Nudges and Behavioural Public Policy 2 Flashcards
Default option example
- make automatic enrolment in to pensions default
- make organ donations default with opt-out option
Why do default options work?
- people have a tendency to do nothing - inertia
- status quo bias
- important part of the choice architecture as a large number of people will end up with the default
- can be strengthened through suggestion that this is recommended option
What are examples of Frames?
- If you use energy conservation methods, you will save $350 per year
- If you do not use energy conservation methods, you will lose $350 per year
The second framing could be more effective due to loss aversion (if an individual losses x, they suffer a greater loss in value than the increase in value they experience if they gain x)
How does faming work?
It is often System 1 (automatic) that makes decisions rather than system 2 (reflective) which would conclude that the outcome of the two options is the same
Example of use of Social Norms
Poster: most of Gallatin County’s Young Adults (89%) Don’t Drink and Drive
Letter: x% of your neighbours pay their taxes
News: x% of adults are vaccinated
Why do social norms work?
- people have a tendency to conform & follow the herd (sometimes based on thinking that others have more information than them; sometimes simply herding; sometimes thinking that others are paying more attention to them than they actually are)
What does it mean to prime?
to influence subtly in order to increase ease at which certain information comes to mind
Study: asking about intention to vote the day before election increases probability of voting by 25 percent
Objections to Nudges & Potential Responses - What are some objections to nudges?
- slippery slope argument - manipulation concerns
- evil nudges and bad nudges
- right to be wrong
- required choosing better than nudging (provide info & let people choose)
- neutrality preferred
- nudges not enough in some situations
- salience objection (nudges, e.g. reminders may make distort individual focus from what is important)
Objections to Nudges & Potential Responses - What is the slippery slope argument?
If libertarian paternalism (nudges) accepted, hard paternalism (bans) will follow
- But: what if the policies are helping people achieve what they themselves would want
- Many of the nudges intend to substitute for hard paternalism (they offer choice)
- In many case nudge is inevitable, some form of choice architecture is there
Objections to Nudges & Potential Responses - What is the evil nudges and bad nudges concern?
concern that choice architects constructing nudges may have their own agenda or be incompetent
- proposed solution: create rule of engagement that make it easy to monitor nudgers
- both for public and private choice architects
- increase transparency (e.g. RECAP)
Objections to Nudges & Potential Responses - What is the right to be wrong
- helpful to make mistakes - basis for learning
- But: Perhaps with some decisions it is difficult to learn as outcome is realized only later or decision is one-off
Objections to Nudges & Potential Responses - Required choosing better than nudges; better to provide info and let people choose
Yes, sometimes. But sometimes choice may be hard and options too numerous. Also, people often choose not to choose
Objections to Nudges & Potential Responses - Neutrality preferred
but: it is sometimes difficult to be neutral
- randomizing ballots makes sense but not randomizing assignment to insurance policies
Objections to Nudges & Potential Responses - Nudges not enough in some situations
- Yes, but in others they may be useful
- they may be seen as complements to more paternalistic policies
What is scarcity?
having less than you feel you need
What are different types of scarcity?
Financial scarcity - unemployment, poverty
Social scarcity - social isolation
Time scarcity - perpetually busy
Dieting - may feel that need for more calories than are allowed
How is Scarcity different from usual Economics concept?
Usual concept of “scarcity” in Economics:
- “How we use our limited means to achieve our unlimited desires”
- “How people and societies manage physical scarcity”
- everyone faces scarcity; money as a limited resource; have to make trade-offs (if I buy x, can’t buy y)
- but having limited resources is not necessarily equal with a feeling of scarcity
Key idea of Mullainathan and Shafir’s Scarcity:
- Physical limits matter but also the subjective perception of them.
What does Scarcity do to our minds?
- Focus dividend - heightened productivity when facing a deadline
-> cost of the focus dividend - other things are neglected
Tunnel - Focus single-mindedly on the scarcity at hand
How does tunnelling change our decisions?
By focusing on a deadline, we neglect other things (e.g. going to the gym)
Entering a tunnel
- changing what comes to mind (may forget about gym)
- costs of activities outside the tunnel are magnified, benefits minimized (health benefits of gym not as pressing)
Tunnelling tax: focus on stuff inside the tunnel at the expense of stuff outside the tunnel, e.g. forego health insurance if you are on a tight budget or eat while driving if you are in a hurry
What does Scarcity affect?
Scarcity affects:
- Cognitive capacity: underlies ability to solve problems, retain information, engage in logical reasoning and so on; a central feature is fluid intelligence
- experience of poverty reduced a person’s cognitive capacity more than going one full night without sleep
- Executive Control: underlies ability to manage cognitive activities such as planning, attention, initiating and inhibiting actions, and controlling impulses (e.g. Marshmallow test to measure self-control)
Scarcity affects bandwidth. What is bandwidth?
Bandwidth
- computational capacity
- ability to pay attention
- ability to make good decisions
- ability to stick with plans
- ability to resist temptations
What removes the feeling of scarcity?
Slack
- part of our budget is left untapped because of the way we pack - inefficiency in how we allocate or distribute our resources due to no slack/ room to make decisions etc.
untapped budget: part of the budget remains unutilized because resources are not allocated optimally
- mental luxury
- allows us time to think
- allows us not to mind mistakes
- Slack removes feeling of scarcity
- it thus affects tendency to consider or not consider trade-offs
- slack refers to the extra capacity, or surplus that provides flexibility in managing resources.
- when slack is absent or minimal, individuals are pushed to their limits, with limited room to adapt to changes or address emergencies
What does scarcity make people do?
Scarcity makes people tunnel
- their minds become preoccupied solely with what they feel scarcity on
- their cognitive and executive control is affected and they therefore perform worse on various tasks including IQ tests
Anyone who suffers from scarcity has more or less bandwidth?
less bandwidth
It is the scarcity that creates less bandwidth that exacerbates poverty
