Michaelsen, Johansson, and Hedesström (2021) on Experiencing Default Nudges

Patrik Michaelsen, Lars-Olof Johansson, and Martin Hedesström, “Experiencing Default Nudges: Autonomy, Manipulation, and Choice-Satisfaction as Judged by People Themselves.” Behavioural Public Policy, First View, 1–22, 19 March 2021. 

• This article examines how people feel about default nudges, especially with respect to their perception of their autonomy and their satisfaction with their ultimate choice. "We present three experiments (total N = 2083) where participants are subjected to opt-out default nudges and compared with participants subjected to opt-in or a no-default active-choice format [pages 3 and 4]."

• Study 1: MTurk folks consider whether to have “green” (and slightly more expensive) appliances in their (imaginary) new flats. There are three conditions: green (environmentally friendly) default (opt out); non-green default (opt-in); and active choice.

• The effect of the default is big, with about twice as many green appliances chosen with opt-out relative to opt-in; active choice leads to more green appliances than opt-in, too, but not as much more as opt-out.

• Participant ratings of their autonomy, satisfaction, and perceived threat to their choice freedom do not differ based on the condition. In particular, the opt-out default, which produces greener choices, does not lead to participant dissatisfaction.  

• Study 2 replicates study 1, but with a twist: now, half of the participants ae told about the default or active choice, and how default nudges are expected to influence choices. How does making the nudge transparent affect its influence on choices and satisfaction?

• It turns out that lots of participants don’t really understand the explanation of how the default nudge is supposed to work.

• The large impact on choosing green appliances from the opt-out default is replicated – and nudge transparency does not change that.  

• The participants give high ratings across-the-board for autonomy, but opt-out folks report slightly higher experienced autonomy and satisfaction than do their opt-in brethren.

• Study 3 aims to raise the stakes (slightly). Participants receive a 20 cent bonus, on top of the 50 cents they are paid to take part.  But they are given an opportunity to donate their bonus to a charity. The opt-out condition is where the bonus is defaulted to the charitable contribution. 

• Defaults continue to have consequences: opt-out folks are more likely to donate than are opt-in; active choice is in the middle; the three conditions have no effect on feelings of autonomy.

• With disclosure (and understanding), opt-in and active choice donations go up. (Again, the number of participants who do not understand the disclosure is fairly staggering.)

• Opt-out folks view the set-up as more threatening to freedom of choice, and full transparency raises everyone's view of such a threat – but despite that threat, people aren't really worked up over it. 

Colby, Li, and Chapman (2020) on Avoiding Healthy Defaults

Helen Colby, Meng Li, and Gretchen Chapman, “Dodging Dietary Defaults: Choosing Away from Healthy Nudges.” Organizational Behavior and Human Decision Processes 161: 50-60, 2020.

• Imagine a burger restaurant that makes carrots the default “side” – as opposed to French fries, say. Are people more likely to choose the carrots than if fries were the default? [Yes]. 

• Note that, unlike some environments with default nudges such as organ donations or pension registration, dining is an ongoing choice; so…

• …would people be less likely to return to a restaurant in which carrots are the default side dish?

• Two real-life(ish) and three hypothetical studies are conducted. In Study 1, university mugs are packaged with either M&Ms or a (healthier) fruit-and-nut bar as defaults. Shoppers know that they can easily override the default by asking the cashier for the alternative filling. 

• The defaults turn out to be almost perfectly sticky (unlike those well-designed M&Ms). But, more mugs are sold when M&Ms are the default. People don't override the healthy default, even though they know they could, but the healthy default seems to put them off the mug purchase altogether.

• If the store elected to employ a healthy default to promote customer health, is it doing the right thing? 

• Study 2 is also a real-life one, involving signing up for meal kit deliveries. What (three) meals will serve as the default for the kit? The experiment compares a default kit of three healthy meals (from one company) with an alternative default of three unhealthy meals (from a different company); once again, it is easy for meal kit purchasers to override the defaults.

• Again, the defaults are sticky, and in particular, the healthy default works in terms of nudging the choice of healthy meals. But, when choosing which company to patronize, there is a significant “dodge” effect: people became more likely to choose the company with the unhealthy default meals. So maybe it is not such a good idea for meal kit companies to set up healthy meals as the default?

• Study 3 is an internet-mediated "lab" experiment about which (hypothetical) restaurants people are likely to patronize. A subject is asked to order food from two competing burger restaurants. One burger restaurant uses turkey burgers as the default (this is the relatively healthy version, though not for the turkey), and the other burger place has been hamburgers as the default. (A similar comparison is run between two pizza places, and two sandwich shops). 

• Once again, (hypothetical) patrons tend to stick with the default, whether it is heathy or unhealthy. But they also are asked which of the restaurants they would return to, and in the case of burger joints, for the most part they would return to the unhealthy default version. People stay away from burger joints with a healthy default – turkey instead of beef burger – even though when at the "healthy" place, they generally go with the default. (It turns out that people are not so reluctant to return to pizza or sandwich shops that offer healthy defaults.)

• Study 4 looks at what happens if potential customers see an ad that lets them know in advance that turkey is the default burger meat. People become more enamored of the alternative restaurant that offers a beef default, and also suspect that ordering will be more of a hassle with the healthy default.

• Study 5 looks at healthy versus unhealthy defaults in a familiar setting, a McDonalds. There is a line, and a subject observes that the five people ahead of him or her in the line each stick with the default burger, where it is healthy or unhealthy. Does this social confirmation influence subsequent orders? 

• Once again, people tend to stick with default – but less so when the default is a turkey burger, when a third of folks request an override. Nonetheless, people indicate that they would dodge the healthy default restaurant in the future – but the dodgers were primarily folks who did not bother to override the healthy default!

