Behavioral economics and psychology have become hugely influential in recent years, with various groups attempting to ‘nudge’ us into healthier behaviors, whether in terms of personal finance, energy efficiency or health and wellbeing. Recent research1 from the University of Zurich suggests that nudging may not be quite as influential as we previously thought however.
There is a pretty robust amount of science behind behavioral economics, and no shortage of practical examples of its impact in the field, but the researchers urge us not to regard it as a silver bullet that can solve all problems, but rather something that needs to be applied in a unique way for each situation.
The research set out to explore what it is about a nudge that results in better quality decisions being made, and how do you measure the improvement in the decision from the individuals perspective?
“We can’t determine whether a nudge improves the choices a person makes until we understand how they reach their decisions,” the authors explain. “Depending on which behavioral model we take as a starting point, it is possible to measure the effectiveness of nudges—or not.”
Making better decisions
The traditional rational view of behavior that dominated economics for decades allowed us to gauge the effectiveness of a decision based upon whether it met out needs or not. Assessing decisions in a behavioral economics world is a little bit more complex as the very nature of being nudged manipulates the decisions that are ultimately measured. As a result, the team looked at an alternative approach to try and determine when nudges work (and when they don’t).
Satisficing is a commonly used model of decision making that suggests that people have a satisfactory outcome in their mind, and will consider all available options until this outcome is met, at which point their decision is made. This model doesn’t really provide us with a great deal of insight into the true preferences of the individual however, and such an approach doesn’t really leave one open to being nudged.
Another popular decision making model is the limited attention model, in which we have a limited number of possibilities in mind, and only this limited subset of options is considered. This model does allow us to infer things about that person’s decision making process, and this can be improved by nudging, as if you can nudge a behavior into the subset of choices under consideration, then you increase the chances of it being chosen.
To accurately determine whether nudges can affect how our decision making process requires a detailed understanding of our true need and preference. Without that, it’s very difficult to ascertain whether any nudging that does occur was actually in the best interest of the individual.
“Our findings show that the success of nudging greatly depends on how we view the human decision-making process,” the authors conclude “We can’t conclusively determine whether nudging makes sense as long as current scientific knowledge in economics, psychology and neuroscience doesn’t allow nudging to be assessed in a consistent manner.”
Article source: Does Nudging Always Result In Better Decisions?
- Benkert, J. M., & Netzer, N. (2018). Informational requirements of nudging. Journal of Political Economy, 126(6), 2323-2355. ↩