‘Behavioural economics’ may sound dry – but it can change your life
Richard Thaler’s Nudge opens with a story about a school cafeteria in the US. Not for the first time, a headteacher was grappling with the question of how to encourage the kids to eat better.
Should the school ban sugary sweets altogether? Subsidise the salads? Eventually, the head found the answer was simple – just put the healthier foods at eye level, and watch as more students reach for carrot sticks over fries.
Sometimes a nudge – small, timely, and easy – may be all we need to make better decisions for ourselves. The school’s finding was a classic example of how behavioural science can put more realistic models of human thinking and behaviour, in all its imperfect reality, back into the thinking of economists and politicians. None of us are infallible units of economic theory, and few have done more to advance this argument than Richard Thaler.
On Monday Thaler won the Nobel prize for economics: well deserved recognition for his pioneering work, but also for the burgeoning field of behavioural science. Thaler is the third behavioural scientist to win the prize, following Daniel Kahneman (2002) and Robert Shiller (2013).
I have particular reason to be grateful. Thaler was instrumental in the creation of the UK’s Behavioural Insights Team (BIT), originally a No 10 unit, back in 2010. We faced an uphill struggle to be taken seriously; despite a growing body of evidence in the US, we knew we had to prove ourselves (“the wackiest and most vogueish corner of government”, was one early reaction from Ben Goldacre).
We set ourselves an ambitious target: recoup a tenfold return on our running costs, or be shut down. Thanks in no small part to the work and support of pioneers such as Thaler, we more than exceeded those initial benchmarks, using behavioural insights to improve the running of several key public services.
BIT is now a social purpose company owned by the UK government, the innovation charity Nesta and its employees – and it works to drive change in many countries. Yet there remains huge untapped potential to use behavioural science to improve policy and help the lives of millions.
Take the broad span of policy areas first of all. There are few limits on where a better understanding of how we behave and make decisions can be used practically.
Our early work looked at improving tax returns through small changes to reminder letters – an extra £200m more was collected on time. Those same principles have since been used to help people back into work, to cut the rate of re-offending among drivers caught speeding, reduce the number of inappropriate 999 emergency calls, and shift smokers on to e-cigarettes. These results represent huge savings across our public services but, more importantly, they have a direct, positive impact on the lives of people across the UK and beyond.
We make much of the simplicity of our interventions – a subtle tweak to an email, or a few seconds added to a phone call. But if properly implemented, they can have a powerful impact on even our biggest societal challenges.
Take pensions, and how to cut through years of stagnating rates of saving: a classic area of interest for Thaler. Governments on both sides of the Atlantic previously assumed that the best way to get people to save for retirement was by putting in place generous tax breaks. But these incentives seemed to have little impact on millions of people’s savings behaviour.
The behavioural science response to this complex problem is seemingly simple, and has now been put into practice across the UK: automatically enrol everyone on to a workplace pension, but give them the choice to opt out. The result? The majority stick with the default, and millions more Britons are saving for retirement. It’s hard to downplay the huge benefits this will bring to those individuals in later life.
And antibiotic resistance, that profoundly complex and global crisis? Behavioural science has its part to play. Simple benchmarking prompts for GPs – telling them whether they prescribe more or less than their peers – has led to a substantial reduction in the levels of unnecessary antibiotic prescriptions.
Behavioural science is a powerful tool for shaping government policy. But by its very nature, it belongs to all of us. We believe strongly that the same principles we apply to difficult policy problems should be made transparent and available to those looking to make small changes in their lives.
Want to build a gym habit? Why not ask a friend or colleague to hold you accountable. Writing that novel you’ve never got round to? Break down the process into manageable chunks, and link these to your daily routine.
We face thousands of decisions in our day-to-day lives, some more significant than others – what to eat, what to wear, whether to buy, how much to save. More than anyone else in his field, Thaler has shown how we can use the behavioural research to change policy, in ways that help people make better choices for themselves.
• David Halpern is chief executive of the Behavioural Insights Team
Behavioural research can help people to make better choices for themselves