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Inside the Nudge Unit: How Small Changes Can Make a Big Difference by David Halpern
Affordable Care Act / Obamacare, availability heuristic, carbon footprint, Cass Sunstein, centre right, choice architecture, cognitive dissonance, collaborative consumption, correlation does not imply causation, Daniel Kahneman / Amos Tversky, endowment effect, happiness index / gross national happiness, hindsight bias, illegal immigration, job satisfaction, Kickstarter, libertarian paternalism, light touch regulation, market design, meta analysis, meta-analysis, Milgram experiment, nudge unit, peer-to-peer lending, pension reform, presumed consent, QR code, quantitative easing, randomized controlled trial, Richard Feynman, Richard Thaler, Right to Buy, Ronald Reagan, Rory Sutherland, Simon Kuznets, skunkworks, the built environment, theory of mind, traffic fines, World Values Survey
The MINDSPACE framework (Institute for Government, 2010). The 2010 government launches the Nudge Unit Squeezed between Steve Hilton and Rohan Silva, the new Prime Minister’s political advisers, in the back of a Paris taxi was not somewhere I thought I’d find myself in the early summer of 2010. It was still the very early days of the new Coalition Government, and we had come to Paris to see if the centre-right administration of Nicolas Sarkozy shared the interest in approaches to government of the new Cameron–Clegg government in the UK, including nudging, Big Society and well-being. It turned out that they didn’t. Richard Thaler was with us, over from Chicago for a few days while we sought to put into action the plan to create the world’s first nudge unit. We didn’t even know what we would call it at that point. At that time, my role was supposed to be to advise the new unit for a day or so a week, drawing on my knowledge of government and my specific knowledge of behaviour and policy.
Data and transparency 8. A different approach to big policy challenges 9. Well-being: Nudging ourselves, and each other, to happier lives 10. What works? The rise of experimental government Section 4 Where next? 11. Risks and limitations 12. Conclusion: Where next? Notes Index Acknowledgements Copyright About the Book This is the story of an experiment. The Behavioural Insights Team, or ‘Nudge Unit’ as it came to be called, was set up in Downing Street in 2010 by Prime Minister David Cameron. The team’s objectives read like a mission impossible: to transform the approach of at least two major departments; to inject a new and more realistic understanding of human behaviour across UK government; and to deliver a 10-fold return on its cost. If it failed, it was to be shut down on its two-year anniversary – with enough time for voters to forget the whole embarrassing experiment before the next election.
Nothing came of the French effort aside from an excellent lunch, but we made good use of our time together on the Eurostar to think about what the team might do and other important matters, including deciding what it should be called. We eventually settled on the Behavioural Insights Team, though Rohan prophetically predicted that the formal name of the team would be irrelevant since everyone would just call it the ‘Nudge Unit’. Now, five years later, it is hard to imagine what would have become of the effort had Rohan not convinced David Halpern to come back from the comfortable, good life working at the UK’s Institute for Government and as an academic at Cambridge, to resume a full-time role in government. David had a unique background that made him the ideal person to lead this new effort. Not only was he a first-rate academic psychologist with a thorough understanding of modern behavioural science research, but crucially he had also worked in the Strategy Unit at 10 Downing Street in Tony Blair’s administration, so knew the workings of Whitehall intimately.
1960s counterculture, Airbnb, business intelligence, Cass Sunstein, corporate governance, dematerialisation, experimental subject, Exxon Valdez, Frederick Winslow Taylor, Gini coefficient, income inequality, intangible asset, invisible hand, joint-stock company, lifelogging, market bubble, mental accounting, nudge unit, Philip Mirowski, profit maximization, randomized controlled trial, Richard Thaler, road to serfdom, Ronald Coase, Ronald Reagan, science of happiness, selective serotonin reuptake inhibitor (SSRI), sentiment analysis, sharing economy, Slavoj Žižek, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, Steve Jobs, The Chicago School, The Spirit Level, theory of mind, urban planning, Vilfredo Pareto
In 2013, the British government was embarrassed when a blogger discovered that jobseekers were being asked to complete psychometric surveys whose results were completely bogus.19 Regardless of how the user answered the questions, they got the same results, telling them what their main strengths are in the job market. It later transpired that this was an experiment being run by the government’s ‘Nudge Unit’, to see if individual behaviour was altered by having this survey offer them these findings. Social reality had been manipulated to generate findings for those looking down from above. This logic of experimentation allows for policies to be introduced which would otherwise seem entirely unreasonable, or even illegal. Behavioural experiments on criminal activity show that individuals are less psychologically prone to take drugs or engage in low-level crime if the resulting penalty is swift and certain.