• So, defaults can be quite sticky. Set up a health default, and you can expect that it will increase the percentage of customers who choose the healthy option. But there is a partial offset: some customers will dodge the restaurant with the healthy default, reducing the effectiveness of the healthy nudge by some 25%.

de Ridder, Feitsma, van den Hoven, et al. (2020) on Simple, Not Easy, Nudges

Denise de Ridder, Joram Feitsma, Mariëtte van den Hoven, et al., “Simple Nudges That Are Not So Easy.” Behavioural Public Policy, 1-19, 2020.

• This article draws upon a Dutch research program (2014-2018) with the acronym WINK: “Welfare Improvement through Nudging Knowledge [p. 3].” WINK "examines nudging from the perspective of three core disciplines: ethics, public administration and psychology [p. 3]."

• The authors posit that there are three common yet false assumptions made concerning nudges: (1) nudges threaten autonomy; (2) nudges are easy to implement; and (3) nudges are simple and effective.

• Autonomy might mean unfettered choice, but it also could refer to agency (capacity to choose) and self-constitution (identity and living the life one desires). Perhaps people who criticize nudges for threatening autonomy (even though by definition nudges do not preclude any choice options) do so because they have adopted a definition of autonomy in which maintenance of freedom of choice does not end the debate.

• Is it enervating to possess too many choices? Should we welcome nudges to reduce the burden of choice?

• The explanation of nudges can alter judgments about the extent to which they threaten autonomy.

• In general, the authors are fairly hostile to claims that nudges threaten autonomy, and tend to believe that nudges are more likely to enhance autonomy, by overcoming common gaps between  intentions and actions.

• The rush to set up nudge units is one piece of evidence that shows that many policymakers view nudges as both effective and cheap to implement. "In reality, however, the process of designing, testing and implementing nudge interventions is far more complicated, which questions the supposed ‘efficiency’ of nudges [p. 8]."

• Persuasion via information provision is hard… so it is not surprising that many policymakers view nudging as a promising, quick-acting alternative (p. 10). But in general, the effects of nudges tend to be fairly modest. This limited effectiveness might be considered an advantage, as it defuses the argument that nudges are overly manipulative. 

• When folks are unsure of their preferences, nudging works pretty well, and promotes autonomy in both the self-constitution sense and in the agency sense.

de Ridder, Kroese, and van Gestel (2022) on Nudgeability

Denise de Ridder, Floor Kroese, and Laurens van Gestel, “Nudgeability: Mapping Conditions of Susceptibility to Nudge Influence.” Perspectives on Psychological Science 17(2): 346–359, 2022.

• What conditions might influence the extent to which people are susceptible to a nudge? The authors look (primarily) at three issues: (1) awareness of the nudge and/or its purpose; (2) pre-existing preferences; and, (3) are the subjects employing System 1 or System 2 thinking?

• In this article, transparency involves making subjects aware of the presence and purpose of a nudge; this is a stricter condition than Thaler and Sunstein’s publicity principle, that asks if nudges, were they publicly known, would garner public support.

• Default nudges tend to maintain their effectiveness under transparent conditions; further, when nudged opaquely, people informed after the fact don’t seem to view those nudges as an affront to their autonomy. (Though when an ex ante inquiry is made, people often indicate that they will feel their autonomy threatened by an opaque nudge; that is, they forecast a higher level of concern than they will actually experience.) 

• Nudges will be “ineffective” at altering choices if the nudge counsels behavior to which they hold a negative view, or if the nudge counsels behavior to which they already are strongly attached! That is, we needn't be too concerned with nudging people into behaviors that their pre-existing preferences do not endorse.

• If people lack clear preferences, a nudge might “impose” preferences – though starting with a request that people discuss their preferences (a plus!) might undermine any perceived manipulation.

• There is not much evidence suggesting that people are nudged more when they are employing System 1 thinking (through ego depletion, say). That is, the effectiveness of a nudge is not tied to the extent that it prompts unthinking responses.

• People with lower cognitive capacity do not appear to be more susceptible to nudges.

• The final sentence of the text succinctly summarizes the article: "Nudges do allow people to act in line with their overall preferences, nudges allow for making autonomous decisions insofar as nudge effects do not depend on being in a System 1 mode of thinking, and making the nudge transparent does not compromise nudge effects [p. 355]."

Banerjee and John (2021) on Nudge Plus

Sanchayan Banerjee and Peter John, “Nudge Plus: Incorporating Reflection into Behavioral Public Policy.” Behavioural Public Policy, 1-16, 2021, available at https://doi.org/10.1017/bpp.2021.6.

• Should we embed a prod for people “to reflect” into System 1 nudges? Such a prod is the “plus.” [The authors themselves seem to equate nudges (or perhaps "classic nudges" with System 1 nudges; the "plus" activates a System 2 element in conjunction with a System 1 nudge.]

• Bundling a nudge with a plus makes nudges more salient.

• People need actual reflection, not just “the potential for reflection [p. 2].”

• Thaler and Sunstein consider that a legitimate nudge must be one that would receive wide assent if everyone were informed about its aim and operation. This restriction would rule out manipulating people in ways that harm them. Nonetheless, such a legitimate nudge might, when it is affecting choice, remain hidden, invoking an automatic, System 1 response.

• Nudge plus wants to extend the transparency, so that just about everyone understands what is going on in the choice moment. Actors maintain their autonomy, though without being required to pay extremely close attention or to engage in strenuous cognitive processing. 

• Commitment devices are a nudge plus, because the need to consider whether to sign up for the device spurs the requisite reflection; likewise with cooling-off periods.

• People often choose not to use GPS on familiar routes – they are thinking, they are not being “tricked into using the device heuristically once again [p. 7].” For them, GPS is a nudge plus.

