The Limits Of Nudging
The behavioural revolution is in full swing, it seems. On Thursday the Behavioural Insights Team (BIT), based in London and previously known as the ‘Nudge Unit’, published a summary of its findings over the past two years. Five years after it started, the buzz surrounding the unit has not faded. So far the BIT has trialled over 100 policy tweaks around the world and boasts an impressive array of results. But for all the excitement, there is still a long way to go.
The report reveals that, embarrassingly slowly, governments around the world are cottoning on to two ideas. First, they need to take into account the behaviour of the people they affect. Second, in the words of Richard Thaler, one of the top dogs in behavioural economics, “we can’t do evidence-based policy without evidence”.
In the field of tax collection, the BIT has helped boost revenues for cash-strapped governments. For instance, in Singapore, the BIT found that 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. Back in Britain, the BIT has shown that stern letters reminding people that taxes fund public services help to reduce late payments.
Its trials also show what does not work. In Singapore cartoons are often used to communicate public policies. But the BIT’s experiments revealed that these cartoons reduced the effectiveness of public messages, such as ones encouraging people to make health insurance contributions. Sending personal text messages helps to nudge people to remain in public programmes, such as literacy or numeracy programmes for young adults. But as wonderful as the initial results are, the concern is that while such programmes initially work when a change acts as a reminder, once people become used to the new order they will stop paying attention to them and continue as before.
Policymakers hope that behavioural insights can improve public services and save money. But they have their limits. So far, the sums the BIT talks about consist of hundreds of millions. That is dwarfed by the £20 billion of cuts to public services that the British government plans to implement over the next three years. And although the unit’s work represents huge progress in the step towards evidence-based policies, the war has not been won yet. It is easy to persuade the government to experiment when the intervention is as cheap as changing the wording on a letter, but much more difficult to experiment with bigger, riskier changes that may harm its reputation if all goes wrong. The BIT is, though, a nudge in the right direction.
Originally published on The Economist.