The British government has a Nudge Squad (called the Behavioral Insights Team) and soon we will too.
Where are we going? To whether behavioral economics can improve government.
A Nudge Squad Primer
A “Nudge Squad” can help us comply productively with government policies by using behavioral economics to influence our decisions. In the U.K., the Nudge Squad told tax procrastinators that “The great majority of people in your local area pay their tax on time…” and it worked. Emphasizing the social norm rather than the punishment they convinced more tax scofflaws to send in their checks.
In a recent NY Times Op-Ed, Harvard Professor Cass Sunstein explained that U.S. government agencies have already begun to recognize that they need to consider how we think. To encourage participation in a loan program, administrators used an “outreach” letter. Similarly, text messages increased the number of college pre-matriculation tasks completed by lower-income students. Even the strategic placement of a signature box generated more revenue from a government form because its designers implemented behavioral techniques.
Now with an executive order, President Obama has further legitimized government’s use of behavioral science. Through a Social and Behavioral Sciences Team, the President is supporting the idea that little behavioral tweaks can have a big impact on government employees and us.
There is only one problem. Policy makers are also human.
Our Bottom Line: The Tradeoff
Blocking the benefits markets bring to our lives, sometimes people display irrational behavior. Behavioral economists tell us that we prefer to select a default rather than consider a host of desirable alternatives. We like a smaller short term benefit rather than waiting for a long term result that we know will be better. And, because losses have a disproportionate emotional impact when compared to gains, we respond more strongly to them.
Called behavioral failures, our irrational responses have stimulated a group of economists to say government is the solution. However, as Professor Sunstein has pointed out, “For every bias identified for individuals, there is an accompanying bias in the public sphere.” Given the authority through a Nudge Squad, government can make the same irrational decisions as individuals.
The result? We have a tradeoff. Do we want to risk market failure or government failure?