Showing posts with label nudges. Show all posts
Showing posts with label nudges. Show all posts

Friday, December 22, 2023

Decline and decay of nudges

 Here's the latest paper to suggest that small "nudges" can have much less of a lasting effect than was initially thought.

The Semblance of Success in Nudging Consumers to Pay Down Credit Card Debt  by Benedict Guttman-Kenney, Paul D. Adams, Stefan Hunt, David Laibson, Neil Stewart & Jesse Leary, NBER WORKING PAPER 31926 DOI 10.3386/w31926  December 2023

Abstract: We run a field experiment and a survey experiment to study an active choice nudge. Our nudge is designed to reduce the anchoring of credit card payments to the minimum payment. In our field experiment, the nudge reduces enrollment in Autopaying the minimum from 36.9% to 9.6%. However, the nudge does not reduce credit card debt after seven payment cycles. Nudged cardholders tend to choose Autopay amounts that are only slightly higher than the minimum payment. The nudge lowers Autopay enrollment resulting in increasing missed payments. Finally, the nudge reduces manual payments by cardholders enrolled in Autopay.

Sunday, September 10, 2023

Nudges, shoves, regulations and designs: debate in Behavioral and Brain Sciences

Do "nudges" provide low cost solutions to big economic problems? Are they crowding out more effective, but harder or more expensive approaches?

The latest volume of Behavioral and Brain Sciences, Volume 46 - 2023, (a journal optimized to achieve impact factor, which counts references to previously published articles) contains 34 responses to the (previously published) target article*

The i-frame and the s-frame: How focusing on individual-level solutions has led behavioral public policy astray

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Here are two of the responses that might be of most direct interest to regular readers of this blog:

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The issue includes two separate responses by the authors of Nudge:

And here's a reply to all the commentary by the authors of the target article:

*Earlier post:

Thursday, June 16, 2022

 

Sunday, November 28, 2021

The Elements of Choice (Architecture) by Eric Johnson

Eric Johnson's new book is about choice architecture, and how when choices are presented in a confusing way, we may make bad decisions.

The Elements of Choice. WHY THE WAY WE DECIDE MATTERS  By ERIC J. JOHNSON

One of the points the book makes is that having too many choices may impede the quality of your decision: you might do better if the choice architect had narrowed or better organized your choice set to make it easier for you to fluently understand the choices presented, which would enable you to make a more accurate decision.

Here is a picture of the first search result that appeared when I searched for the book, which I surmise is an ad composed by the publisher:



I read with interest his discussion of school choice, in which he argues that much of the potential welfare improvement produced by market design could potentially be undone by confused decision making by participants, and that welfare could be improved if market designers did a better job of actively curating and organizing the choices offered.

He writes "Increasing the number of options increases the probability that families will be presented with the best school for them, but it does not mean they will see it."

Some of his recommendations suggest that market designers should get involved at all level of detail: e.g. easier to read fonts may increase fluency and allow more choices to be presented effectively.

Others of his recommendations seem to me to be further removed from the actual practice of school choice: e.g. "If we can remove any terrible schools from the set, choosers, even if they were picking randomly, would on average get better outcomes." Closing underperforming schools (e.g. by not admitting new students) is much more complicated than that.

I haven't finished reading the book yet (Eric pointed me first to the section on school choice), and I'm looking forward to it.  Choice architecture is certainly an important part of market design.

Friday, December 18, 2015

A skeptical look at "nudges" in the Atlantic (which reminds me of Loewenstein's 2010 op-ed in the NY Times)

In the Atlantic, a recent complaint about the tendency to over-promote the efficacy of"nudges" as inexpensive solutions to big problems:

Why 'Nudges' Hardly Help by Frank Pasquale

"...the nudge is really a fudge—a way of avoiding the thornier issues at stake..."
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I think the promises and perils of relying on nudges as primary tools of policy were set forth elegantly in a 2010 NY Times op-ed by George Loewenstein and Peter Ubel, who spoke of the relative magnitudes of the effects of nudges compared to e.g. changes in price:

Economics Behaving Badly

 "Behavioral economics should complement, not substitute for, more substantive economic interventions. If traditional economics suggests that we should have a larger price difference between sugar-free and sugared drinks, behavioral economics could suggest whether consumers would respond better to a subsidy on unsweetened drinks or a tax on sugary drinks."

Loewenstein, of course, is one of the founding giants of behavioral economics.

Tuesday, November 24, 2015

Alcott and Kessler on behavior and welfare changes from 'nudges"

An NBER working paper:

The Welfare Effects of Nudges: A Case Study of Energy Use Social Comparisons
Hunt Allcott, Judd B. Kessler
NBER Working Paper No. 21671
Issued in October 2015

Abstract:
"Nudge"-style interventions are typically evaluated on the basis of their effects on behavior, not social welfare. We use a field experiment to measure the welfare effects of one especially policy-relevant intervention, home energy conservation reports. We measure consumer welfare by sending introductory reports and using an incentive-compatible multiple price list to determine willingness-to-pay to continue the program. We combine this with estimates of implementation costs and externality reductions to carry out a comprehensive welfare evaluation. We find that this nudge increases social welfare, although traditional program evaluation approaches overstate welfare gains by a factor of five. To exploit significant individual-level heterogeneity in welfare gains, we develop a simple machine learning algorithm to optimally target the nudge; this would more than double the welfare gains. Our results highlight that nudges, even those that are highly effective at changing behavior, need to be evaluated based on their welfare implications.