• Adding a regular prompt to set a future fitness goal turns an otherwise ordinary fitness tracker into a nudge plus.

• But… do people really desire this “experiential learning environment [p. 10],” this near necessity to reflect regularly, at least to some extent?

Duckworth and Gross (2020), "Behavior Change"

Angela L. Duckworth and James J. Gross, “Behavior Change.” Organizational Behavior and Human Decision Processes 161: 39-49, 2020.

• Suppression of impulses is a mug’s game. But changing the environment and adopting strategies concerning how we react hold promise.

• The requisite changes might be self-initiated, or initiated by others, such as employers or the government. Notice that self-deployed strategies require that people be sophisticated about their self-control shortcomings.

• Please put aside problems that arise from lack of knowledge or skill. This article is devoted to looking at situations where "we know what we should do and how to do it [p. 40]." 

• How to overcome the fact that  (temporarily) tempting options might get chosen over alternatives that are preferred by our more considered selves? The authors outline the "process model of behavior change" to point to methods where the "larger later" option is not sacrificed to the temporarily appealing "smaller sooner" choice. Here's their Figure 2 (p. 40) that outlines the process model: 

• 

• Habits or self-adopted strategies might allow you to skip the appraisal stage, leading to an automatic response when a familiar situation enters awareness. Giving into temptation, then, is not the done thing, it doesn't present itself as a viable alternative. 

• But sometimes you both want to take the stairs (for exercise) and want to take the elevator (because you are tired). What can be done to encourage stair-taking or other types of physical exercise?

• The process model suggests that you could try to alter the situation, alter where you put your attention, and/or alter your response strategy – or try to inculcate one of those automatic responses that skips the appraisal stage.

• You could begin the day by putting on comfy shoes; you could do things that would make the lazy alternative less available, like not bringing your car keys or bus pass. 

• You could keep track of your steps and adopt a so-many steps per day goal.

• You could reframe the time-consuming walk as “an energy break.”

• You could adopt (and possibly publicize) a rule that you always walk.

• Others can help. For instance, employers can make the stairwells more inviting, or promote the social norm/company culture of  stair use. 

Zlatev and Rogers (2020) on Returnable Reciprocity

Julian J. Zlatev and Todd Rogers, "Returnable Reciprocity: When Optional Gifts Increase Compliance.” Organizational Behavior and Human Decision Processes 161(S): 74-84, November 2020.

• Sometimes a charity, say, will send potential contributors a small gift along with a request for a donation. They presumably are trying to take advantage of a human propensity to reciprocate gifts, which might in part derive from an aversion of feeling indebted. 

• "Returnable reciprocity" is when the gift that is first sent is explicitly made returnable. The return of the gift by non-contributors is not required, it is perfectly OK to keep the gift and not contribute. Is it possible that by including the option to return the gift, people are more likely to contribute or to otherwise reciprocate?

• Note that with a return option, one has a new channel to avoid the guilt of not reciprocating the gift, beyond contributing – namely, returning the gift.

• The authors conduct six experiments looking at returnable reciprocity in the context of trying to incentivize people to participate in rather virtuous behavior, behavior they would think it admirable to do – like signing up for their employer's wellness program. 

• The first experiment involves a hypothetical choice, of whether you would sign up for a wellness program, if you were first gifted $5. In one condition, you keep the money and either join or not, but in the second condition, you can keep the money and join or not, or return the money (and presumably not join). The returnable condition yields a higher percentage of folks saying they will join. 

• The second experiment, this one a field experiment,  concerns returning a filled-out survey, and being gifted $5 in advance. Once again, the returnable variant increases compliance (returning the completed survey). "Study 2 found that the addition of a single line mentioning the possibility of returning the gift led to a 26% increase in compliance over a traditional reciprocity request [p. 80]."

• Other experiments find that people in the returnable reciprocity condition anticipate feeling more guilty for a failure to comply, and that when given the choice between a standard reciprocity condition and a reciprocal reciprocity condition, people prefer standard reciprocity. Nudging via reciprocal reciprocity might increase compliance, but it might not be a nudge "for good." 

Steffel, Williams, and Tannenbaum (2019) on Presumed Consent for Organ Donations

Mary Steffel, Elanor F. Williams, and David Tannenbaum, “Does Changing Defaults Save Lives? Effects of Presumed Consent Organ Donation Policies.” Behavioral Science and Policy 5(1): 69–88, 2019 [pdf here].

• The chief source of kidneys for transplants come from deceased (cadaveric) donors – approximately one-quarter of kidney transplants involve a living donor. (A cadaveric donor, of course, is often able to donate two kidneys.) 

• There is a kidney shortage. More than 90,000 Americans are on the waiting list for kidney transplants, and thousands of them die from conditions that a timely transplant would have averted.

• Many people who survive the wait list nevertheless wait for years (often more than five years) for their new kidney. During their wait, they are maintained (to some extent) by dialysis. 

• Most Americans, it seems, favor a presumed consent system – an opt-out system – for cadaveric organ donations. [FWIW, I do not, nor do nudgers Thaler and Sunstein.]

• No US state uses a presumed consent system; rather, opt-in (explicit consent) or active choice mechanisms are employed.

• Presumed consent does, at least, “make it easy” for (what is apparently) the majority of the population that wants to be on the organ donor list. Nonetheless, presumed consent can seem, well, presumptuous.

• With presumed consent, family members (next of kin) of potential donors might be unsure of their deceased relative’s wishes, given that there is likely not to be an explicit indicator of those wishes.

• Donor lists tend to grow (markedly) when presumed consent becomes the rule – although many of the new additions to the donor roster did not get there through an active choice.

• The procurement of organs for transplant, and the number of transplants, also seem to be enhanced (though not so markedly) by a presumed consent system.

