Behavioral Policies – Nudge

Nudge gives a deep insight into people’s behavioural tendencies and is therefore useful for formulating behavioural policies. It is essential to get an insight into people’s behaviour, as more often they think emotionally and reflexively instead of being rational or logical.

This makes it absolutely essential to analyze human behaviour in order to determine how people usually make decisions, so that policies can be defined accordingly. Nudge is a tool that helps in this regard. It observes people’s behavioral patterns and helps develop methods that can then be used to subtly change their behaviour. Hence, people’s behaviour can be altered in a positive manner without being intrusive. Such behavioural changes are permanent.

To understand how Nudge functions, let’s look at the behavioral aspects that it influences.

Some of the behavioural attributes of people include:

  • People usually prefer opting for things they perceive as normal
  • Most people select default options
  • People can make better choices if they get real-time feedback

This is where Nudge plays a critical role. It is a set of cost efficient tools which reminds, alerts and politely warns people by considering the above facts and helps shape their behavior.

There are numerous examples where private and government organizations have used behavioral insights to mold the behavior of the people in order to achieve their objectives.

In the UK, HMRC used its insights into people’s behaviour to encourage them to pay their taxes without defaulting. It sent letters to tax defaulters with a simple sentence that stated, “9 out of 10 people pay their taxes in time.” Consequently, the number of tax defaulters went down as they perceived themselves to be included in a minority. To become a part of the norm, they chose to pay taxes.

In the state of Massachusetts in the United States, the General Hospital motivated people to prefer healthier food items in its cafeteria by altering the default placements of food. The result was an increase in water consumption by 25%.

To control speeding, a California town installed equipment displaying the legal speed limit next to the speed-monitoring radar so that drivers would know that their speed is being monitored. It helped reduce speeding by 14%.

In yet another instance, a power generation company in the US presented to their customers a comparison of their electrical consumption with the consumption of others. When people perceived that their power consumption was higher, they reduced it. It resulted in reducing the total power consumption of around 4%, thereby saving millions of kilowatts of electricity.

There are three ways policy makers can achieve this: