A Philadelphia Inquirer columnist’s take on nudge

Chris Satullo writes about nudge in last Sunday’s Philadelphia Inquirer.

Been nudged lately? You have, whether you know it or not. If you’ve ever obeyed your computer’s invitation to install some software in the “standard (recommended)” mode, you’ve been nudged, in a helpful way. If you’re still paying for that magazine subscription you got in a “free trial” three years ago, you got nudged less benignly.

Unless you’re a creature of rare self-discipline, you get nudged all the time. If Barack Obama becomes president, you will likely be nudged more often by the federal government, as his policy advisers seek ways to reach goals without new mandates or hard-and-fast bans.

Nudge now peppers wonkish conversation the way tipping point did a few years ago after Malcolm Gladwell published his famous book. At a recent Urban Institute panel on the future of retirement, every panelist mentioned something about “finding the right nudge” or “seeing a nudge opportunity.”

As with tipping point, this instant cliche comes from a book. Written by two witty guys from Chicago, economist Richard H. Thaler and legal scholar Cass R. Sunstein, it’s called Nudge: Improving Decisions About Health, Wealth and Happiness. Sunstein is a good friend of Obama’s; both authors serve as informal policy advisers.

So people are reading Nudge to find clues to the practical meaning of “change you can believe in.” If the senator from Illinois really thinks like his University of Chicago colleagues, an Obama presidency would look very little like the neo-socialist nightmare of Sean Hannity’s rants.

So what is a nudge? The book’s path to explaining that simple term passes through some clunkier ones: behavioral economics, choice architecture and (deep breath) libertarian paternalism. Behavioral economics, which Thaler helped shape, hinges on the belated (for the dismal science) recognition that human beings often resemble Homer Simpson more than they do Mr. Spock.

Psychologists have shown that we humans harbor many quirks that don’t resemble the hyperrational Economic Man of free-market theory. We’re experts at inertia (those lingering magazine subscriptions). We’re overconfident, sure that we invest our money better than the average bear, that our marriages (unlike half of everyone else’s) won’t end in divorce. We’re impulsive, suggestible, and slaves to peer pressure.

So, the authors argue, “choice architecture” – the way choices are presented and explained – inevitably sways the decisions we make. Given that, they say, shouldn’t government and institutions set up choices to nudge people toward the most beneficial decision?

In the school cafeteria, whatever’s put at eye level gets eaten most. So why not carrot sticks instead of Doritos? Given their libertarian streak, Thaler and Sunstein still want Doritos to be available; they hate to bar choices. As important, “nudge paternalism” aims only to help individuals achieve goals that they themselves say they want.

Take this popular example of a national policy nudge: People say they want to save for retirement, but half the workers eligible for tax-protected 401(k) accounts don’t sign up for them. Crazy. When employers have made those accounts opt-out (that is, you’re enrolled automatically, with the option to pull out), nearly everyone keeps a 401(k). Obama wants to make that nudge the federal norm.

Similarly, opt-out registration for organ donation sharply increases donor rates. Where else does Obama look Nudge-y? His housing-meltdown fix, with its focus on clear disclosure of loans’ true costs, is taken nearly word for word from the book. Critics of Nudge say such subtle intervention isn’t adequate to fix some big, deep problems. Thaler concedes with typical wit: “The Mafia is probably pretty immune to nudging.”

But nudges can produce big change. I’m living proof, as a happy customer of RecyleBank, a four-year-old Philadelphia recycling company. In the 40-odd towns where it operates, including Cherry Hill and Philadelphia, RecycleBank has never failed to double the recycling rate.

RecycleBank nudges people in ways that Thaler and Sunstein would applaud. The amount you recycle is weighed and turned into points that you can track on a Web site and redeem for coupons to local stores. (Simple incentive to get your inner Homer off his duff? Check!)

The Web site tells you how many trees and barrels of oil you’ve conserved through this single-stream recycling. (Personally meaningful feedback? Check!) Even the size (huge) and color (green) of the company’s wheeled bins serve as a nudge. Unlike those little blue bins so prone to spillage, these 64-gallon monsters signal to you that most of the waste you produce should be recycled. They dare you to fill them up. In my household, we do. Every week. We’ve been nudged. And it feels so good.

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