• Active choice is where people are encouraged to explicitly say yes or no (or perhaps yes or later) to a query about whether they would like to be an organ donor.

• Mandated choice is where the encouragement to answer is somewhat more forceful.

• An active choice system where the choice easily can be postponed or avoided does not seem to enhance donor lists.

• Surviving family members generally get to make the call on donations, even when the deceased opted into the donor list. It might be sensible to nudge family members, if the goal is more donations. 

Kirgios, Mandel, Park, et al. (2020) on Temptation Bundling

Erika L. Kirgios, Graelin H. Mandel, Yeji Park, et al., “Teaching Temptation Bundling to Boost Exercise: A Field Experiment.” Organizational Behavior and Human Decision Processes 161: 20-35, 2020.

• Temptation bundling came to the world's attention (er, my attention) in a 2014 article by Milkman, Minson, and Volpp. Temptation bundling is when you pair a "should" behavior –exercise, for instance – with a "want" behavior, an indulgence such as listening to a captivating, somewhat trashy novel. The idea is that the pairing makes it more likely that you actually will engage in the "should" activity, and it will be more enjoyable than it would be without the tied "want," while you also will reduce the guilt feelings associated without giving in to an indulgence. Hmm, I might have some (vegan, of course) chocolate while blogging...

• The 2014 article had a pretty small sample size (226) and findings that suggested temptation bundling did provide, in the short-term, a boost to engagement with the "should" behavior.

• The 2020 article (which involves as a co-author Katherine Milkman, part of the original temptation bundling team) works with a commercial fitness company to test temptation bundling on a much larger sample. The experiment sticks with the audio books/exercise pairing, but with about 15 times the previous number of participants.

• A new question that is looked at is whether would-be exercisers actually have to be told about temptation bundling, or can an exercise gym company, by giving people an audiobook in the context of encouraging exercise, induce their customers to temptation bundle on their own? The term of art the authors employ is "information leakage." That is, even without being told or advised to bundle, maybe just being given access to an audio book by your gym induces temptation bundling.

• A chain of gyms introduced a 28-day long StepUp Program for their millions of members, with some rewards for participating. The Program was described as “a habit-building, science-based workout program [p. 23].” StepUp served as the locus for tons of research: "Our study was one of 20 preregistered studies embedded in the StepUp Program... [p. 23]." 

• Within the framework of the StepUp Program, more than 2,300 people participated in a temptation bundling experiment. About half of the participants were informed they had been gifted a free audiobook, and they received a code allowing them to choose and download a book. The other half received the same audiobook gift and were encouraged to use the book in a temptation bundle with exercise; this encouragement continued throughout the month.

• Most people (some 86%) didn’t bother to collect their free audiobook. Now I am sad. In some sense, we are back to a small sample: less than 200 subjects in each of the conditions downloaded their free audiobook. 

• Gym attendance is the main variable of interest. The free audiobook offer, whether paired with temptation bundling encouragement or not, increases workouts by something like 10 to 14%, both during the Program and up to 17 weeks later. (This result comes from a variation of the experiment that includes a third control group of participants who are not offered a free audiobook.)

• The marginal impact of the temptation bundling is pretty small (effectively zero during the 28-day treatment period), perhaps inducing some people to go to the gym (in the long run) who would not otherwise have gone. 

• A follow-up lab experiment establishes that information leakage might be what drives the very similar results for the audiobook treatments, with and without the temptation bundling encouragement. (As the lab experiment was not part of the original pre-registration, presumably its utility was understood only after the  original experiment showed near identical results for the two conditions.)

• In my view, this experiment removes a bit of the luster from temptation bundling. I'm a bit disappointed, really – not in the experiment itself, which is superb, but by the meh, alas, results. 

Leitzel (2021) on Regulating Cocaine

Jim Leitzel, “Double Defaults: Behavioral Regulation of Cocaine.” Journal of Behavioral Economics for Policy 5(1): 7-12, 2021 [pdf here]. 

• Can we protect against the dangers of excessive or highly risky cocaine use without imposing the huge costs that accompany cocaine prohibition? 

• Yes, we can! We can offer some protection against diseased or impulsive decision-making, without posing a large barrier to “rational” cocaine use. 

• We can manage the supply side like alcohol, perhaps, or prescription drugs, but… we also can “nudge” people towards rational cocaine-related behavior. 

• We can take advantage of the surprising power of default options. 

• The First Default: You are Not Eligible to Purchase Cocaine. 

• If you are of age, you can choose to override this default of ineligibility.

• Pass a test, pay a fee, acquire a cocaine buyer’s license; behave well or you will lose your cocaine buyer’s license!

• The Second Default(s): You Can Only Purchase Cocaine in Moderate Doses.

• Prices, Quantities, Waiting Periods – the default settings on all of these are aimed at enforcing modest consumption. The waiting period involves ordering your cocaine purchases in advance, by three days, say. 

• At some cost (time, money), you can override these default terms for more liberal access to cocaine (if you have a record of unproblematic cocaine-related behavior); alternatively, you can opt-in to more stringent rules, at low cost or even some subsidization. Want to only be allowed to purchase cocaine on weekends? – great, you can impose this restriction, and the suppliers will enforce it.  Want to have a cocaine-free February? Great, you can put in a no-purchases-during-February rule, and the sellers will enforce it.

Bittschi, Dwenger, and Rincke (2020) on Nudging Donor Loyalty

Benjamin Bittschi, Nadja Dwenger, Johannes Rincke, “Water the Flowers You Want to Grow? Evidence on Private Recognition and Donor Loyalty.” CESifo Working Paper No. 8424, July 2020. 

• Nonprofit organizations often are heavily reliant on recurring donors; most studies of how to nudge contributions look at one-time, not recurring, donations. 

