Insights into Editorial- India’s nudge unit: An idea whose time has come
19 February 2016
With the recent executive order, issued by the US president Obama, asking US agencies to integrate ‘nudges’ in their daily operations, the US has joined a group of countries including the UK, Australia, Singapore, and institutions like the World Bank who have been using and advocating behavioural research to dramatically improve public policy design, and deliver better outcomes for taxpayer money. This move is the clearest sign that behavioural public policy is here to stay.
But what are nudges?
If policy design is thought as the map and development outcomes as the destination, then nudges can be the road signs that gently guide you towards the best route.
Formulating these road signs requires expertise at two levels:
- Understanding why consumers pick less optimum routes (cognitive biases)
- Designing signs that guide users to better routes (nudges/interventions).
‘Nudge’ theory was proposed originally in US ‘behavioral economics’. But, it was popularized by the 2008 book, ‘Nudge: Improving Decisions About Health, Wealth, and Happiness‘, written by American academics Richard H Thaler and Cass R Sunstein. The book is based strongly on the Nobel prize-winning work of the Israeli-American psychologists Daniel Kahneman and Amos Tversky.
Nudge theory is a flexible and modern concept for:
- Understanding of how people think, make decisions, and behave.
- Helping people improve their thinking and decisions.
- Managing change of all sorts.
- Identifying and modifying existing unhelpful influences on people.
Basis for such interventions:
Behavioural economists have found that all sorts of psychological or neurological biases cause people to make choices that seem contrary to their best interests. The idea of nudging is based on research that shows it is possible to steer people towards better decisions by presenting choices in different ways.
- Nudges and other behavioural change interventions primarily rely on design and messaging that address the effect of behavioural biases on human behaviour.
- These biases are no unique phenomenon in government and public policy, neither do they affect only a small percentage of the population—cognitive biases are everywhere.
- Take for example the IKEA effect (named after the do-it-yourself Swedish furniture retailer). This bias leads to us placing a disproportionately high value on ideas or products that we had a hand in creating. The bias can prevent us from recognising early on that our much-valued product isn’t working well, or make us closed to ideas from elsewhere since we’re attached to the home-grown idea.
- Another common bias that we face on a daily basis comes from the psychological theory of framing—where the construction of a sentence or situation changes your perception or reaction of it (reactions in newspapers to the latest census results on religious groups are an excellent example of framing).
Do such interventions work?
Previous experiences suggest that, if planned carefully, and backed by accurate bias-targeting, then, such interventions do work.
- In Israel, the issuing or renewal of an ID, passport or driving license, became conditional upon answering the question of becoming a registered donor. The default option was an ‘opt-in’ provision, which greatly increased the list of registered donors by targeting the status quo bias.
- Similarly, in Singapore—known for a number of innovations in governance—providing the average electricity usage of the locality on the back of bills has nudged households to think about their own energy consumption, driving them towards reducing it to the average levels, an example of the groupthink effect.
- Copenhagen’s experiment of using green footsteps to lead to trash bins helped reduce littering by 46%.
- In the field of tax collection, nudge has helped boost revenues for cash-strapped governments. For instance, in Singapore, printing tax bills on the pink paper typically used for debt collection led to an improvement in the prompt payment rate of between three to five percentage points.
Does it hold any relevance for the Indian Polity?
It might be argued that such interventions are rather narrow and first-world interventions that hold no relevance for the Indian polity. But even at a first glance, there is much that policy in India can adapt and use from these research findings.
- Research by Final Mile, a Mumbai-based firm, suggests that using fictionalized photographs of a person getting run over by a train reduced incidences of railway-related deaths significantly at unmanned crossings—something that the railway ministry might consider implementing as a pilot.
- Such interventions may also encourage large-scale signing up for organ donation, and rework the ‘give it up’ policy for cooking gas subsidy on that basis.
Ultimately, the progress of our country depends on government policies adapting and addressing the developmental challenges facing millions of our fellow citizens.
- The government already uses choice interventions like subsidies and taxes to shape citizen behaviour.
- Understanding cognitive biases correctly, and formulating interventions that take into account such biases can have a huge impact on making public-spending more effective.
- As an added bonus, India can make use of this opportunity to lead the way in pioneering behavioural research in South Asia, focusing on the policy challenges unique to this region.
Put simply, if behavioural interventions have the potential to increase the efficacy of our social spending, what are we waiting for? We need action on this front from a government elected on the platform of agility and progress. However, it remains to be seen how the most promising trials of nudge theory can be scaled up. But the initial signs are promising. If nothing else, the nudge revolution encourages the use by government of plain language; favours the design of policies that actually take account of real-world behaviour; and allows the testing of ideas on a small scale before wider implementation. It deserves to be pushed.