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Sunday, January 16, 2011

Are You Feeling A "Nudge" From This Administration?

Glenn Beck has been saying for quite some time that Cass Sunstein is one of the most dangerous associates of President Obama. The following are some articles and videos of Cass Sunstein and Richard Thaler that explain their "nudge" theory and how it can be applied to force people to make decisions THEY think YOU should make.

Meet Richard Thaler~the coauthor of "Nudge"~

Richard Thaler bio:


Thaler has written a number of books intended for a lay reader on the subject of behavioral finance, including Quasi-rational Economics and The Winner's Curse, the latter of which contains many of his Anomalies columns revised and adapted for a popular audience.

Most recently Thaler is coauthor, with Cass R. Sunstein, of Nudge: Improving Decisions About Health, Wealth, and Happiness (Yale University Press, 2008). Nudge discusses how public and private organizations can help people make better choices in their daily lives. "People often make poor choices - and look back at them with bafflement!" Thaler and Sunstein write. "We do this because as human beings, we all are susceptible to a wide array of routine biases that can lead to an equally wide array of embarrassing blunders in education, personal finance, health care, mortgages and credit cards, happiness, and even the planet itself." Thaler and his co-author coined the term choice architect.

Other writings:

Thaler gained some attention in the field of economics for publishing a regular column in the Journal of Economic Perspectives from 1987 to 1990 titled Anomalies, in which he documented individual instances of economic behavior that seemed to violate traditional microeconomic theory.

In one of his most recent papers, Thaler and colleagues analyzed the choices of contestants appearing in the popular TV game show Deal or No Deal and found support for behavioralists' claims of path-dependent risk attitudes.

As a columnist for the New York Times News Service, Thaler has begun a series of economic solutions for some of America's financial woes, beginning with "Selling parts of the radio spectrum could help pare US deficit," with references to Thomas Hazlett's ideas for reform of the FCC and making television broadcast frequency available for improving wireless technology, reducing costs, and generating revenue for the US government. 

This video is from the Scientific Council for Government Policy Conference held September 11, 2010. The Government as Choice Architect?  

Public Policy Nudges: the Government as Choice Architect by Richard Thaler 

The following are some interesting excerpts from the video: 
"The approach Cass & I take are what we call "Libertarian Paternalism" or "Liberal Paternalism."  "At least in the US, both halves of this are unpopular."  "Why do we combine 2 unpopular contradictory terms and write a book about that?"
"We think when combined, the terms are both compatible and maybe even lovable"
9:20 of the video~"So by Libertarian or liberal all we mean is we try to devise policies that maintain freedom of choice.  "So we don't tell people you must do this or you must not do that." "We try to give them a choice."
9:50 of the video~"By Paternalism, we simply mean devising policies that are aimed at making people better off as judged by themselves so it's not that Cass and I think we know best for other people or that we think Barack Obama or David Cameron know what's best for other people.  We think we can help people make the choices that they would make if they had all the information and time necessary to make a good choice."
10:30 of the video~"How do we do it? We do it using "CHOICE ARCHITECTURE" which is a phrase we coined while writing this book."
10:45 of the video~"So what is CHOICE ARCHITECTURE?" A choice architect is anyone who designs an environment in which choices are made."
16:38~What is a 'NUDGE'?" "Some small feature of the environment that attracts our attention and influences our behavior.  Now it's important to stress that nudges work on humans but not on econs.  Econs choose optimally without nudges but humans sometimes need a nudge."