• Can a nice “thank you” message enhance donor “warm glow,” and motivate donors to continue their support? 

• Germany has a church tax, where church members are assessed a surcharge of 8 percent on their income taxes to finance the church. (In the sample in this article, the amount of the tax averages 478 euro per year, but with significant variance.) 

• The connection to the personal income tax makes the church tax progressive – like the fee structure for American Economic Association members? – and low-income church members pay no church tax.

• The church tax, which is automatically deducted from paychecks, is a default for anyone who is baptized, though individuals can opt out of paying it! Opting out requires “an official declaration made in person at a district court [p. 5].” People who opt out cannot enjoy the full panoply of church-provided services. 

• The authors conduct a large-scale field experiment, n≈198,000, circa 2015. Half the sample receive a letter thanking them for their church tax payments and are told that they are making “an important contribution to our community.” This is termed “a private recognition treatment.” (A postal survey of n≈1,000 provides another source of data.)

• The issue examined is how the receipt of the letter affects opt-out rates in the coming 12 months. 

• The survey suggests that people who receive the thank-you note hold higher opinions of the church and feel more appreciated. (Receipt of the letter does not make people feel better about the government.)

• The thank-you note seemingly does reduce opt-outs over the course of the year, perhaps by as much as 9% -- the “extra” church taxes collected exceed the costs of mailing the letters! The letter seems particularly effective at keeping low-income church members involved. 

• The highest-income people increase their opt-outs, however, immediately after receiving the letter, though over the course of the year, the receipt of the letter doesn’t seem to change opt-out rates of the wealthy.

• The century-plus imposition of church taxes collected by the German state might be doomed, letter or no letter, as people quit church to avoid the tax.

Holz, List, Zentner, Cardoza, and Zentner (2020) on Nudging Tax Compliance

Justin E. Holz, John A. List, Alejandro Zentner, Marvin Cardoza, and Joaquin Zentner, “The $100 Million Nudge: Increasing Tax Compliance of Businesses and the Self-Employed Using a Natural Field Experiment.” NBER Working Paper 27666, August 2020 (pdf here). 

• The tax authorities send you a message… 

• ...maybe the message just happens to mention the upcoming tax filing deadline: the control arm 

• ...maybe the message also notes the potential for your tax evasion to be publicized – one treatment arm, designed to increase the salience of social penalties for being a tax cheat. 

• ...maybe, instead of highlighting the public nature of identified tax evasion, the message notes the potential for your tax evasion to result in imprisonment – another treatment arm, designed to increase the salience of criminal penalties attached to tax evasion. 

• And for each of the three arms noted above, we can take half of the letter recipients and also mention in the letter that the tax authorities are prepared to potentially view mistakes in tax declarations, even honest mistakes, as intentional. (The notion is to frame evasion as a sin of commission, not of omission.) Mistakes imply that you were trying to be a tax cheat! 

• This very natural field experiment is conducted in the Dominican Republic, circa 2019, n≈56,000 firms and n≈28,000 self-employed people; tax evasion reportedly is rife in the Dominican Republic. 

• The field experiment applies to business entities subject to the corporate income tax and to self-employed taxpayers subject to the individual income tax. 

• The various messages are sent shortly before the tax filing deadline. 

• The threat of public disclosure of tax evasion dissuades tax evasion for both firms and individuals. 

• The “prison” message also reduces evasion, and for firms, about twice as effectively as the “publicity” message. 

• Framing evasion as an active choice, a sin of commission, in itself (without publicity or punishment prompts), does nothing (or worse than nothing), and likewise is ineffective if it is paired with the publicity notice. 

• But the combination of “intentional” framing with the prison message doubles the impact of the prison message. 

• The effectiveness of the interventions seems to arise from a decrease (by 20%) in potential taxpayers who declare (falsely, presumably) that their income is below the minimum required for taxation. 

• Large firms drive the reduced tax evasion – there is little or no compliance gain from the smallest 60% of taxpayers.

Sunstein (2020), “Behavioral Welfare Economics"

Cass R. Sunstein, “Behavioral Welfare Economics.” Journal of Benefit-Cost Analysis 11(2):196–220, 2020. 

• Economist Douglas Bernheim (2016) lists three premises when discussing individual welfare: (1) a person is the best judge of her wellbeing; (2) judgments are governed by our coherent, stable preferences; and, (3) preferences are what guides our choices. 

• None of these premises is self-evident; indeed, they might all be incorrect. 

• If people lack stable, consistent preferences, or if their choices are skewed by bias, how can we judge how well off they are, how good a job they are doing at serving their own interests? Further, their preferences might be shaped by rules and laws, so crafting rules to promote current interests might be a mistaken (or arbitrary) approach. 

• Behavioral science makes us suspicious of consumer sovereignty, or the claim that people are the preferred judges of their own situation, best positioned to make desirable self-regarding choices. 

• The behavioral evidence rightly undermines our unquestioned respect for consumer sovereignty, but we should be loath to turn it into general disrespect. It might make sense to start with deference to consumer sovereignty, but be willing to look to alternatives if evidence suggests welfare might otherwise be compromised. [Respecting consumer sovereignty as a default...!] 

• A standard description of rationality is that it consists of taking optimal (or, less stringently, reasonable) means of achieving your goals. 

• Nudges or other interventions that are designed to make choices more navigable, to make it easier for people to achieve their goals, are paternalistic with respect to means. 

• Economists generally are not in the business of questioning people’s goals, the ends they have in mind – but Professor Sunstein suggests that there can be strong evidence, in some settings, that (self-regarding) ends should be questioned: “The ends that people choose might make their lives go less well [p. 196].” 

