L 10 Policy

Question 1

Define Policy vs consumer policy

Answer 1

• policy: “a course or principle of action, adopted or proposed by a government, party, business, or individual” (Australian Concise Oxford Dictionary)
• consumer policy: “a suite of government policies that deal with purchase of and use of consumer goods and services” (Productivity Commission)
◦ For our purposes, not just government initiated

Question 2

Traditional approaches to consumer policy (Chen, Bendle, & Soman, 2017)

Answer 2

1. Restrictions (bans and laws)
2. Incentives: carrots and sticks
3. Increased information

Question 3

Consumer regulation in Australia policies

Answer 3

Competition and Consumer Act 2010
◦ covers areas such as product safety and labelling, unfair market practices, price monitoring
Australian Competition and Consumer Commission (ACCC)
◦ independent statutory authority
◦ role is to ensure compliance with the Competition and Consumer Act 2010 and other consumer protection laws

Question 4

How much did neurofen make?

Answer 4

claimed multiple uses and charged more for targeted relief tablets. 45 million dollars

Question 5

Cambridge Analytica: how 50m Facebook records were hijacked

Answer 5

1 Approx. 320,000 US voters (‘seeders’) were paid $2-5 to take a detailed personality/ political test that required them to log in with their Facebook account to a third party app

2 The app also collected data such as likes and personal information from the test-taker’s Facebook account as well their friends’ data, amounting to over 50m people’s raw Facebook data

3 The personality quiz results were paired with their Facebook data – such as likes – to seek out psychological patterns

4 Algorithms combined the data with other sources such as voter records to create a superior set of records (initially 2m people in 11 key states*), with hundreds of data points per person

Allegedly used to target people with highly personalised advertising for political purposes (ALLEGEDLY)

Question 6

Privacy regulation Australia: The Privacy Act 1988

Answer 6

◦ regulates the management of personal information
◦ Notifiable Data Breaches Scheme (Feb 2018)
The EU: General Data Protection Regulation (GDPR; 2016; enforceable in May 2018)

Question 7

Is regulation Enough?

Answer 7

• The fact that Neurofen and Cambridge analytica occurred mean the answer may be no.

Question 8

Energy conservation: Solutions?

Answer 8

• Provide incentives to make energy conservation and use of renewable energy cost-effective ◦ e.g., ceiling insulation rebate, solar panel rebate
◦ However, financial incentives can “crowd out” intrinsic motivation (e.g., Menges et al., 2005)
• Increase information to persuade people to conserve energy
◦ e.g., education, mass media
◦ However, greater knowledge does not translate into more action (e.g., Abrahamse & Steg, 2011).

Question 9

Neoclassical economics

Answer 9

“Rational choice” model of human behaviour (humans are rational, we maximise utility)
◦ This model portrays humans as “Econs” (Thaler & Sunstein, 2009): sophisticated decision makers who are logical, maximise their self-interest, follow their “true” preferences

Question 10

Behavioural economics

Answer 10

◦ “Bounded rationality” (this model says we are human in our decision making, sometimes impulsive, subject to emotions)
◦ Decision-makers as “Humans”: not always logical, make decisions that are subject to systematic biases and heuristics

Question 11

Thinking Fast and Slow

Answer 11

One brain, two systems
System 1 = fast, unconscious, automatic, parallel processing, e.g. native language speaking
System 2 = slow, conscious, controlled, sequential processing, e.g. foreign language learning

Question 12

What is the challenge with policy?

Answer 12

• Restrictions, incentives, and increased information are designed for “Econs”
• Need approaches designed for humans by applying “behavioural insights”

Question 13

Behaviourally informed approaches to consumer policy

Answer 13

Focus on changing contexts/environments to “nudge” choices and actions in desirable/beneficial directions (Thaler & Sunstein, 2009)

Question 14

◦ Choice architecture

Answer 14

designing the manner in which different options are presented to a decision maker

Question 15

◦ Nudge

Answer 15

◦ Nudge: an intervention to change the manner of presenting options

Question 16

◦ Discuss behaviourally informed approaches to consumer policy

Answer 16

◦ gold standard: randomised control trials (RCTs) measure if intervention was good compared to control group
◦ iterative (doing intervention again and again making improvements
Should be Choice-preserving

Question 17

How to nudge for energy conservation: 4 heuristics policy makers can play on

Answer 17

• Status quo bias: we go with the pre-set default (make the default environmentally friendly )
• Loss aversion: losses loom larger than gains ◦ Use loss-frame messages
• Salience: our attention is drawn to stimuli that are novel, accessible, and simple◦ Give consumers visual reminders or prompts e.g. light bulbs change colour when on too long

• Normative social influence (social norms/validation/proof): We follow the herd
◦ Tell consumers that: other people are conserving energy (DESCRIPTIVE NORM)
AND
tell people that other people approve of conserving energy (INJUNCTIVE NORM)

Question 18

Normative social influence study (Schultz et al., 2007)

Answer 18

290 households in California
either told descriptive norm only: own and average energy use in their neighbourhood in previous week(s) OR
◦ descriptive plus injunctive !

Households ABOVE average at baseline: descriptive norm sig decreased energy consumption (Boomerang = undesirable outcome where they decrease proenvironmental behaviour)
Households consuming BELOW average energy at BASELINE: descriptive norm sig increased energy consumption (which is bad) UNLESS also combined with injunctive norm to say yes, keep saving energy people will like you.
Similar results in Long term

Question 19

Reading Relative effectiveness of behaviourally informed vs. traditional approaches (Benartzi et al., 2017)

Answer 19

“Relative effectiveness”: measure of the impact of the intervention per dollar spent
They constructed a measure on the impact of nudging behaviour per dollar spent on the intervention. Sometimes nudges outperformed more traditional approaches like discounts on electricity bills.
- enrollment system retirement savings vs opt out (effective)
- A nudge for people to plan the date and time when they would obtain an influenza vaccination increased jabs by 4.2%
- opt-out condition for vaccinnes increased the vaccination rate by 11.7%
- offering a $30 incentive increased vaccination rates at campus clinics by 10.7 percentage points
- educational campaign increased vaccination rates by 8.19
- free vaccinations increased jabs 15.3 %
Recommendations:
1. there should be increased investment in behaviorally informed policies to supplement traditional policies
2. nudge units and other organizations enlisting nudges should share data and knowledge (e.g., through a central repository)
3. , behavioral scientists should measure relative effectiveness to quantify the impact of nudge interventions

Question 20

Is nudging ethical?

Answer 20

◦ nudges must be choice-preserving (not coercive) (should be less coercive than regulation and incentives)
◦ nudges should be transparent and open for public debate
Philosophy of libertarian paternalism (we must preserve freedom of choice while also steering people in the direction you want)
◦ But who gets to decide what is a desirable outcome?