The following is an article that was written in 2008: 

Nudge, nudge: meet the Cameroons’ new guru

The economist Richard Thaler — a favourite of the Cameron and Obama camps — talks to James Forsyth about the power of ‘nudging’: small transformative acts of persuasion

16 July 2008
No one likes to be pushed, prodded or shoved. But no one objects to a nudge in the right direction. The idea that people can be nudged into making better choices is the brainchild of Richard Thaler and Cass Sunstein, two whip-smart University of Chicago academics. The two professors see nudging as the ‘real third way’, an alternative to both government regulation and laissez-faire liberalism. The idea is the new big thing; the two politicians of the moment — Barack Obama and David Cameron — are both keen on it.  
Thaler and Sunstein, though, have no more discovered nudging than Benjamin Franklin discovered electricity. Thaler, who is currently in London teaching a summer school and having his brain picked by Conservative high command, gladly admitted to me that nudging was as old as time, quipping that ‘religion at its best is all about nudging’. But what Thaler and Sunstein have drafted is a guide to how the power of nudging can best be harnessed. In this ‘post-ideological’ age, this is something that politicians are eager to understand. Indeed, the Tories are so keen on Thaler’s ideas that George Osborne wrote an op-ed for the Guardian this week praising him and saying that Brown’s failure to appreciate his insights will lead to the PM losing power. There is also an away-day planned, where the shadow Cabinet will work with Thaler and other behavioural economists to develop policies.
A nudge can come in many forms. Sometimes it is about providing the consumer with more information. For instance, what Thaler — with a grin playing across his affable, intellectual features — calls ‘the new nudge Cameron’ might require shops that sell Chocolate Oranges at the counter to label them prominently with their calorific content, which should help more of us to make the right decision. Then there is the power of social norms; letting people know what other people do. Informing them that most of their peers are organ donors leads to more registered donors. Another kind of nudge is making the default option the more socially desirable option. One example of this advocated by Thaler and Sunstein in their book Nudge — and adopted by the Obama campaign, to which Thaler and Sunstein are informal advisers — is automatically enrolling people in a pension plan. Those who want to can still opt out, but the default position is that you contribute. Such schemes have been proven to raise the savings rate.
These nudges work as they chime with human nature; a gentle reminder can dissuade us from doing something we know we shouldn’t; we want to fit in and inertia is a powerful force. We understand these forces all too well. I complain to Thaler about how I still have the same mobile phone price plan as when I was at university and so now get stung with horrendous bills for making international and peak-time calls, yet the fact that I pay by direct debit means that I never get round to actually changing it. Thaler advises that direct debit is ‘the right way to save and the wrong way to pay’. He makes me feel a lot better about my own failure to update my phone plan by telling me that he and his wife had not cancelled their monthly NetFlix subscription despite being away for the summer. (The power of social norms, though, means that I now feel too relaxed for my financial good about my failure to move to a more efficient phone plan. I had been nudged back to where I started.)
Understanding why nudges work requires doing something quite difficult for an economist: jettisoning the idea of homo economicus. Thaler thinks that man never was a purely rational economic actor, that the idea was a ‘useful figment’. He explains the economist’s traditional belief in him as a way to make the discipline work: ‘Economics started to get mathematical in the 1940s and especially in the 1950s and when it got mathematical, the math got hard very quickly. The only way to make the math easy is to make the people very smart.’ Thaler thinks that economists under 40 accept that homo economicus is a flawed concept while those older than that cling to the old certainties. But this problem is self-correcting. With a hearty laugh, Thaler recalls Max Planck’s adage: ‘science marches on, funeral by funeral’.
This, perhaps, explains Brown’s lack of interest in Thaler’s thinking and behavioural economics more generally. He is both of the wrong generation and quite close to actually being homo economicus. Somehow one suspects that Brown does not have direct debits for a gym membership that he never uses or anything like that.
Thaler thinks the most potent of his ideas is complete electronic disclosure which he claims would ‘completely change the way we think about regulation’. Thaler gives the example of credit cards. Your card issuer would be obliged to send you two files each year, one explaining every charge they make — e.g. interest charged, late fees, currency conversion — while the other file would list every time you incurred a charge. This would lead, Thaler argues, to websites springing up telling us what credit card was actually best for us. The knowledge of how and when we had been charged would leave us forewarned and fore-armed. Thaler believes this would ‘eliminate the need for credit card regulation’. Politically, this allows you to square the circle: consumers would welcome the increased transparency while it would allow for the bonfire of regulation that business is always demanding and that politicians are always promising but never delivering.
The speed with which the nudge agenda has been adopted by both Cameron and Obama tells us that they are both pragmatists, not ideologues. For nudge is all about what works. Indeed, Thaler sees similarities between the Obama and Cameron campaigns, remarking that the Cameroons he has met remind him of Obama’s people in that they are ‘smart, curious and pragmatic’. Nudge also requires an appreciation of the limits of government. Thaler, who has known Obama since his Senate primary campaign, disputes the characterisation of Obama as a big-government-style liberal, saying that ‘deep down he is a pragmatist’, and arguing that ‘you can’t spend 10 years at the University of Chicago Law School, even part time, and not get an appreciation for markets. It is just not possible.’
Perhaps the reason Thaler’s work resonates so much with the Tories is that both are trying to achieve the same thing. Thaler says that he wants to ‘see how far we can go using classical liberalism in directions favoured by the Left’, which sounds awfully close to Oliver Letwin’s definition of Cameronism as taking ‘Conservative approaches to achieving progressive goals’. Maybe it is this that is the real third way.

