Archive for December, 2008

Farmers market nudges

December 29, 2008

For those who have wondered, the Nudge blog will be back in full force in 2009. For the time being, the Washington Post reports on an idea that mixes libertarian paternalism with good old-fashioned monetary incentives devised by the Wholesome Wave Foundation.

In the spring, it launched a program that doubles the value of food stamps and fruit and vegetable vouchers of low-income mothers and seniors who use them at farmers markets in Connecticut, Massachusetts and California. The Wholesome Wave matching grants were an instant hit at the City Heights market in San Diego. On the first day that matching funds became available, sales using government-issued electronic benefit cards soared by more than 200 percent. In subsequent weeks, the line to receive matching vouchers formed at 7:30 a.m., and the available funds were exhausted by 9:30 a.m., just 30 minutes after the market opened.

“We’re not taking away your benefits because you spend them on Twinkies,” said Michel Nischan, a Connecticut chef and president of Wholesome Wave. “But if you decide you want to spend it on fresh tomatoes, you’ll get double your money.”

And some Congressional testimony on why creative nudges like this will be needed to solve health problems like obesity.

“Research is clear — handing out nutrition brochures does not work,” Eileen Kennedy, dean of the Friedman School of Nutrition Science and Policy at Tufts University.

An american book in parliament square

December 19, 2008

Stephen Dubner of Freakonomics was in London’s Parliamentary Bookshop recently and saw a single American book on the display shelf.

nudge-book

Wanted: A nudge for finishing the holiday to-do list

December 18, 2008

David Giacalone of f/k/a in the Harvard Law blogosphere laments that the Nudge blog lacks a “relevant Holiday Nudge to get me working on that To Do List right now.” He says he’s hunting for something “specific for turning on (much less sustaining or modeling) holiday spirit.” Something like a “’holiday decision tree’ for working past my punchbowl procrastination and finding seasonal renewal and inspiration.”

Readers are encouraged to post their best tips for completing their holiday to-do lists.

Addendum: Turns out that mom was the best nudge for f/k/a.

(Almost) the public intellectuals of the year

December 18, 2008

The Prospect’s judges were split.

A three-way contest emerged, between economist Nouriel Roubini, social scientists Richard Thaler and Cass Sunstein, and General David Petraeus. Our judges voted according to type: the wonks liked the Nudge duo, the more economically minded wanted a thinker linked to the credit crunch, while foreign policy watchers thought the solider-philosopher deserving of the nod. On our website we provide details of all our judges’ votes, and their reasons, along with short bios of all those we considered. Ultimately, though, there could only be one winner.

Who would it be? The General.

A college health clinic devises a nudge to separate the weary from the wily

December 18, 2008

Call this another example of choice architects adjusting to crafty patrons. (Click here for the coffee shop example.) The health service at a school that shall remain nameless has altered its rest policy in light of a crush of “fatigued” students. The health service has slightly raised the cost of a visit for those who are just looking to escape from an assignment. We bet fatigue, real or otherwise, runs highest during exam period, which is wrapping up at schools around the country just about now.

Due to the increased incidences of students coming into the health clinic to “rest” during the academic period, we have re-initiated a policy from previous years.  The policy states that those students that come in the clinic and need to rest for more than an hour during the academic day will be asked to rest and refrain from social engagements, during the evening. The dorm staff will be reinforcing this policy with the students.

The “evening health restriction” policy will help those students that need a little extra rest and down time in the evening rejuvenate themselves, so that they are available for learning the following day.

A reader spots a nudge at his house party

December 17, 2008

Reader Zach Savage of New York hosted a party with his roommate a few nights ago. “I came across a powerful nudge,” he writes.

