Wink Wink, Nudge Nudge
Terry Jones and Eric Idle from Monty Python’s Flying Circus
March 22, 2014
When first discussing the Productivity Cycle framework with folks, I often encounter a bit of resistance around the concept of the “demand” component. To be sure, reducing demand to increase productivity is a more nuanced concept than increasing employee effectiveness, optimizing assets or rationalizing activities. And, when viewed through a pristine lens of inputs and outputs, demand appears to sit outside the operational ecosystem. Nonetheless, demand is a critical component for public service organizations to manage, and it is the core driver of increased costs, due to the growth in both populations and service expectations.
Last week, the UK Government announced plans to “mutualise” an agency that has been actively managing demand for the past couple years (a mutual is a government agency that is privatized, creating a public-private partnership that is equal parts owned by the employees, the UK Government, and a private third-party.) The agency in question is officially called the Cabinet Office Behavioural Insights Team, but is better known by its nickname: The Nudge Unit.
Set up by PM David Cameron in 2010 shortly after the coalition came to power. It is a team of 13 academics – made up of economists and psychologists. The unit applies insights from academic research in behavioral economics and psychology to public policy and services. Its nickname comes from a book launched in 2008 called ‘Nudge’ by Richard Thaler and Cass Sunstein. The book provides the original ‘Nudge Theory’ which suggests that bad choices and laziness are part of what makes people human. It suggests making the right choices easier for people, rather than relying on people to act in their self-interest.
The unit looks closely at how citizens make their choices and then tests small changes in how the choices are presented. The objective is to ‘nudge’ people into leading better lives and reduce the cost to the government that is incurred through decision making or behaviours that are not in the individual’s (or state’s) best interest (e.g. decisions to not pay fines or taxes, or decision making as part of the job search for the unemployed.)
Since the unit was set up three years ago, it has become an internationally renowned source of ideas on how to change voters' behaviour without legislation, using techniques drawn from psychology and advertising, as well as common sense.
In addition to working with most government departments in the UK, the unit has worked with local authorities, charities, NGOs, private sector partners and foreign governments, developing proposals and testing them empirically across the full spectrum of government policy.
One example of how the Nudge unit has succesfully reduced demand in the UK relates to reducing the number of people receiving unemployment benefits by getting them back to work more quickly. The unit observed that new jobseekers visiting an employment support center were confronted with a barrage of forms (as many as nine different ones) to complete on their first visit, at which point they were sent home to wait as long as two weeks before an advisor would finally meet with them. The Nudge team set up a trial, splitting 2,000+ jobseekers into a control group (suffering the traditional wait) and a trial group wherein each person met with an advisor on their initial visit and discussed their approach to getting back to work. On subsequent visits, they were encouraged to make clear 2-week action plans, rather than simply being asked what they did in the 2 weeks preceeding the visit. And, if they were still unemployed after 8 weeks, activities such as “expressive writing” and “strengths identification” were prescribed to enhance their “psychological resilience and well-being”.
The result? After 13 weeks, the trial group was 15-20% more likely to be employed, reducing demand on the unemployment system significantly.
Additional examples of proactive demand reduction can be found around the world. And the benfits go far beyond cost reduction. Much has been made of New York City Mayor Michael Bloomberg’s efforts to ban large beverage sales in NYC; but the city’s residents have already benefitted from these types of efforts in the past. In fact, New Yorker’s enjoy a life expectancy almost a year longer than the average American. Why? Well, walking is a key component, driven by the urban density and pedestrian-friendly actions taken by the city. But the city’s 2003 adoption of a broad ban on smoking is estimated to have decreased smoking-related deaths by 10%. And the city’s wide range of healthy food options is considered to be another strong contributor to the increased life expectancy of its residents.
So maybe Mayor Bloomberg has a point when he says that changing the availability of options will change the way people consume less-healthy foods. He’s just giving his fellow New Yorker’s a little nudge in the right direction.