(Behavioural Economics cont. 8)

Summary

You need to understand and acknowledge people are not homo-economicus (always rational, etc) but homo-sapiens (with all our biases, etc).
"...research has raised serious questions about the rationality of many judgements and decisions that people make..."
Richard Thaler et al, 2021

Recognising biases allows you to project outcomes and shape choices, eg

- planning fallacy
"...systematic tendency toward unrealistic optimism about the time it takes to complete projects..."
Richard Thaler et al, 2021

- status quo bias, ie inertia

There is a tendency to design projects around slow thinking, assuming people
"...- are consistently rational
     - act in their self-interest
     - make unbiased decisions using cost/benefit analysis
     - think and consider each decision..."
Arun Pradhan, 2019.

However, this is not always the case; People
"...- are predictably irrational
     - act based on least effort
      - make biased decisions using mental shortcuts (heuristics)
     - are generally on autopilot..."
Arun Pradhan, 2019.

In change initiatives, you need to minimise the thinking, ie use automatic pilot or fast thinking more; reduce the load in cognitive decision-making:
"...reduce unnecessary thinking and decisions and make positive decisions and behaviour a no-brainer..."
Arun Pradhan, 2019

Use nudges to support the automatic pilot; it is very hard for nudges to be neutral.

Nudging is best done to help make decisions that are difficult, infrequent and complex; have poor feedback available; when the relationship between choice and experience is ambiguous; when there are limited opportunities for learning.

Furthermore,
"...busy people in a complex world in which they cannot afford to think deeply about every choice they have to make. People adopt sensible rules of thumb that sometimes lead them astray. Because they are busy and have limited attention, they accept questions rather than trying to determine whether their answers can vary under alternative formulations.....People are.....nudge-able..."
Richard Thaler et al, 2021.

Golden rule: only
"...offer nudges that are most likely to help and least likely to inflict harm..."
Richard Thaler et al, 2021

Nudges need to be

- transparent

- pass the publicity principle (can be defended publicly)

- respectful

- useful, etc.

NB A nudge should not become a shove.

Use EAST framework for nudging:: E = Easy, A = Attractive, S = Social, T = Timely

Need to be careful of human frailty.

NB Generally, people will take the path that requires the least effort or least resistance, eg inertia, status quo bias, default option (ie, do nothing, especially if there is some implicit or explicit suggestion that it represents the norm or even the recommended course of action), etc.

Many things (intentionally and unintentionally) can influence people's choices, such as a school cafeteria this lying more prominently healthy food like fruits and salads ahead of deserts (processed foods) to encourage students to eat more healthy food.

"...subtle influences can increase the ease with which certain information comes to mind......sometimes the merest hint of an idea or concept will trigger an association that can stimulate action..."
Richard Thaler et al, 2021

Use the 6 principles of good choice architecture (NUDGES): iNcentives, Understand mappings, Defaults, Give feedback, Expect error and Structure complex choices

With nudging, there is no coercion, as choices remain unrestricted, ie still have freedom to choose.

Need to be careful of risk, mistakes, biases and over-reaching when nudging.

Nudges are preferred to commands, requirements, prohibitions, bans, mandates, etc.

In addition to nudges, people respond to incentives.

How your frame something is important and needs to be viewed in context.

The starting point can be important.

"...how seemingly similar groups, cities, and even nations converge on very different beliefs and action simply because of the modest and even arbitrary variation in starting points..."
Richard Thaler et al, 2021

Generally, the fewer the options, the higher the participation rate.

Choice architecture is persuasive and unavoidable; it greatly impacts our decisions
"...choice architects can preserve freedom of choice while also nudging people in directions that will improve their lives..."
Richard Thaler et al, 2021

Remember: one size does not fit all.