At the party, my roommate and I set out six bottles of wine on a table. The wine bottles were still corked, so we put a corkscrew next to the bottles.  We also offered other drinks – beer, eggnog, and cider. After the party had been going on for about 30 minutes, I noticed that our guests were drinking the beer, cider, and eggnog very quickly, but nobody was drinking the wine. I thought people might need a little nudge to induce them to drink the wine, so I opened one of the six bottles. Within about 10 minutes, that bottle was gone. However, the other 5 bottles were still untouched. I opened another bottle, and again, that entire bottle was consumed within about 10 minutes, but nobody had touched the other four bottles. I then opened the four remaining bottles, and by the end of the party, they were all gone.

It was very clear that what determined whether someone drank a particular bottle of wine was not whether they liked the type of wine in the bottle, but whether or not the bottle was open.

Just where were the oenophiles at this fine party?

Rethinking unemployment insurance: Part II

December 16, 2008

Picking up on the recent unemployment insurance post about Jeff Kling’s proposal for a revenue-neutral reform of unemployment insurance that would create earnings replacement account, funded by workers, that would help them through short-term job layoffs, allowing government-funded unemployment insurance to be used for long-term layoffs or permanently lower wages in new jobs that can be especially damaging.

Kling makes the argument that his proposal will actually reduce temporary layoffs by 10-15 percent and permanent layoffs by an unspecified amount. How? By forcing firms to bear the costs of unemployment. Under the current unemployment insurance system, firms make payments to the government to cover payments. Kling proposes that firms contribute to government coffers for for wage-loss insurance, repayment insurance, assistance on earnings replacement accounts for those with lower wages. Since the proposal is revenue neutral, the total costs to these forms of insurance would be the same as they are now. But Kling proposes raising the taxable earnings base to a real value of $90,000 (in some states it is currently below $10,000), cutting the overall unemployment insurance payroll tax rate, and lowering the minimum amounts that firms must pay. The result, Kling says, would be a tighter linkage between layoffs and direct firm costs. Intra-firm subsidies for unemployment insurance would thus be reduced.

In addition, since most employees who become unemployed would bear the costs of unemployment benefits directly, they would be much more likely to voice strong opposition to temporary layoffs than they are under UI when they receive payments with no corresponding future obligations. Firms in industries with frequent temporary layoffs would be pressured by the labor market to raise wages in order to continue to attract workers who, under the proposal, would be self-insuring income loss during layoff through savings and borrowing.

Addendum to previous post on unemployment: Here is one more reason why individuals might be more likely to return to work faster under Kling’s plan. Recent research by economist Raj Chetty argues unemployment insurance raises some problems of moral hazard, but that equally serious effects come from something he calls the “liquidity effect.” (A gated version of his working paper is here.) In essence, unemployment benefits allow an individual to remain out of work longer since they have enough cash-on-hand to survive. But if workers have to use the money they saved themselves through their earnings replacement accounts to fund their short-term unemployment, they could be more motivated to find a job. Certainly more motivated than if the entire insurance check was coming out of some other taxpayer’s pocket.

A new gallons per mile calculator

December 16, 2008

Rick Larrick, who blogged about the MPG Illusion, has created a new calculator that lets you check out the gallons per mile for your vehicle, or any other for that matter. You can also compare gallons per mile information for all 2009 vehicles. The calculator is here.

What do coffee shops do when college students come in to use their wireless network without buying any coffee?

December 15, 2008

An agency in the Netherlands comes up with a clever piece of choice architecture for every coffee or sandwich shop in a college town:

(CoffeeCompany) wanted to attract more students. So it installed WiFi in some of its stores near universities. The problem is lots of students just come into the store for the WiFi but hardly look at the menu. So (a marketing firm) and CoffeeCompany decided to move the store’s menu into the WiFi menu of customers’ laptops (and iPhones).

In case you can’t read the last line on this image it reads: “The best part came when people yelled across the room to ask the barista what the name of the WiFi network was and the barista answered one of the WiFi lines like, “OrderAnotherCoffeeAlready.”

coffeenudge1

The wireless network menu also always includes lines alerting customers to food and drink specials.

coffeenudge21

Hat tip: Jordan Lloyd


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