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Bad behaviour: Britain won’t nudge its way to a better economy

It is known as the Nudge unit; a government behavioural insights team, that draws on theories popularised in a bestselling book from Yale. Following much hype and publicity, the behavioural insights team…

Who’s nudging who? J slick

It is known as the Nudge unit; a government behavioural insights team, that draws on theories popularised in a bestselling book from Yale. Following much hype and publicity, the behavioural insights team is now to be privatised. But what exactly is it, and can a philosophy based on altering individual behaviour really lead to major social change?

The central idea of “nudging” is that individuals can be helped to take decisions which are better for themselves (such as better nutrition), for the environment (for instance, recycling), for government (such as paying taxes on time) or for others (all manner of civic and altruistic behaviour), without being forced or regulated into doing so.

Instead, the way in which options are framed and communicated plays a significant role in how the brain is likely to interpret and act on them.

Efficient psychology, effective economics

For politicians eager to define themselves as neither traditional market liberals nor traditional big state interventionists, the idea of a nudge unit has obvious appeal. It is no surprise that Obama and David Cameron both seized this message, as if an entire new model of the state might be built upon very minor tweaks to the “choice architectures” (a phrase used by the authors of “Nudge”) within which individuals acted.

The unit has found ways of redesigning job centres and tax return letters to improve the resulting behaviour, as judged in terms of economic results. For example, prominent nudgers have stressed the importance of making occupational pension schemes opt-out, rather than opt-in, such that it becomes the norm to participate, and abnormal not to do so.

Policymakers now widely use randomised controlled trials (a technique developed for pharmaceutical testing) to discover which nudges are working best: two subtly different policies are run side by side, and the outcomes then evaluated.

Nothing major

How significant is any of this? These ambitions are actually very humble, which is partly the point. Nudgers do not seek major policy changes. Rather, they want to demonstrate how very small – and, more importantly, often cost-free – alterations to the status quo can yield much better outcomes.

In many ways this merely represents a discovery of psychological techniques that private sector management first acquired during the 1930s. Notions such as consumer “attitude” and workplace “morale” emerged during this time, to provide a psychologically nuanced way of understanding how people could be manipulated by business. While policymakers have been struggling to govern people through altering “incentives” and “regulations”, marketers and human resource managers have long known that behaviour is not typically determined by economic rationality.

Orthodox economics assumes that individuals act to maximise their own private satisfaction, in a calculated, almost mechanical fashion. Behavioural economics, by contrast, recognises that individuals are swayed by social influences and past experiences.

One question, for psychologists at least, is whether the nudgers go far enough in abandoning the orthodox assumptions of economics.

After all, the goal of a successful nudge usually remains to get people to act in a more efficient, market-oriented fashion.

Nudging, claim some, helps people to act as economics traditionally assumed they would. Economists are now increasingly aware that individuals are prone to act in a herd-like way, as demonstrated by the collective miscalculations of risk that led to the financial crisis. Individual rationality therefore needs propping up, if it is to function properly in the marketplace.

Nano-nudging’s not enough

Given the seriousness of our current social, economic and environmental problems, nudging is simply too conservative a remedy.

To suggest, for instance, that bankers need to have their “choice architectures” tweaked, to avoid saddling taxpayers with several hundred billion pounds-worth of cost, would be to add insult to injury. There is a risk that this new-found fascination with “nano-level” policy means we lose sight of the “macro-level”.

The problems we face are ever more global and systemic, yet our analyses of these problems seem to be shrinking. We’re now at the point where brain synapses and chemistry are used as the explanation of last resort.

Nudging is innocent enough, if it’s a way of trimming costs here, and helping people there. But it strengthens the tendency to speak of all problems as “behavioural” or “cognitive”, at a time when institutions themselves need to be rethought and rebuilt.

With major questions of power and political economy at stake, focusing on “nudges” may ultimately prove to be a distraction.