In that sense, due process becomes viewed as an inefficient blockage, standing in the way of behaviour change. The much-celebrated HOPE (Hawaii’s Opportunity Probation with Enforcement) programme, which builds directly on this body of evidence, ensures that repeat offenders know they will be jailed immediately if found up to no good. Projects such as the Hudson Yards quantified community, the Nudge Unit’s fake survey and HOPE share a number of characteristics. Most obviously, they are fuelled by a high degree of scientific optimism that it may be possible to acquire hard objective knowledge regarding individual decision-making, and then to design public policy (or business practices) accordingly. This optimism is scarcely new; indeed it tends to recur ever few decades or so. The first wave occurred during the 1920s, inspired by Watson and Taylorist principles of ‘scientific management’.
Today, the fact that it is ‘quants’ (mathematicians and physicists, equipped with algorithmic techniques to explore large data sets) who are rendering our behaviour predictable is deemed all the more promising, given these individuals are not burdened by any theory of what distinguishes human beings or societies from any other type of system. Secondly, the surveillance. As examples such as Hudson Yards or the Nudge Unit indicate, the new era of behaviourist exuberance has emerged on the basis of new high-level alliances between political authorities and academic researchers. Without those alliances, social scientists continue to labour under the auspices of ‘theory’ and ‘understanding’, as indeed we all do when seeking to interpret what each other are up to in our day-to-day lives. Alternatively, there are companies such as Facebook, who are able to make hard, objective claims about how people are influenced by different tastes, moods or behaviours – thanks to their ability to observe and analyse the online activity of nearly a billion people.
Why Nudge?: The Politics of Libertarian Paternalism by Cass R. Sunstein
Affordable Care Act / Obamacare, Andrei Shleifer, availability heuristic, Cass Sunstein, choice architecture, clean water, Daniel Kahneman / Amos Tversky, Edward Glaeser, endowment effect, energy security, framing effect, invisible hand, late fees, libertarian paternalism, loss aversion, nudge unit, randomized controlled trial, Richard Thaler
., Changing Human Behavior to Prevent Disease: The Importance of Targeting Automatic Processes, 337 SCIENCE 1492 (2012) (exploring role of automatic processing in behavior in the domain of health). 25. See The Behavioural Insights Team, CABINET OFFICE, http://www.cabinetoffice.gov.uk/behavioural-insights-team (last visited Dec. 10, 2012). 26. Id. 27. Various reports can be found at the website of the Behavioural Insights Team. See id. 28. See Oliver Wright, Steve Hilton’s “Nudge Unit” Goes Global, INDEPENDENT (London), Sept. 20, 2012, http://www.independent.co.uk/news/uk/politics/steve-hiltons-nudge-unit-goes-global-8157492.html. 29. See Consumer Policy Toolkit, ORG. FOR ECON. COOPERATION & DEV. (July 2010), http://www.oecd.org/sti/consumerpolicy/consumerpolicytoolkit.htm. 30. See DG SANCO, Consumer Behaviour: The Road to Effective Policy-Making, EUR. COMMISSION (2010), http://ec.europa.eu/consumers/docs/1dg-sanco-brochure-consumer-behaviour-final.pdf. 31.
