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The Nudge is Not Enough! The Love Story Between Behavioral Science and Practical Applications

October 15, 2015

A couple of weeks ago I published this post on BehavioralEconomics.com Thank you Alain Samson for the invitation.

 

A romantic relationship goes through various stages from early dating to marriage and, in about half of all cases, divorce. It begins with flirting and continues with that essential first date. If that goes well, it is followed by more dates. If things go OK and the chemistry is good, the relationship will go to the next level: one partner offering the other a shelf in their closet. Sooner than many realize, this leads to the natural question of Why pay two rents? followed by a de-facto living together. After a while, one of the partners pops the BIG question: Will you marry me?

 

The relationship between academic or theoretical behavioral science (let’s call him THEORY) and applied behavioral science (let’s call her PRACTICE) is not much different from a romantic relationship.

 

 

 

It was quite hard for THEORY to get that first date with PRACTICE, but luckily it happened.

 

In hindsight, the seminal papers of Kahneman and Tversky on heuristics and biases and on prospect theory published in mid and late 1970s were not enough, at the time, to get PRACTICE to accept the first date.

 

Fortunately, after about 20 years of flirtation, that first date happened. It was in mid and late 1990s, when Thaler and Benartzi developed and analyzed early implementations of the Save More Tomorrow program which helped (American) employees to save more for retirement by bridging the intention-action gap. In very brief, at every pay raise a person’s savings rate automatically increased (e.g. from 3% to 4%). The automated escalation of savings rates helped most people keep their commitment to save more, while the coupling with pay raises eluded the miserable feeling of losing money out of one’s current paycheck (i.e. loss aversion identified by Tversky and Kahneman).

 

Occasional dates happened between THEORY and PRACTICE after that, but neither side was taking the relationship too seriously.

 

The book Nudge (2008) by Cass Sunstein and Richard Thaler showed that THEORY and PRACTICE have a shot at a serious relationship. The establishment of the Behavioral Insights Team (UK Nudge Unit) in 2010 was equivalent to PRACTICE offering a shelf in its closet to THEORY. As in any romantic relationship, THEORY brought in more and more of its things into PRACTICE’s apartment. Now in 2015, they have (almost) de-facto moved in together.

 

Throughout their relationship, THEORY and PRACTICE have enjoyed making nudges… those small, relatively inexpensive, supposedly irrelevant changes in choice architecture that lead to potentially large changes in behavior – tax collection, college enrollment rate, savings rate, sales etc. Simply put, nudges are small changes that have a large impact on behavior. The result of THEORY and PRACTICE’s union.

 

However, the Nudge is Not Enough!

 

Indeed nudges or behaviorally informed interventions have (considerably) improved several areas of public and private services. Most of the time, these small interventions are more than welcomed. Simplifying and structuring choice related information is great simply because everyone hates filling in endless forms and making complicated choices between things they are clueless about (such as Ethiopian food).

 

Nudges are, most often, great! Nonetheless they are not enough.

 

The shortcoming of nudges is that most often they are simply tweaks augmenting a pre-existing service or policy.

 

While they can be beautiful, intriguing and occasionally elegant, nudges are just augmenting (improving) an existing service / policy regardless of that service’s (policy’s) quality, appropriateness or fitness.

 

For example, an education institution optimizes the choice architecture of its forms in order to smooth the actual application and enrollment processes, resulting in more students joining the institution’s programs. This nudge does not change the service provided. The additional students will attend the exact same courses, go through the exact same stages (from enrollment to graduation) as before the nudge was applied. While for the additional students who joined because of the improved choice architecture attending more education might be beneficial, it is possible for them to be rather unhappy since the courses might be boring and irrelevant.Getting more people into schools or other forms of (adult) education is generally beneficial for everyone involved. We can use behavioral science insights to increase enrollment and decrease drop-out rates. But what if we could use the same knowledge to design better education services?

 

For example, night-school or other forms of evening-learning are rather popular among adults. However, after a full day at work, System 2 is fatigued and self-control resources are almost depleted. Therefore, it might be a good idea to ada