The Weekend Australian - Review - - Contents - Deirdre Macken [email protected]

Now that a be­havioural eco­nom­ics team is beaver­ing away in­side fed­eral gov­ern­ment, we in­creas­ingly are be­ing nudged to do the right thing — to pay the proper taxes, re­ply to gov­ern­ment sur­veys, choose more en­ergy-ef­fi­cient heaters and be­lieve our GPs when they tell us we don’t need an­tibi­otics for that an­noy­ing snif­fle.

Crit­ics don’t like the idea of gov­ern­ment push­ing us around with an in­vis­i­ble hand. They say that too often push be­comes shove. But there are fans of the nudge and some of us have be­gun adopt­ing this new branch of eco­nom­ics in our own house­holds to achieve what we’ve al­ways wanted — peace, sen­si­ble be­hav­iour and the abil­ity to get our own way. So, in the in­ter­ests of bet­ter out­comes, here’s how to use the nudge in the home.

Be­havioural eco­nom­ics has dis­cov­ered ev­ery­one is loss averse. In fact, we hate losses 10 times more than we like gains. Take pocket money. You can lever­age ex­tra work out of the kid by promis­ing her more pocket money or with­hold­ing pocket money, but you will get huge lever­age if you threaten to take pocket money back af­ter you’ve paid her. It’s called claw­back, or mean par­ent syn­drome.

Cog­ni­tive over­load. Just think of the way tech gi­ants get us to sign away our rights to pri­vacy, copy­right and our first­born child by flood­ing us with hun­dreds of pages of read­ing or sug­gest­ing we just press the Agree but­ton. Now you can re­work that prin­ci­ple to your ad­van­tage at home. For in­stance, if you want to go on an elab­o­rate over­seas hol­i­day, you could dump a load of brochures, sched­ules, timeta­bles and travel in­sur­ance quotes on your part­ner’s lap and say, do you want to read all this or do you just want to give me your credit card num­ber?

The en­dow­ment ef­fect holds that we value what we al­ready own more than what’s on of­fer, even if it’s the same thing. Next time you want to up­grade your car, try say­ing this. “Dar­ling, I know you love your sporty car and wouldn’t dream of sell­ing it with prices of used cars so low, so why don’t I sell the fam­ily van and buy a sporty lit­tle num­ber be­cause prices are so low at the mo­ment?”

The fram­ing ef­fect is all about how the con­text of a price af­fects whether it seems ex­pen­sive or cheap. This prin­ci­ple can be em­ployed in any num­ber of house­hold de­ci­sions. To pre­pare your part­ner for credit card shock, have a chat about the 2018-19 bud­get deficit shortly be­fore open­ing the state­ment. If you fancy a new lounge suite but your part­ner is feel­ing tight, flick through Vogue Liv­ing, tear out pages of ad­ver­tise­ments for Euro­pean suites, stick them on the fridge door and then sug­gest you both have a wan­der through Har­vey Nor­man.

Opt out is one of the most pow­er­ful tools for wily econ­o­mists be­cause it plays on our lazi­ness. So, if you want your part­ner to opt in, make opt­ing out too hard. For ex­am­ple, you want to see that art house movie but your part­ner is re­luc­tant? Try this. “Dar­ling, I’ve booked two seats to see Dark and Dis­turb­ing Movie but if you re­ally don’t want to see it, that’s fine, I’ll go with a friend and you can rus­tle up some­thing for din­ner while we’re din­ing at the lo­cal af­ter­wards.”

A fi­nal ruse is the band­wagon ef­fect. If your part­ner needs a nudge to go to the gym, say: “I saw your mate Paul the other day. He’s look­ing good, it’s the boot camp, I think. He said he’d like to have a beer with you but can’t on Fri­day night be­cause he does spin class with Barry, George and Ian. They’re look­ing good, too.”

Eco­nom­ics in the house­hold may sound a bit 101 but it shouldn’t be sur­pris­ing that we em­ploy so many car­rots, sticks, nods, winks, frames and nudges in our daily ne­go­ti­a­tions be­cause we in­vented those be­hav­iours. Whether it’s how to ar­range the pile of bills for your part­ner’s pe­rusal, how to stock a fridge so the right snack will be cho­sen or how to shift a teenager off the couch by sug­gest­ing a nice chat, we are the masters of per­sua­sion. The only news is that econ­o­mists have tired of draw­ing graphs and mod­el­ling data and turned their at­ten­tion to daily life where the masters of per­sua­sion have al­ways ruled.

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