Understanding Nudges

Introduction

How do people make choices? Why do people make good choices or bad choices? What is the role of the environment in choice-making? Can we influence the choices made by people by changing the features in the environment? All of these questions are important in the study of behavioral science. Human behaviour is complex and people make choice under the influence of countless factors. However, the environment is one of the main factors affecting the choices made by people. In this article, we will explain the meaning of nudges and the effect of changing the environment on the choices made by people.

What is a Nudge?

The literal meaning of the word ‘nudge’ is a small and gentle push from the elbow to get someone’s attention.

In behavioural economics, a nudge is a small, attention-grabbing aspect of the environment that is used to change people’s behaviour in a predictable way without restricting their freedom of choice. In simple words, a nudge is a small feature in the environment that attracts our attention and influences the way we behave. For instance, placing salad bar at the start of a restaurant to promote healthy options for eating is a nudge.

Important Terms

Before going into further details of nudges, let’s define some important terms.

Nudge Theory

Nudge theory refers to the use of small features in the environment in the form of positive reinforcements or indirect suggestions (nudges) in order to achieve a desired behavior change without limiting the freedom of choice.

This theory is a concept of behavioral economics and it proposes that people’s behaviours and decisions can be influenced in a predictable manner by making small changes in their choices and how they are presented to them.

Choice Architecture

Choice architecture means the presentation of objects or choices in different ways in front of people. Any changes in the presentation of objects can influence the decisions made by people without sacrificing their freedom of choice. For instance, placing items like candies and magazines near checkout counters to encourage last-minute purchase is the use of choice architecture. A nudge is an aspect of the choice architecture.

Choice Architect

A choice architect is a person who decides the presentation of objects or choices in order to influence the decisions and behaviours of people. For instance, a person who is deciding the restaurant’s layout is a choice architect. He/she can present healthier snacks on the prominent side and non-healthier items on the less visible side, with the intention that people should choose healthy eating.

Historical Background 

The term ‘nudge’ was first introduced by the famous American academics Richard Thaler and Cass Sunstein in 2008. Thaler & Sunstein co-authored a book, “Nudge: Improving Decisions about Health, Wealth, and Happiness.” This book was declared the best book of the year 2008 by ‘The Economist’. After the publication of this book, the concept of nudge theory became famous. According to the behavioral economist Richard Thaler, people may behave irrationally and make bad choices that are not in their benefit. The use of nudges can encourage people to make better choices which are good for them. Thaler & Sunstein call the use of nudges libertarian paternalism.

Example of Nudges

The following are some examples of nudges:

Healthy Eating

An example of nudge can be the placement of fruits, vegetables, and other healthy snacks at eye level in a grocery shop to encourage healthy eating among people instead of eating junk food. Similarly, calorie labels can be added to various items on a restaurant menu to give people incentives to eat healthy.

Responsible Driving

Nudges are frequently used to encourage road safety and responsible driving. Some examples are the use of road markings or zebra crossings to indicate pedestrian crossing areas and the use speed bumps to slow down traffic in residential areas.

Waste Disposal

Nudges can be used to encourage people to stop littering and to dispose their waste properly. For example, public parks can have eye-catching bins with bright colours and foot-steps to attract people’s attention. Such nudges encourage the visitors to use these bins and dispose the waste materials properly.

Donations

Nudges can also be used to encourage people to donate money for social good. For example, donation boxes can be placed near the check-out counters of the shopping stores to promote donations.

Default Options

Nudging can also be used by changing the default options. For example, changing the default option from opt-in to opt-out while filling out a form may promote organ donation among organ donors. Similarly, employees can be made part of savings plans by default unless they choose to opt-out.

What is a Nudge and What is not?

A nudge is a small reinforcement or an indirect suggestion that can influence people’s behavior without restraining their freedom of choice. On the other hand, restraining the freedom of choice or forcing people to behave in certain ways is not nudging. The following table contains some examples to explain what nudges are and what they are not. 

Features of a Good Nudge

The following qualities must be present in a good nudge:

Transparency

A good nudge must be perfectly transparent. It does not hide the actual cost of a choice or other option related to it.

