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How effective is ‘nudging’ in resolving public policy issues?

There is no doubt that behavioural science or nudging is an effective tool in public policy. But the caveat lies in its proper usage. The ultimate aim of nudges should be improving welfare and not effectiveness.

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Behavioural science is different from other fields of social sciences, significantly impacting decision-making. It overlaps many areas, including economics, sociology, psychology, and anthropology. It increases the explanatory power of economics by providing answers to irrational human behaviour differing based on situation, time, emotions, location, and social norms. The works of Daniel Kahneman and Amos Tversky are closest to revealing the patterns that connect the irrational conduct of humans. Their pathbreaking work greatly impacted academic research and public and private institutions of diverse natures. As behavioural science gained traction from different actors, debates spurred at national and global levels to understand its effectiveness in resolving public issues.  

Nudging: A Modern Perspective

Several studies took place in private institutions highlighting the success of behavioural science. The nudge principle is one of the most prominent approaches to applying behavioural science. The nudge, as a concept, was developed by Richard Thaler and Cass Sunstein. It is based on the idea of influencing choices people make that are often non-rational. Nudges further gained popularity in addressing behavioural deviance at minimal costs while preserving people’s freedom. In the meantime, government agencies lead from the front in evaluating behavioural science or nudge theories in various real-life situations worldwide. However, the United Kingdom became the first country to formally set up the first governmental nudge unit, referred to as Behavioural Insights Team, in 2010. Since then, many countries have established formal and informal nudge units within the government to apply behavioural science concepts in resolving public policy issues.

Application of Nudge in Public Policy

Nudging has many applications in health, education, the environment, and finances. In an experiment on changing adult dietary behaviour, nudges resulted in an average 15.3% increase in healthy dietary or nutritional choices. Similarly, nudges resulted in improvement in the dietary behaviours of children. In another study, nudging the students via automated and personalised text messages resulted in a 4-7% increase in college enrollment among the marginalised communities. Using nudges in energy conservation reduced 2% energy consumption for Opower’s customers. The ‘Save More Tomorrow’ program used defaults as behavioural science principles to increase employees’ savings rates from 3.5% to 13.6% over 40 months. In the organisational development experiment, framing manipulations increased factory worker productivity. The intervention enhanced worker productivity by 1% solely due to the framing. Nudge impacts voting behaviour too. In 2010 US Congressional Elections, using the social proof principle as a trial on Facebook, showed an increase in voting turnaround. Nudging has application even in encouraging people towards charitable giving and ensuing law-abiding behaviour.

Nudges and India’s policy issues

India is a diverse country where all communities retain their distinct identities, referring to the country as a salad bowl. It becomes complex to cater to all communities’ needs with a conventional policymaking process that doesn’t consider human behaviour. In such a scenario, the nudge units effectively design interventions with limited resource utilisation. The Government of India has highlighted the relevance of behavioural science and nudges in its Economic Survey 2019. In 2019, NITI Aayog successfully partnered with Bill and Melinda Gates Foundation (BMGF) and the Centre for Social and Behaviour Change (CSBC) to institutionalise the first Behavioural Insights Unit (BIU) in South Asia. The BIU unit is tasked with the dual responsibility of using behavioural insights in policymaking in India and engaging the rapidly growing behavioural science community worldwide in the Indian policy ecosystem.

Effectiveness of Nudging in the long run

Nudging is seen as an evolving concept across domains and sectors. Based on a quantitative review of the effectiveness of nudging, it is observed that only 62% of nudging treatments are effective in achieving the intended outcomes. Further, the study highlights that defaults are the most effective, whereas precommitment-based interventions are the least effective among all the nudge principles. Its effectiveness is highly dependent on the category and context. Category refers to the type of nudge principles used to influence human behaviour. Context refers to the domain in which nudge is applied, such as health, education, finances, and the environment. The concentration of data and studies in a particular context is interconnected with the desired outcomes. For instance, the availability of clusters of studies in the health context ensures the proper selection of nudge categories in transforming human behaviour.

Recent studies indicate backfiring of nudges with unintended consequences. For instance, the use of social normative messaging by Arizona’s Petrified Forest National Park to reduce the theft of wood. However, the message on the signboard read, “Many past visitors have removed the petrified wood from the Park, changing the natural state of the Petrified Forest”. It increased wood theft by about 8% as people interpreted the message differently, i.e. “theft is common” rather than “theft is bad”.

Thus, nudges might be effective to start with, but they can also be ineffective or less effective than expected because of the following reasons:

  • Create confusion for the target audience
  • Nudges result in short-term effects and dilute their effectiveness over time
  • Nudges fail due to an improper understanding of the contexts
  • It may produce reactance, i.e. opposition
  • Nudges lead to no effect

Way forward

There is no doubt that behavioural science or nudging is an effective tool in public policy. But the caveat lies in its proper usage. The ultimate aim of nudges should be improving welfare and not effectiveness. One of the strong arguments in favour of nudges is that it follows the principle of freedom of choice and allows people to make their decisions without coercion. However, it should not be considered a replacement for the conventional policymaking process. Instead, it should be seen as an evidence-backed approach to augment the positive impact of policies.

The following steps could be followed to create effective and welfare-generating nudges:

  • Identify the policy objectives desired to be achieved
  • Determine the context and category of nudge principles required to achieve the desired objectives
  • Test, retest, and assess the impact of the nudge intervention
  • Collect feedback from the end-users
  • Incorporate feedback, reframe and redesign the intervention

In some cases, due to the insufficient evidence for the effectiveness of nudges, the following three potential approaches can be applied: a) nudge differently; b) do nothing; c) use counter nudges via incentives, penalties, bans, or mandates.

In conclusion, India has taken the right step in creating the nudge unit and collaborating with different partners on exploring behavioural science for policymaking. However, it is crucial to ponder over the question of how and where to implement the nudges. Indian nudge unit can learn from different countries and their BIU unit. In doing so, it can understand diverse human behaviour in India and emerge as an enabler of change and development.

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