• So, Sunstein starts from a position of alignment with Bernheim, where individual self-regarding choices are respected – but only if those choices are informed and free from behavioral biases. Further, Sunstein will not make a means/ends distinction: the ends could be problematic, just like the means can be. Nonetheless, “means” issues are generally what Behavioral Economics takes on. Tread carefully with “ends” stuff. 

• Bernheim thinks outsiders essentially lack standing to coerce the “direct” choices of others; the outsiders’ preferences are mere opinions and only one opinion, that of the individual involved, counts. Sunstein disagrees. [Benheim refers to choices that matter in themselves as "direct," whereas choices that only matter instrumentally in serving some larger purpose are "indirect."]

• People might be bad at forecasting the welfare they will receive from a choice, and prospective and experienced welfare needn’t match. (We might add retrospective welfare into the confusing mix, too.) 

• The three main contenders for what identifies “welfare” are: (1) preferences; (2) Subjective Well-Being; and (3) (the obtainment of) specified "objective" goods. All of these approaches to welfare are inadequate. 

• There are many circumstances in which people’s choices are wrong, with serious welfare consequences. And what is a direct choice? Perhaps “direct” issues only come in such high levels of abstraction – enjoy a good life – that choice architects in practice are unconstrained by respect for such issues. 

• Given the increased scope for intervention provided by behavioral considerations, how can they be held within reasonable bounds? Guideposts we can use for increasing our respect for individual choices are that the choices be informed, active, free of biases, and the product of a broad perspective.

Le Grand (2018) on Government Paternalism

Julian Le Grand, “Future Imperfect: Behavioral Economics and Government Paternalism.” Review of Behavioral Economics 5: 281–290, 2018.

• Nudges and even stronger government interventions are often justified on the grounds of allowing long-run, more considered or "truer" individual preferences to assert themselves. But there are problems with identifying and privileging any one set of preferences. This article offers two justifications for paternalistic interventions that do not rely on identifying true or long-run preferences. 

• The defense of paternalism offered here applies (as is usually the case in economics) to means-related paternalism, not ends-related. People's goals are taken as given (and, implicitly, rational); can policies be designed to empower people to better achieve those goals?

 • What if the government sees people engaging in an activity like smoking that the government believes will have future costs for smokers that with a high probability will more than compensate (in terms of the smokers' own values) for the increased value they enjoy from smoking now? 

• The government might reasonably want to dissuade such smoking, but why would smokers make such a mistake? Maybe they lack information, so there is much to be said for ensuring that accurate information is readily available – but this is not the same as justifying a smoking tax or ban. Maybe smokers use a different discount rate than does the government in comparing current with future costs and benefits – again, this difference should not license coercive interventions by the government.

• But maybe (drawing upon Le Grand's 2015 book with Bill New) the problem is that smokers suffer from one or more "reasoning failures": "limited technical ability, limited experience or imagination, limited willpower and limited objectivity [p. 286]." In particular, can a young smoker imagine a realistic portrayal of herself as a 65-year old? The failure of imagination is not a problem of too little information about the health risks of smoking; rather, it is a lack of knowledge of how the well-being of future selves will be affected by current smoking. A paternalistic policy can be justified not only on the basis of better knowledge of true or more-considered preferences, but on a better understanding of health effects on well-being. 

• A second defense of paternalistic interventions might be to consider how a person's future selves might contract with current selves to influence current decision making. Government could serve as a stand-in for those underrepresented future selves. Now the justification for a paternalistic intervention is market failure, in that future selves generally are unable to participate in market transactions that nevertheless implicate their interests.

• Le Grand adapts an example from a 2018 book by Robert Sugden. A young person inherits from an uncle a wine collection, though she has little interest in wine, and does not place much value on her inheritance. But her father suspects that in a few years the young person will feel differently. So he could offer her a low price for the wine today (which she will accept), and after a few years, offer to sell it back to her at a higher price. If the father was right, she will agree to both transactions, and everyone is happy. 

• For goods which, unlike wine, cannot be transferred, the government could arrange a similar (though not voluntary?) deal, by subsidizing smoking avoidance today, with the subsidy repaid by taxes in the future on the now older non-smokers. But does this "contractarian approach" avoid the identification of a true or long-term preference? Le Grand thinks that it does not, as the (imposed) subsidy is designed to override the young person's current preferences.

Špecián (2019) on True Preferences

Petr Špecián, “The Precarious Case of the True Preferences.” Society 56(3): 267-272, June 2019.

• Are voluntary trades (with no spillovers) Pareto improving? To assert that they are suggests a belief in coherent preferences. This is the standard economics approach: choices reveal underlying, true preferences.

• Behavioral evidence undermines the belief that choices reveal true preferences. Nonetheless, nudges aim to make people better off “as judged by themselves," so there is an appeal to some underlying true preferences from which those judgments emerge.

• But when can we know that people's un-nudged choices do not reflect their true preferences? How can we determine which preferences should be disregarded or questioned? Signposts of potential irrationality might include rare choices, intertemporal choices, choices involving temptation goods…

• Can we rely upon cold-state (as opposed to hot-state) preferences, or long-run, considered preferences, as somehow being "true" preferences? But maybe these proclaimed "more considered" preferences reflect social norms and are just marketed for public consumption, even as people really want to be Mr. Hyde, not Dr. Jekyll. 

• Perhaps Sugden (2008) is right, perhaps there are no underlying coherent preferences at all.

• Nudgers might believe that their interventions make matters better in practice even if these fundamental questions about how to judge individual welfare remain unresolved. [That's pretty much my view, too -- JL] Nudgers should be humble, and wary of overconfidence.

