Nudging by Government: Progress, Impact and Lessons Learnt David Halpern & Michael Sanders

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Nudging by Government: Progress, Impact and Lessons Learnt David Halpern & Michael Sanders report Nudging by government: Progress, impact and lessons learnt David Halpern & Michael Sanders abstract “Nudge units” within governments, most notably in the United Kingdom and the United States, seek to encourage people to behave a certain way by using insights gained from behavioral science. The aim is to influence people’s choices through policies that offer the right incentive or hurdle so that people choose the more economically beneficial options. Getting people to save for retirement, eat more healthful foods, and pay their taxes on time are some examples of institutionally desirable activities. The 10-fold rise in “nudge” projects undertaken since 2010—more than 20 countries have deployed or expressed interest in them—have revealed many lessons for policymakers. Chief among these lessons: the necessity of obtaining buy-in from key political leaders and other stakeholders, and the benefits of testing multiple intervention strategies at once. Although detailed cost– benefit analyses are not yet available, we estimate that behaviorally inspired interventions can help government agencies save hundreds of millions of dollars per year. Halpern, D., & Sanders, M. (2016). Nudging by government: Progress, impact, & lessons learned. Behavioral Science & Policy, 2(2), pp. 53–65. “ here is not enough money for retirement” this capability into their own governments. Our is a common lament among workers and analysis is not a comprehensive overview but Tpolicymakers alike. As things stand now, instead draws directly on our own experiences the U.S. Social Security trust fund will run empty and knowledge, particularly of the U.K. govern- by 2035,1 and about half of all Americans have ment’s Behavioural Insights Team (BIT), which saved less than $10,000 for their golden years.2 serves as a model that many other governments In the past decade, policymakers have tackled have begun to follow. w this failure of people to act now for a better tomorrow by redirecting people’s own natural Core Findings inertia. Specifically, more and more organiza- A Brief History tions require employees to opt out of retirement Governments have long drawn on tacit knowl- What is the issue? plans rather than opt in, as in the past. In the edge of human behavior to shape how their The U.K. government’s United Kingdom alone, the opt-out approach citizens act. However, in the early 2000s, Behavioral Insights has meant more than 5 million extra workers governments on both sides of the Atlantic began Team (BIT) is delivering monetary benefits in have started saving for their workplace pensions to more overtly incorporate psychological and the region of hundreds since 2012. By the end of 2016, the default rule behavioral factors into policy, regulation, and of millions of dollars, change reached the entire population of United program delivery. Thaler and Sunstein’s article4 if not billions. To replicate this success, Kingdom workers, including small firms and on libertarian paternalism attracted the atten- other governments even micro-employees (people who work only tion of U.S. policymakers, while in the United must first work to a few hours for a given employer, often a family) Kingdom, the idea of applying behavioral science successfully embed such as nannies and cleaners. came to the attention of government officials behavioral interventions in the policy mix. after Personal Responsibility and Changing The success of increasing retirement savings Behaviour5 was published from within the Prime How can you act? shows the value of behavioral interventions. Minister’s Strategy Unit, which existed during Selected best Since the publication of the book Nudge: Tony Blair’s administration to provide advice and practices include: 1) Building strong Improving Decisions About Health, Wealth, and policy analyses. relationships with Happiness by Richard Thaler and Cass Sunstein academia through in 20083 and especially over the last few years, In the United States, the 2008 publication of cross-disciplinary 3 advisory panels governments have increasingly incorporated Nudge and the subsequent move of one of 2) Starting with rapid, low- overtly behavioral approaches into policy. Of its authors, Cass Sunstein, into an influen- cost, multi-arm behavioral course, almost all government policy is a form tial position within the White House in 2009 trials using existing of behavioral influence, insofar as it aims to gave a major boost to embedding behavioral administrative data 3) Investing in impact influence the actions of human beings through approaches into policy. As head of the Office valuations to measure either legislation, regulation, or the provision of of Information and Regulatory Affairs and with the return on investment information. However, policymakers have moved the support of President Obama, Sunstein from interventions toward getting people to change their behavior. was able to intervene on a range of regulatory Who should take It is an overt acceptance, or even embracing, issues, particularly through the use of executive the lead? of behavioral science in the form of behavioral orders. For instance, these orders enabled the Policymakers economics, psychology, and related fields, as a Environmental Protection Agency to regulate in government, tool for adjusting people’s behavior. greenhouse gas emissions and set fuel economy academics working in behavioral science standards without congressional approval. In this article, we review developments in and the (Sunstein left the Obama administration in 2012.) expanded use of behavioral science by govern- ments and other institutions. We also tentatively The United Kingdom soon followed the U.S. estimate the number of government-conducted example. Although the 2004 Prime Minister’s randomized controlled trials (RCTs) that explic- Strategy Unit paper sparked negative political itly attempt to apply findings from these fields and media reactions,6 the newly elected coali- and offer the beginnings of a profile of their tion government in 2010, partly inspired by the impacts. Finally, we reflect on early lessons perceived impact of Nudge on Barack Obama’s learned, particularly for the benefit of policy- presidential campaign and administration, makers and academics in the process of building created 10 Downing Street’s BIT. 54 behavioral science & policy | volume 2 issue 2 2016 An important but subtle difference emerged University economist Raj Chetty, this strategy between the British and American approaches can lead to new policy proposals, better predic- at this time. Whereas Sunstein primarily relied tions, and a different perspective on the relative on the use of executive orders to incorporate efficacy of existing policy tools.8 Second, behav- behavioral approaches into policies, the U.K. ioral approaches have brought in their wake, at unit pursued a more experimental approach, least in their U.K. manifestation, a form of “hyper- one that resembled Lockheed Martin’s Skunk empiricism,” in that variations in interventions are Works programs, where engineers are not constantly being tested and their causal impacts assigned to specific projects with a short-term are continually estimated. Halpern has termed goal but instead are given greater freedom to the approach radical incrementalism: although pursue innovative and novel ideas, the expec- each intervention on its own may seem modest, tation being that even if most of these ideas when the approach is applied widely and fail, the successes will more than pay for the persistently, it is transformative. The road to this unit’s costs. stage has not been entirely smooth, and much has been learned en route. In the next section, The advantage of Sunstein’s approach was that we articulate a few of the keys to successfully it offered the prospect of large and immediate applying behavioral science to policy and some effects by instantly or quickly transforming of the lessons learned on the way. entire domains. The disadvantage, of course, is that executive orders often lack the legacy of congressional approval. Therefore, the orders Key to Successful may have only short lives and face dissolution Nudging: APPLES by court challenges (such as rulings issued Attempts over the last decade to bring behav- by the U.S. Supreme Court against President ioral science out of the laboratory and into the Obama’s orders on immigration) or by new world of policy have produced many lessons. executive orders from a different administra- Policymakers seeking to create “nudge units” tion (such as President Trump’s first-day order within their own government or other public to begin dismantling the Affordable Care Act). bodies are advised to pay heed to the following The United Kingdom’s more modest approach necessary components that can be summarized often involves running small-scale trials to test in the simple mnemonic of APPLES: administra- interventions inspired by behavioral science. This tive support, political support, people, location, more experimental approach brings with it other experimentation, and scholarship.6 We outline advantages, not least being that it builds up an APPLES in greater detail below. evidence base that can ultimately prove highly persuasive to an otherwise skeptical audience of Administrative Support senior public servants and commentators. This Ensure you have senior level buy-in inside the approach has since been replicated overseas, system. For BIT, it was key that we had the notably in the White House Social and Behavioral support of the cabinet secretary,
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