Freedom of Choice

Nudges are not mandates. A good nudge must not limit the freedom of choice of the decision-maker. If the freedom of people's choices will be restrained, then it will not be a nudge.

Attention

A mere nudge must be eye-catching and attention-grabbing. If people will not notice it, the behaviour and choices may not be affected. 

Stages of the Nudge Theory Model

Nudge theory can be used to improve the behaviour of employees in an organisation. The following are seven steps to successfully implement a positive behavioural change among employees with the help of nudge theory:

Understand the Current Behaviour

The first step is to understand the current behaviour of employees. For example the current behaviour can be a low productivity of employees or a lack of team work. 

Identify the Desired Behaviour

The second step is to clearly identify the desired behaviour you want to encourage or promote among employees. For example, increasing productivity and teamwork among employees can be the desired behaviours. 

Design Nudges

The third step is to carefully design nudges according to our desired change, keeping in view the employees’ behaviour. For example, giving reminders and putting notices around office premises to remind employees to opt for the options you are giving them. 

Test and Refine

The fourth step is to test and refine the nudges. At the initial stage, you should test the designed nudge on a small group of employees and gather outcomes from the employees. If the outcome is according to your desire, then you can more to the next step. If not, then you should refine and implement adjustments and then again check it through the testing process.

Scale Up

After testing and refining, your desired nudge is able to be implemented on a large scale among employees. This stage includes training sessions designed for managers and employees to encourage desired behaviour among them.

Monitor and Evaluate

The sixth step is to keep monitoring and evaluating the employees’ behaviour due to the implemented nudges. Organisations must regularly monitor the progress of their employees due to the use of nudges. This step helps organisations analyse further changes in their nudges.

Sustain and Reinforce

The seventh and last step is to sustain success and reinforce the desired change. Reinforcement can be done by giving promotions, extra bonuses, and recognition to employees. This will result in behavioural changes in organisations.

Advantages of Nudges

The following are some advantages of the nudges:

Easy and Non-Intrusive

Nudges gently guide individuals instead of imposing strict rules and regulations. With the help of nudges, people can make better choices in an easy and non-intrusive way.

Promote Positive Behaviour

Nudging approach is used to promote positive behaviour among individuals. Such as eating healthy foods, saying no to smoking, and practices to keep the environment clean by giving gentle reminders and offering choices to make positive decisions. 

Cost-Effective

Nudges are cost-effective interventions that can be implemented on a large scale to promote positive behavioural change among individuals instead of using other traditional methods of behaviour change such as regulation.

Disadvantages of Nudges

The following are some disadvantages of the nudges:

Manipulation Concerns

It is said that there are many manipulative concerns that are associated with nudges because they gently and subtly propose individuals behaviour to choose something without their willingness. Critics argued that nudges limit individual decision-making power.

Lack of Effectiveness

Nudges lack effectiveness. They do not always provide the desired behavioural changes. Individuals behave differently to multiple nudges. Many individuals are resistant and harsh towards their influence. Nudges are not enough to manipulate complex behavioural changes among different individuals.

Ethical Considerations

Critics argued that nudges are only designed to fulfill the interests of those who design them. There are also some ethical issues because individuals do not know the intentions behind the interventions. Interventions do not consider the individual’s values and preferences.

Are Nudges Enough?

Despite the effectiveness of nudges, there sole use may not be enough to tackle the bad-choice behaviour of individuals in a society. For example, in order to reduce smoking in a country, nudges should be used hand-in-hand along with laws, regulations, and strict smoking policies, such as restrictions on smoking in public places, ban on sales to under-aged and or high tax rates on the sale of cigarettes. So nudging can supplement any public policy intended to promote a behavioral change.

Conclusion

In conclusion, nudges are small interventions in the environment with the help of the choice architecture to promote a desired behaviour among people without restraining their freedom of choice. Nudges are designed in a way that does not seem manipulative to individuals but feels easy to understand and notice. Nudges are used to reinforce positive behaviour among individuals at a very low cost, but they do have ethical dimensions which must be considered by the choice architects and policymakers.