Benartzi, Beshears, Milkman et al. (2017) on Government Investments in Nudges

Shlomo Benartzi, John Beshears, Katherine L. Milkman, Cass R. Sunstein, Richard H. Thaler, Maya Shankar, Will Tucker-Ray, William J. Congdon, and Steven Galing, “Should Governments Invest More in Nudging?” Psychological Science 28(8): 1041–1055, 2017.

• Government nudge units have thrived since the British showed the way in 2010; these units have set up canny defaults or streamlined paperwork or otherwise looked to make presumably desirable behavior easy for individuals to implement.

• But nudges, with their definitionally-low impact on "standard" (monetary, say) incentives, are not the only way to alter behavior, nor necessarily the cheapest. They do, however, tend to be cheap, so even a small behavioral impact might be well worth the nudge expense. 

• An e-mail nudge aimed at inducing US military personnel to enroll in a retirement plan increased enrollments in one month from a baseline just above 1 percent to somewhere in the 1.6 to 2.1 percent range; this nudge cannot be said to be wildly effective, but it was so inexpensive that the increased retirement savings per dollar invested were quite large (and orders of magnitude larger than with traditional monetary incentives targeted at inducing savings).

• "To be maximally informative, future policy-oriented behavioral science research should measure the impact per dollar spent on behavioral interventions in comparison with more traditional interventions [p. 1042]."

• The authors identify policy outcomes such as the amount of retirement savings and then scour the academic literature (highly-ranked journals) for relevant studies of both nudge and non-nudge policy interventions, for the purpose of calculating impact (on the chosen outcome variable) per dollar spent. In addition to retirement savings, the outcome variables include energy conservation, college enrollment, and influenza vaccination.

• For each outcome measure, the oomph-per-dollar ratio is highest (easily) with a nudge intervention as opposed to a traditional policy lever aimed at, for instance, monetary incentives. (This is not to say that all nudge interventions are comparative winners, just that the most cost-effective policies are nudges.) Automatic enrollment in retirement plans, for instance, is better at increasing savings (per dollar spent) than is a subsidy such as providing a 50% match for individual contributions.

• Nudges seem to be particularly cost effective when the problem that is being addressed implicates shortfalls in the rationality of individual decisionmaking. In these settings, small changes in the choice architecture can have large effects, whereas monetary interventions to improve the benefit-cost calculus that presumably underlies those individual decisions are both expensive and rather ineffective.

• In some circumstances, nudges and traditional policy interventions might be effective in combination.

• The evidence suggests that the current investment in nudge interventions is suboptimal.

Cronqvist, Thaler, and Yu (2018) on Long-Lasting Nudges

Henrik Cronqvist, Richard H. Thaler, and Frank Yu, “When Nudges are Forever: Inertia in the Swedish Premium Pension Plan.” American Economic Association Papers and Proceedings 108: 153-158, 2018.

• Perhaps nudges such as default settings initially are quite powerful, but over time lose their influence as people get around to shifting to a preferred option.

• The Swedish Premium Pension Plan was initiated in 2000, and by 2016, served more than 7 million Swedes. The nudges that accompanied that plan have proven to have long-lasting consequences.

• One nudge concerned the default pension plan that savers were placed into if they didn't explicitly choose one of the hundreds of options. 

• A second nudge involved trying to convince savers that they indeed should make a positive choice themselves, that is, that they should override the default. This second nudge was surprisingly effective, in that 2/3 of the initial pension participants made an explicit choice of their investment portfolio. 

• But this second nudge only operated at and near the inception of the plan, in which the large initial cohort (4.4 million people) entered the pension scheme. The annual flow of new entrants then became much smaller, with less than 200,000 entering in 2016. As a result, the public and private advertising which constituted the second nudge dissipated within a few years. The percentage of enrollees choosing their own portfolio in subsequent cohorts fell to less than 10 percent by 2003, and after 2007 has always been four percent or below. 

• Those in the initial, large cohort who stayed with the default tended to continue with the default, though more than one-quarter of them did eventually choose a different portfolio. Of those who initially chose to make their own portfolio choice, less than three percent later decided just to go with the default. They also displayed quite a bit of attachment to their initial portfolio choice, even though they could alter it more or less continuously if they so chose. 

• The features of the default fund changed markedly in 2010 and 2011, removing a bias towards investments in Swedish companies (2010) and increasing the amount of leverage significantly (2011). These major reforms did not seem to alter the attractiveness of the default, few people opted out even though the financial characteristics of their pension plan were significantly changed.

• A 2017 corruption scandal at one of the leading pension funds also was not met with the huge abandonment of that fund that might have been expected.

• The Swedish pension nudges have had very significant, long-term effects! Nudge wisely!

Fennell (2019), "Personalizing Precommitment"

Lee Anne Fennell, “Personalizing Precommitment.” University of Chicago Law Review 86(2): 433-458, March 2019.

• Achieving long-term goals such as losing weight or writing a book requires the cooperation of many temporal selves of the same individual -- and perhaps the indulgences of some Mr. Hydes will undermine Dr. Jekyll's best-laid schemes. Precommitment can help, and the law might have a role to play in making such precommitments more available.

• Fennell invokes the "scale mismatch" terminology of Drazen Prelec; scale mismatch is when the goal (such as losing weight) is achieved in aggregate terms but the steps (literally?) to achieve the goal are lots of small individual decisions.

• Rigid rules – exercise one hour every day – might work in overcoming these temporal internalities, but such rules might be excessive or so demanding that they are abandoned.

• Perhaps people can fashion their own, less rigid but more sustainable rules? Good choices of “partitions” and “menus” can aid the process. For instance, appropriate serving sizes and types of serving utensils and single-serve packaging: all of these nudges can contribute to achieving a weight-loss goal.

• Segmentation eases metering and monitoring. How much cake did I eat? It might be easier to know the answer when the cake is consumed in segmented units -- I had three cupcakes -- than when I just keep picking at some unsegmented blob o' cake.