The Precariat: The New Dangerous Class by Guy Standing
8-hour work day, banking crisis, barriers to entry, basic income, Bertrand Russell: In Praise of Idleness, call centre, Cass Sunstein, centre right, collective bargaining, corporate governance, crony capitalism, deindustrialization, deskilling, fear of failure, full employment, hiring and firing, Honoré de Balzac, housing crisis, illegal immigration, immigration reform, income inequality, labour market flexibility, labour mobility, land reform, libertarian paternalism, low skilled workers, lump of labour, marginal employment, Mark Zuckerberg, mass immigration, means of production, mini-job, moral hazard, Naomi Klein, nudge unit, old age dependency ratio, pensions crisis, placebo effect, post-industrial society, precariat, presumed consent, quantitative easing, remote working, rent-seeking, Richard Thaler, rising living standards, Ronald Coase, Ronald Reagan, science of happiness, shareholder value, Silicon Valley, The Market for Lemons, The Nature of the Firm, The Spirit Level, Tobin tax, transaction costs, universal basic income, unpaid internship, winner-take-all economy, working poor, working-age population, young professional
The authors do not attribute the idea to Bentham but say the state should create ‘an architecture of choice’. On becoming US President, Obama appointed Sunstein to head the Office of Information and Regulatory Affairs, based in the White House. Meanwhile, in the United Kingdom, Conservative Party leader David Cameron told members of parliament to read the book; on becoming Prime Minister in 2010 he set up the Behavioural Insight Team, quickly dubbed ‘the Nudge Unit’, in Downing Street, advised by Thaler. The mandate was to induce people to make ‘better’ decisions, in the interest of ‘society’. Steering people is always questionable. How do we know that the nudgers know what is best for any individual? Today’s conventional wisdom becomes yesterday’s error. Again and again, policies or practices that seem unwise turn out later to become norms and vice versa.
The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay by Guy Standing
3D printing, Airbnb, Albert Einstein, Amazon Mechanical Turk, Asian financial crisis, asset-backed security, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Bernie Sanders, Big bang: deregulation of the City of London, bilateral investment treaty, Bonfire of the Vanities, Bretton Woods, Capital in the Twenty-First Century by Thomas Piketty, carried interest, cashless society, central bank independence, centre right, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, credit crunch, crony capitalism, crowdsourcing, debt deflation, declining real wages, deindustrialization, Doha Development Round, Donald Trump, Double Irish / Dutch Sandwich, ending welfare as we know it, eurozone crisis, falling living standards, financial deregulation, financial innovation, Firefox, first-past-the-post, future of work, gig economy, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, housing crisis, income inequality, information retrieval, intangible asset, invention of the steam engine, investor state dispute settlement, James Watt: steam engine, job automation, John Maynard Keynes: technological unemployment, labour market flexibility, light touch regulation, Long Term Capital Management, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market clearing, Martin Wolf, means of production, mini-job, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, Neil Kinnock, non-tariff barriers, North Sea oil, Northern Rock, nudge unit, Occupy movement, offshore financial centre, oil shale / tar sands, open economy, openstreetmap, patent troll, payday loans, peer-to-peer lending, Plutocrats, plutocrats, Ponzi scheme, precariat, quantitative easing, remote working, rent control, rent-seeking, ride hailing / ride sharing, Right to Buy, Robert Gordon, Ronald Coase, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, sharing economy, Silicon Valley, Silicon Valley startup, Simon Kuznets, sovereign wealth fund, Stephen Hawking, Steve Ballmer, structural adjustment programs, TaskRabbit, The Chicago School, The Future of Employment, the payments system, Thomas Malthus, Thorstein Veblen, too big to fail, Uber and Lyft, Uber for X, Y Combinator, zero-sum game, Zipcar
Turner, Between Debt and the Devil: Money, Credit and Fixing Global Finance (Princeton: Princeton University Press, 2015). 10 ‘As safe as houses’, The Economist, 31 January 2015. 11 L. Buttiglione, P. R. Lane, L. Reichlin and V. Reinhart, ‘Deleveraging: What Deleveraging?’, Geneva Report on the World Economy 16 (Geneva: International Centre for Monetary and Banking Studies, 2014). 12 A morally inappropriate response has been proposed by influential behavioural economists linked to the nudge units in the White House and 10 Downing Street. This is to ban people from over-borrowing. As one enthusiast put it, ‘What is the big deal? Let’s limit people’s ability to hurt themselves in borrowing, like we do with seatbelts in driving.’ D. Ariely, Predictably Irrational: The Hidden Forces that Shape our Decisions (New York: Harper Collins, 2008). This would be arbitrary, subjective, costly and an obvious intrusion into freedom. 13 Cited in W.
