Inside the Nudge Unit by David Halpern, provides new insights into behaviour which New Zealand public policy is steadily taking into consideration.

Have you noticed that the defaults or first choices in the website of a commercial entity favour the business’s goal? Fill in their forms and, as like as not, the top choice is theirs too. For decades businesses have been using research from social psychology to enhance their profits. (More insidious are the ‘behavioural predators’ who manipulate you; famously, tobacco companies made smoking seem glamorous, while knowing it kills people.)

Should not governments use the research’s findings too? In Britain and America they have been coherently doing so for a decade and some countries are adopting the approach too. The first directed effort may have been when President Obama made lawyer Cass Sunstein ‘regulatory czar’ in charge of the US Office of Information and Regulatory Affairs. However, the most famous is the British Behavioural Insight Team also known as the ‘Nudge Unit’.

I have written on nudging earlier; that is, when a choice has to be made the response is consciously favoured to construct a particular outcome but the alternative choice is left as an option. For instance, do you invite opting into an organ donation scheme or opting out? Austrians have an opt-out provision for organ donations; Germany has an opt-in. Almost all (99%) Austrians agree to donate after their death, but only 12% of Germans. Knowing that and knowing that the forms have to display one of the options, which should they offer? You probably would choose the Austrian option, providing the exercise of opting out was not too onerous. Sunstein and economist Richard Thaler called their approach ‘liberal paternalism’ and applied it in the US. (Another key player is psychologist Daniel Kahneman.)

The Nudge Unit went further, using behavioural insights from social psychology more widely than just liberal paternalism. They found the way that Inland Revenue wrote its followup letters influenced the willingness of late taxpayers to cough up. You can bet your life the IRD now uses the version that elicits quickest repayments.

The history of the British ‘Nudge Unit’ (officially the ‘behavioural insights team’) has been written up by its founder, David Halpern. His book, Inside the Nudge Unit, is packed with ideas including a very useful opening section which summarises the research findings and the following section which describes the way to apply them.

I have been following behavioural economics for some time; Paul Krugman described it as the most important innovation in the economics discipline for half a century. (Here are some of my writings some of which suggest how it is truly disruptive to standard economics.) But I had not appreciated that behavioural economics is only a part of a wider research and policy program.

The book becomes a super introduction to the wider study. On almost every page I thought ‘that is interesting’ or ‘I never thought of that’ or ‘we should be doing that’ – and sometimes all three. One finding really hit home. A particular presentation of energy use in a neighbourhood reduced carbon emissions by the equivalent of a tax increase on carbon of 10 to 20 percent. The exact figure may differ for New Zealand because we are not so dependent on coal (usually). But the lesson that behavioural insights can substitute for tax interventions almost certainly applies here. It is especially relevant given the difficulties of using taxes as an instrument of government policy.

David Halpern has visited New Zealand twice. (Here is the report of his most recent visit.)

Behavioural insight thinking is trickling into our public service thinking and at least one local council has a specialist. (The greatest ‘nudge’ success is that when you are joining Kiwisaver the default is to opt in. The design occurred even before the British Nudge Unit was established.) Apparently our Behavioural Insights Community of Practice has over 200 mostly policy people across the public service members. My impression is that academics are not nearly as involved. Many of our universities offer Masters of Public Policy courses which do not even offer the possibility of studying behavioural insights.

And some sections have yet to catch up. We are all aware of the obvious deficiencies of the majority of public websites and forms which suggest a widespread lack of ignorance from behavioural insights in their design area.

The way to think about it is that while most in public policy have at least a rudimentary knowledge of public accounting, public law and some economics (such as cost-benefit analysis), the psychology discipline’s equivalent of behavioural insights is not as mandatory.

Here are a few thoughts of what might further be done.

My first advice to someone who is thinking of going into policy work is to make sure you have done a course which will give them behavioural insights (just as they should have a knowledge of economics, history and statistics).

Second, if you are running a policy team make sure at least one of them has a working knowledge of behavioural insights and try to encourage others to get some understanding. Reading Halpern’s book would be a good start.

I do not think there is a place for a Nudge Unit in our government system. The original British one started with seven people, equivalent to half a New Zealander on a per capita basis. In any case we probably do not yet have enough depth of social psychology in our universities. Our strategy of percolating the behavioural insights approach through the public service makes more sense. Perhaps there is a case for a formal Nudge Co-ordinator near the centre of our bureaucracy to encourage coordination and cooperation. There may already be an informal one.                               

I noticed while reading the book instances where it would make sense for the Commerce Commission and the Productivity Commission to use behavioural insights in specific enquiries.                                        

‘Ridiculous!’ you say, ‘They are economics-based activities; what has social psychology to do with economic policy?’ That is exactly Krugman’s point. It may not have been in the past but it will in the future.