this, suggesting that in many cases, an important part of these strategies is to frame it not as intrusive and paternalistic, but as a united community effort to bring good. 

However, it is worth noting that sometimes, nudges work precisely because people are aware of the nudging. Notably, airplane pilots became more fuel efficient, saving around 500,000 kg of fuel in 8 months, because they were aware of being watched, with similar effects occurring in a study preventing doctors from overprescribing medicine[11]. As such, these are likely to continue to work, even if the idea of nudges proliferates.

Ultimately, nudges are not a silver bullet that can drastically change behaviour. They are designed to be weaker adjustments to behaviour, and consequently face issues when people try to look for social cues. In some cases, this renders them ineffective as people become increasingly aware of the nudging and work against it. However, many other cases can be overcome when designers think about the inferences that decision makers are likely to make, and adjust depending on whether those inferences help or hurt compliance. The effort required to actively counteract a nudge also makes the cases of failure a minority. As such, we will not become immune to nudges in the long run.

Bibliography

Finkelstein, S, Liersch, M and McKenzie, C (2006), Recommendations Implicit in Policy Defaults: Psychological Science

Zamir, E (2014), Law, Psychology, and Morality: The Role of Loss Aversion: Oxford University Press

Sunstein, C (2015), Choosing Not to Choose: Oxford University Press

Behavioural Insight Team (2017), EAST: 4 Simple Ways to Apply Behavioural Insights

World Bank, When Context Matters: Increasing Tax Payments in Poland

Beshears, J, Dai, H et al (2017), Framing the Future: NBER Working Papers

Costa, D, Kahn, M (2015), Energy Conservation Nudges: NBER Working Papers

Bruns, H, Rahali, B et al (2016), Can Nudges be Transparent and Yet Effective: Journal of Economic Psychology

Kroese, F, de Ridder, D, Marchiori, D (2015), Nudging Healthy Food Choices: Journal of Public Health

Pickering, J, Hong, J, Kealley, M (2017), Applying Behavioural Science to the Queensland Sugar Cane Industry: Rural Extension and Innovation Systems Journal

Gosnell, G, List, J, Metcalfe, R (2016), Solving Externalities by Incenting Workers: NBER Working PapersKrijnen, J, Tannenbaum, D, Fox, C (2017), Choic


[1] Behavioural Insight Team, EAST: 4 Simple Ways to Apply Behavioural Insights

[2] World Bank, When Context Matters: Increasing Tax Payments in Poland

[3] Finkelstein, Liersch, McKenzie, Recommendations Implicit in Policy Defaults, (Psychological Science, 2006)

[4] Sunstein, Choosing Not to Choose (Oxford University Press, 2015)

[5] Zamir, Law, Psychology, and Morality: The Role of Loss Aversion (Oxford University Press, 2014)

[6] Beshears, Dai et al, Framing the Future (NBER Working Papers, 2017)

[7] Costa, Kahn, Energy Conservation Nudges (NBER Working Papers, 2015)

[8] Bruns, Rahali et al, Can Nudges be Transparent and Yet Effective (Journal of Economic Psychology, 2016)

[9] Kroese, Ridder, Marchiori, Nudging Healthy Food Choices (Journal of Public Health, 2015)

[10] Pickering, Hong, Kealley, Applying Behavioural Science to the Queensland Sugar Cane Industry (Rural Extension and Innovation Systems Journal, 2017)

[11] Gosnell, List, Metcalfe, Solving Externalities by Incenting Workers (NBER Working Papers, 2016)

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