• Writing a book might be made manageable by segmenting the task into chapters and sections. But…while smaller chunks are easier to complete, given scale mismatch, they also look less meaningful in terms of progress, and more capable of postponement.

• Instead of segmenting work time, what about segmenting time not spent working – like limiting breaks to ten minutes?

• Monetary issues often can be addressed with precommitments and partitions. Purchasing a home can be a sort of forced saving – but this commitment device can be undone by easily acquired home equity loans. Can programs be provided that allow people to opt into a "no home equity loans" condition? 

• People might try to earmark money for savings by having special accounts or even physical envelopes -- though the commitment can be undone if an emergency arises. In general, setting high savings targets with sub-partitions (so that prematurely opening one savings envelope does not mean that all the others are opened, too) looks like a pretty good strategy. Even precommitting some money to indulgences can aid the larger goal of saving money. Should bank savings accounts come with earmarked sub-accounts that are made salient in web-based representations, say?

• Online menus could be personalized, by removing some excessively tempting items at the consumer’s request. 

• Rigid rules such as “no dessert” prune the menu to two choices: comply or don’t comply: “the reason that they can be so effective – the extreme chunkiness of the choices they present – is also the reason why they often fail” 

• Rules change the effective payoffs: the good choice becomes more automatic, and the wrong choice bears a higher price. 

• Lapses can induce further failures. Ex ante, it often is best to believe that behavior is bundled, that a lapse today will mean a rapid downward spiral. (Fennell calls such notions "behavioral firewalls"; in this case, good behavior today prevents future bad behavior.) Ex post (after a lapse), however, it is best to believe that the lapse was anomalous, that it doesn’t fore-ordain future behavior. Now the firewall changes: future behavior must be sealed off from the lapse.

• As with money set aside for financial indulgences, limited, planned exceptions can be helpful – but perhaps not implementable, perhaps zero tolerance, rigid rules are needed. 

• Receiving an income tax refund can be a form of forced savings or a welcome source of wam – but private firms can offer products that undo the commitment element of tax refunds. The IRS, incidentally, provides a split-refund facility, to allow the funneling of part of a refund into savings.

Cooke, Diop, Fishbane, et al. (2018) on Failure to Appear in Court

Brice Cooke, Binta Zahra Diop, Alissa Fishbane, et al., “Using Behavioral Science to Improve Criminal Justice Outcomes: Preventing Failures to Appear in Court.” ideas42 and the University of Chicago Crime Lab, January 2018 [pdf].

• In NYC in 2014, about 41% of summons to appear in court for minor infractions went unheeded.

• Missed court hearings are costly to the court and to the defendants, who have a warrant issued for their arrest.

• But perhaps behavioral factors, not preferences, are at the root of many missed court dates; maybe people forget, or fail to plan to miss work, or don’t understand the consequences, or just aren’t paying adequate attention. (Court dates can be months after the offense.)

• Perhaps present bias leads to failures-to-appear (FTAs): the benefits of skipping a court date are immediate and the (uncertain) costs are in the possibly distant future.

• “Mental models” (such as the belief that minor offenses do not warrant a court appearance) and perceived social norms (a belief that most people don't show up at court for minor matters) might also lead to FTAs.

• The researchers redesigned the summons form, to: (1) increase the clarity of the message that the form constitutes a summons to court; (2) highlight date, time, location for the court appearance; and to (3) foreground the consequence (an arrest warrant) for failing to appear. 

• The researchers also instituted a series of text message reminders about the court date. Some reminders focus on consequences of a missed court date, and some on planning. The sample size for this intervention is about 20,000. 

• Both interventions are analyzed as randomized trials. 

• The new summons forms reduce FTAs by 13%. 

• The most effective text messages reduce FTAs by 26%; and, when a further text message is sent to those who miss their court dates, the end result is a 32% reduction in warrants issued. 

• The researchers estimate that the two interventions (redesigned form and text reminders), combined, could have reduced FTAs in 2014 by 20,000 to 31,000 or so. 

• Incidentally, text messages are really cheap to send, but most arrestees currently do not provide a cell phone number.

Sunstein (2018) on "Misconceptions About Nudges"

Cass R. Sunstein, “Misconceptions about Nudges.” Journal of Behavioral Economics for Policy 2(1): 61-67, 2018.

• Professor Sunstein examines seven mistaken or misleading – but frequently voiced – complaints about nudges. 

• (1) “Nudges are an insult to human agency” But…compared to what?; how can the provision of information, for example, be such an insult?; try active choosing if defaults make you nervous – but people often prefer a default!

• (2) “Nudges are based on excessive trust in government” But…compared to what?; governments must nudge; nudges, by definition, have low “error” costs; the private sector engages in lots of nefarious nudging; nudges can (and should) be made transparent.

• (3) “Nudges are covert” But…aren’t GPS devices and warning labels transparent?; is this misconception based on concerns about randomized field experiments?; transparency doesn’t seem to undermine the effectiveness of nudges.

• (4) “Nudges are manipulative” But…how is a reminder manipulative?; maybe a graphic warning is a little manipulative, ok?; but in general, manipulation should be made of sterner stuff. 

• (5) “Nudges exploit behavioral biases” But…do GPS and other technologies that improve navigability exploit a bias in a nefarious way?; many nudges counteract behavioral biases, such as inertia; nonetheless, defaults might indeed work because of inertia.

• (6) “Nudges wrongly assume that people are irrational” But…well, let’s say boundedly rational; nudging is inevitable; we needn’t resolve every philosophical issue to make pragmatic progress. 

• (7) “Nudges work only at the margins; they cannot achieve a whole lot” But…millions of additional school meals consumed?; billions in increased savings?; sigh.