self reflection based on class materials
5/30/2017 1 Nudge BUS143: Judgment and Decision Making Ye L i Today’s Agenda 1. What is a Nudge?
2. A few examples of nudges 3. In class mini project: Design your own nudge Nudge Thaler & Sunstein (2008) •Richard Thaler you should know… –President of the American Economic Association (2016) –Father of behavioral finance (next topic) –One of founders of behavioral economics E.g., mental accounting, endowment effect, house money effect •Cass Sunstein –Robert Walmsley University Professor of Law at Harvard UChicago until 2008 colleagues with Barack Obama –Former head of the White House Office of Information and Regulatory Affairs –Most cited legal scholar of 21 stcentury!!
–449 thbest squash player in the world (as of 2017) 5/30/2017 2 Choice architecture •Imagine you are setting up a cafeteria layout –How should you arrange the order of the food? A. Random order B. Put the most expensive things first and splurge items at the checkout line C. Put the most healthy items at the start of the line D. Put the most healthy items at the end by checkout counter E. Order doesn’t matter So finally, what is a “nudge”? •Definition: Choice architecture that alters people’s behavior in a predictable way without removing any options or significantly changing their economic incentives. –To count as a nudge, the intervention must be easy and cheap to avoid. •One form of libertarian paternalism (not an oxymoron) –Paternalism Organization or government controlling people’s behavior for presumably for their own good (like a parent) –Libertarian Maximize individual freedom and liberty How to nudge (i.e., guides) •iNcentives –E.g., draw attention to costs (e.g., electric use monitors) •Understand “mappings” –E.g., how many megapixels is enough? 88x10” print, applicances that provide translation from kWH usage to dollars per year •Defaults –E.g., software defaults (e.g., screensaver) rarely changed •Give Feedback –E.g., white paint that goes on pink when wet •Expect Error –E.g., credit card machines that take your card any way, road crossing signs in UK that say “Look Right” •Structure Complex Choices –E.g., filtering by shoe type, size, and color; sort by popularity 5/30/2017 3 The government is nudging you •UK Behavioural Insights Team (BIT) –Created 2010, led by David Halpern •Social and Behavioral Science Team –Obama’s 2015 Executive Order -- Using Behavioral Science Insights to Better Serve the American People •And many more countries have started their own. –50+ countries as of 2015 –Many local governments! Why not just mandate the “right” behavior?
•People hate bans, taxes, and government mandates –Possibility of reactance doing the opposite out of spite –Good choices are not “one size fit all” •More importantly, people often want to do the right thing but the right thing is HARD to do!
(dynamic inconsistency and self-control) –Nudges great at guiding System 1 (your inner Homer) –People who make the right choices can create good habits rule of consistency In-class Group Project •In groups of 5-7 students Pick a societal issue to address and design a new nudge to improve things!
•Pick a leader Leader has to present for the group •Copy of Nudgeawarded for best nudge idea, as voted by the class Group leader picks who gets the book –If it’s really good, we can make an effort to make it a reality at UCR at least •Voting criteria (can’t vote for own group) –Is it a nudge? Options cannot be removed (i.e., no bans) Economic incentives cannot be changed significantly –Will it be effective and FEASIBLE?
–Is the idea creative/original?
–Addresses an important societal issue? 5/30/2017 4 Is nudging ethical/moral? •Reactance is even worse if companies are nudging for profit –Ubernudges Surge pricing vs. tell drivers to drive to high demand areas Asks for income targets and reminds drivers they are close Send next pickup before end of current trip (like Netflix) –Compare to Lyft’s reputation for being driver- friendly (although they still nudge) –Any other examples?
Scales from this week’s web assignment •Big FivePersonality Inventory –Openness to experience, Conscientiousness, Extraversion, Agreeableness, and Neuroticism •Gritscale (see Angela Duckworth TED talk) –Pe r s ev e r a n c eand passionfor long-term goals –Significant predictor of success (especially academic) –Uncorrelated with intelligence •Tightwad-Spendthrift scale (Rick, Cryder, Loewenstein 2008) Ye ’s K e y s 33.Nudges help humans do the “right” thing when the right thing is hard to do due to limited willpower or cognitive resources.
34.The best nudges work automatically using a variety of psychological mechanisms such as loss aversion, framing, social proof, and especially status quo bias/inertia.