Misbehaving: The Making of Behavioral Economics by Richard H. Thaler
3Com Palm IPO, Albert Einstein, Alvin Roth, Amazon Mechanical Turk, Andrei Shleifer, Apple's 1984 Super Bowl advert, Atul Gawande, Berlin Wall, Bernie Madoff, Black-Scholes formula, capital asset pricing model, Cass Sunstein, Checklist Manifesto, choice architecture, clean water, cognitive dissonance, conceptual framework, constrained optimization, Daniel Kahneman / Amos Tversky, delayed gratification, diversification, diversified portfolio, Edward Glaeser, endowment effect, equity premium, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, George Akerlof, hindsight bias, Home mortgage interest deduction, impulse control, index fund, information asymmetry, invisible hand, Jean Tirole, John Nash: game theory, John von Neumann, Kenneth Arrow, late fees, law of one price, libertarian paternalism, Long Term Capital Management, loss aversion, market clearing, Mason jar, mental accounting, meta analysis, meta-analysis, money market fund, More Guns, Less Crime, mortgage debt, Myron Scholes, Nash equilibrium, Nate Silver, New Journalism, nudge unit, Paul Samuelson, payday loans, Ponzi scheme, presumed consent, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, random walk, randomized controlled trial, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Silicon Valley, South Sea Bubble, statistical model, Steve Jobs, technology bubble, The Chicago School, The Myth of the Rational Market, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, transaction costs, ultimatum game, Vilfredo Pareto, Walter Mischel, zero-sum game
On the train ride over, Steve Hilton and I got into a heated debate about what the new team should be called. Steve wanted to use the term “behavior change,” which I thought had awful connotations. David Halpern and I were lobbying for Behavioural Insights Team, the name finally chosen. The argument consumed most of the trip to Paris. At some point Rohan took Steve aside and told him to give in, arguing, prophetically, that “no matter what we name it, everyone will call it the ‘nudge unit.’” By the time of my next trip to London, the initial team had been established and was set up in temporary facilities in an obscure corner of the Admiralty Arch, located a short walk away from 10 Downing Street and Parliament. It was winter, and London had been hit with what locals considered a massive snowstorm. Accumulation was about an inch. And it was not much warmer inside than outside the drafty building that served as the team’s first home.
Thinking, Fast and Slow by Daniel Kahneman
Albert Einstein, Atul Gawande, availability heuristic, Bayesian statistics, Black Swan, Cass Sunstein, Checklist Manifesto, choice architecture, cognitive bias, complexity theory, correlation coefficient, correlation does not imply causation, Daniel Kahneman / Amos Tversky, delayed gratification, demand response, endowment effect, experimental economics, experimental subject, Exxon Valdez, feminist movement, framing effect, hindsight bias, index card, information asymmetry, job satisfaction, John von Neumann, Kenneth Arrow, libertarian paternalism, loss aversion, medical residency, mental accounting, meta analysis, meta-analysis, nudge unit, pattern recognition, Paul Samuelson, pre–internet, price anchoring, quantitative trading / quantitative ﬁnance, random walk, Richard Thaler, risk tolerance, Robert Metcalfe, Ronald Reagan, The Chicago School, The Wisdom of Crowds, Thomas Bayes, transaction costs, union organizing, Walter Mischel, Yom Kippur War
The appeal of libertarian paternalism has been recognized in many countries, including the UK and South Korea, and by politicians of many stripes, including Tories and the Democratic administration of President Obama. Indeed, Britain’s government has created a new small unit whose mission is to apply the principles of behavioral science to help the government better accomplish its goals. The official name for this group is the Behavioural Insight Team, but it is known both in and out of government simply as the Nudge Unit. Thaler is an adviser to this team. In a storybook sequel to the writing of Nudge, Sunstein was invited by President Obama to serve as administrator of the Office of Information and Regulatory Affairs, a position that gave him considerable opportunity to encourage the application of the lessons of psychology and behavioral economics in government agencies. The mission is described in the 2010 Report of the Office of Management and Budget.