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Making the right choices

Insights from behavioural economics are being adapted into policy by the so-called ‘nudge unit’ at Number 10 – but is it time for more local authorities to take the lessons on board? Adam Hewitt reports.

Using the findings of behavioural economics to change policy and encourage people to act in different ways has been a fashionable idea for a few years now, taken up by the Coalition Government, Obama administration, and many individual institutions – for example, those that now label one bin as ‘recycling’ and the other as ‘landfill’.

True behavioural economics is a complex and emerging area, but the basic principle can be boiled down to influencing behaviour through changing the nature of the choices and information people are faced with when making decisions, but without actually restricting choice or forcing people to do things. Key to the approach is the idea that people are not rational economic actors, but rather easily influenced by their environment, peers, and the way things are presented.

An early insight was the idea that an abundance of choice does not lead to optimum decisions, but poor ones: people are better at choosing between three to four options than a whole host of them, when they tend to pick more haphazardly.

Translating this into public policy is seen as a low-risk way of making big changes, and Downing Street’s Behavioural Insight Team’s latest wheezes include the idea of a prize draw for self-assessment tax returns completed two months early, with the potential cost to the Government far outweighed by the benefits, they reckon. A prize fund of £100,000, plus running costs in the low hundreds of thousands, could save tens of millions of pounds for HMRC, it’s claimed.

Another is to cut fraud and error by making taxes easier to pay, changing the wording of forms and letters, and reminders that 9/10 people do pay their tax on time.

One of the team’s early papers applied behavioural insights to health, looking at how nudge theory could prevent smoking, boost organ donation, reduce teenage pregnancy and alcohol consumption, and so on.

The ideas included demonstrating and reinforcing true social norms – many people who drink too much believe others drink more than they really do, for example; using visual prompts, such as a section in supermarket trolleys labelled ‘fruit and veg-etables’; giving information more salience by putting it in graphical or star-rating form; and using creative and fun ideas to change behaviour, like turning the stairs at underground stations into virtual piano keys that play notes as they’re walked on.

Many of these ideas were based on or have been turned into actual pilots or schemes, as in the Royal Borough of Windsor & Maidenhead, which now runs a reciprocal ‘credits’ scheme for people who help with others’ social care, known as CareBank. It is modelled on the Japanese Fureai Kippu initiative, where credits built up by helping elderly people with shopping or food preparation, for example, can be banked and later used to help fund one’s own care, or that of a parent.

The ‘nudge unit’ accepted that many of the ideas are based on small-scale trials and need more testing, but there is little to lose and much to gain through experiments of this nature, especially for society’s most entrenched and complex problems, like paying for social care, improving lifestyle, and making public spending more efficient.

In local government these principles could be used to influence – and thus reduce – demand for services.

Indeed, a recent survey of 100 senior council executives conducted by consultants iMPOWER for a report into behaviour change found that 65% think it is the single greatest opportunity for reducing costs. Virtually all, 98%, think changing behaviour can reduce demand for council services and spending, but most say they lack the understanding of motivations needed to achieve this.

The report, ‘Changing the Game’, is also careful to point out that cutting demand through behaviour change is not a simple case of tightening eligibility criteria, restricting access or opening hours, stopping non-statutory services or passing costs on to partners. Rather, it is about changing processes and communication with residents, reducing over-supply, tapping into citizen-driven innovations, and getting people to take more responsibility for their own needs.

Jon Ainger, director at iMPOWER, said: “As demand spirals and funding falters, council leaders are looking beyond traditional, supply-led approaches to delivering cost savings. The case for demand-led initiatives is resoundingly clear.”

But ‘nudging’ can only go so far, the report’s authors acknowledge, saying that ultimately the state must change its own ways, not just expect the public to. They say: “‘Nudge’ type initiatives are attractive to policy makers because they appear cheap and simple with an immediate payback. But they only address a small part of the problem – that of a mismatch in expectations, or poor choices, and can be temporary in effect.

“For behaviour change approaches to really transform the relationship with the citizen, the state has to make the first move. “Local authorities need to change the way they and their staff behave towards the public before the public will respond.”

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