Fast forward to 2010...............

Nudge guru touts 'fast and fun' green revolution

Head of behavioural insight team advises green businesses to promote instant benefits of products over long-term gains.

26 Nov 2010

The head of the government's so-called "nudge unit" has urged green businesses to publicise the immediate and fun benefits of their products instead of longer-term environmental gains if they want to drive environmentally friendly behaviour change among customers.
David Halpern, head of the Cabinet Office's Behavioural Insights Team, told delegates at Fiat's eco-driving event in London this week that people were more likely to adopt green practices such as more fuel-efficient driving if they could see the short-term benefits.
 Speaking about both Fiat's eco-drive technology and behaviour change more generally, Halpern said humans naturally want instant gratification and as such  are less attracted by long-term environmental or even financial gains.
"One of the dilemmas we have is that in our behaviour, we heavily discount all these future gains, particularly gains for others," he said. "A challenge facing designers [of eco-drive technology] is that saving the environment or saving a bit of money is not very salient. That it could be fun and people will get there faster is actually far more important, and that's a recurrent theme in many areas."
According to research from Fiat, fuel-efficient driving habits such as accelerating and braking more smoothly help reduce journey times.
Halpern also argued that focusing on how people's actions affect others could help drive positive behaviour change. For example, people would brake more smoothly if they thought about the fact that braking sharply could jolt other people in the car, or force the car behind to brake sharply.
"Often behavioural change doesn't only affect us, it has these externalities, these knock-on effects," he said.
Defending the wider behavioural economics or "nudge" theory from critics who warn it could lead to "nanny-state" policies, Halpern said it was crucial to ensure people feel in control of their actions.
The theory, which has helped shape David Cameron's "big society" agenda, is likely to become increasingly prevalent as the environmental demands on people to change their behaviour intensify.
"We're very aware, as we wrestle with these issues across a number of areas, that you also have to maintain legitimacy," he said. "And going forward, as we get on to more difficult issues it's absolutely essential that we maintain that by involving the public quite heavily."
For example, while Halpern agreed Fiat's existing eco-drive technology was not inherently unacceptable, he wondered if people might object if they were asked to compare their driving skills with other drivers.
"We need to keep the public with us, and they need to give us permission to do these kind of approaches," he said.
BusinessGreen has also learned that the Department for Transport (DfT) is in talks with Halpern's team to come up with ways of promoting eco-driving practices.
Speaking at the Fiat event, Rupert Furness, head of environment policy and delivery at DfT, said his department was trying to raise public awareness about eco driving and urged businesses to enroll their employees in subsidised "smarter driving" courses.
Consumer behaviour is an increasing concern for a wide range of businesses trying to cut their carbon footprints. Research has shown that it is not enough for some firms to solely change their products without asking their customers to also adapt.
It has led to campaigns such as Procter & Gamble's "turn to 30" advertisements, urging customers to wash their clothes at lower temperatures.
Source: Business Green


In What Way Has This Administration "Nudged" You?

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