Zoom-Shroom in the Mazda 5

Yale economist Dean Karlan reports on a nudge gone bad in the Mazda 5. Its choice architecture turned out to have serious consequences during a recent trip out west. Beware the car’s dashboard.

(The Mazda 5) has sensors to know whether it is dark out, to turn the lights on. But here is the kicker: it only turns the dashboard lights on, not the headlights! So my subconscious thought the headlights were on, and I didn’t turn them on. Until a cop pulled me over. And then said we fit his “profile”: one way rental from Phoenix to Tucson, 14k miles on the rental, licenses from the east, and two of us from different places which he says is an indication that we don’t know each other (I was with JZinman, and he didn’t seem to get it when I told him that if he doubts we know each other, he can google me and get the suggestion “karlan and zinman”). We didn’t even tell him we were daytripping to Nogales, Mexico, that clearly would have been the kicker. We just told him Tucson. Next step? K-9 unit arrives after 20 minutes (all this at 2 a.m.).

Here is the funny part: the dog found something! Clearly our rental car was recently used for a drug run. The dog was going nuts. But only residue, they never found anything. Took an hour for the cops to let us go. But then when we pulled out, I did remember to turn my headlights on despite the dashboard lights already being on.

Is “trash” keeping us from recycling?

Reader Jason Bade writes in with a comment about the power of labels on decision making about recycling.

Oftentimes, we are given two options when it comes to disposing of our refuse: “Recycle” and “Trash.” When one approaches a recycling receptacle, one is confronted by a set of rules that are rather easy to break, even if by accident (for example, I can recycle a plastic milk bottle, but not a plastic soap bottle). Because we, as humans, are lazy, we tend toward the option that carries with it no burden of rules–no risk of being wrong. There are no rules to throwing stuff in the trash, so it is the naturally appealing option. How, then, can we change this choice architecture to eliminate (or at least equalize) the risk of each option?

The reason this situation exists in the first place is that these choices are not mutually exclusive. In theory, aluminum can could be put in either receptacle without breaking any “rules.” Although I am unsure of this empirically, I would venture that a change in garbage can lingo could increase recycling rates, if it were more specific and put the choice in absolute terms. Take the label “trash,” or “garbage,” which implies “everything we don’t want.” If we relabeled garbage cans as “Non-Recyclables” (or the trash cans next to compost bins as “Non-Compostables”), it might make people think a lot harder about what to put in which bins. Recycling bins could still be labeled “Recyclables” but trash bins might also be labeled “Non-Recyclables.” This not only would give every single discardable item only one legitimate destination, but it would also put the decision to recycle on par with throwing it away.

Addendum: Jason is an undergraduate at Stanford who is starting a group called BEAST–-Behavioral Economists at Stanford. BEAST’s purpose, he writes, is “to investigate behavioral problems, implement controlled `nudge’ experiments around campus and in the greater community to remedy them, and then publish the results online and in the greater community for implementation elsewhere.” The group isn’t up and running yet, but if you’re at Stanford and interested in nudging, try and check it out.

Assorted links

1) The New Yorker interview with Richard Thaler.

2) London’s mayor wants to start a recycling bank program that gives people shopping vouchers for their recyclables.

3) Another plug this past weekend for the automatic tax return. California says it costs $2.59 to process a paper return, but only 34 cents to process its version of the automatic tax return, ReadyReturn. The makers of Turbo Tax have been trying to end the program, most recently this fall.

4) Calorie postings at Starbucks led to lower calorie consumption by six percent–except around the holidays. Hat tip: Farnam Street.

5) Will Obama mention the automatic IRA in his State of the Union speech Wednesday?

Nudge-friendly transparency by the U.S. government

As part of a pledge to democratize data, the White House recently ordered every department to post at least three sets of never-before-disclosed “high-value” data. Everything released will be available on data.gov.

Open government groups are supportive.

“There’s recognition that public equals online,” said Ellen Miller, executive director at Sunlight Foundation, a nonprofit group focusing on the use of technology for greater government transparency.

Miller said the effort represents “a sea change in government’s attitude,” with newfound support for the idea that government data belongs in the hands of citizens instead of locked away in the basement of a federal agency.

Full story here.

Richard Thaler on mortgage defaults. Why so few? Will there be more?

In his latest Economic View column, Richard Thaler offers his thoughts on mortgage default rates and why homeowners stay underwater.

Much has been said about the high rate of home foreclosures, but the most interesting question may be this: Why is the mortgage default rate so low?

After all, millions of American homeowners are “underwater,” meaning that they owe more on their mortgages than their homes are worth. In Nevada, nearly two-thirds of homeowners are in this category. Yet most of them are dutifully continuing to pay their mortgages, despite substantial financial incentives for walking away from them.

A family that financed the entire purchase of a $600,000 home in 2006 could now find itself still owing most of that mortgage, even though the home is now worth only $300,000. The family could rent a similar home for much less than its monthly mortgage payment, saving thousands of dollars a year and hundreds of thousands over a decade.

Keep reading in the full column here.

Why can’t “keep the change” send it to a charity instead?

Keep the Change is a Bank of America program that takes a debit card purchase, rounds it up to the nearest whole dollar and deposits the difference in the consumer’s saving account. Moving some spare change to your savings account every day probably isn’t going to guarantee a comfortable retirement, and so the program may not seem all that appealing to people. “I don’t use the program now because the incremental savings isn’t great enough to change my behavior,” writes reader Kate Barasz. How can Bank of America get customers like Kate to participate?

More than a few readers with similar thoughts have written in to ask: Why can’t Bank of America offer the option to send this spare change to a charity of the consumer’s choice instead? That would increase its popularity, readers say. Of course, sending the money, even in these small amounts, would move it out of the bank’s capital base. Given how pitiful interest rates are these days on savings accounts and how conservative lending standards have become, every penny that stays in house is likely to make banks a nice return. Bottom line: Good idea; don’t look for it anytime soon.

Urinals part X

From an Umbro ad similar to urinals part III.

Five guys wants you to order the big burger

So how do they nudge you? It’s all in the labels and the menu architecture, says reader D. M. Westervelt.

Anywhere else, said larger burger would be deemed a “double” (“double cheeseburger”, “double double”). Not at Five Guys; for them a “hamburger” is two patties and a “little hamburger” is one patty. And, on the menu board, the hamburger is on the far left column and the “little hamburger” is in the next column over. The difference? 220 calories and about $1.50.

Addendum: Five Guys is a burger and fries chain that originally started in Virginia.

Addendum too: In a standard two-panel folding restaurant menu, the upper-right-hand corner is prime real estate. It’s not clear where the best place is when the menu is plastered high on a wall behind the counter.

Behavioral economics in Afghanistan

Tim Harford reports on a  military program from Afghanistan modeled on the Comprehensive Rural Health Project.

The more psychologically detailed insights of behavioural economics may also be promising. Mackay and Tatham cite Afghanistan’s National Solidarity Programme as an example of the “choice architecture” described by policy guru Cass Sunstein and the behavioural economist Richard Thaler. The NSP handed out grants to villages, provided the village leaders were elected by secret ballot, held communal meetings, and posted accounts in a public place: a nudge towards better governance.