When Nudges Fail: Designing Better Behavioral Interventions

When Nudges Fail: Designing Better Behavioral Interventions

Nudges are indirect suggestions used to encourage people to take a certain action, while still allowing them the freedom to deny the recommendation. Though they are a widely employed strategy to improve the welfare of target populations, nudges do not work in every circumstance. In fact, many nudges may even end up risking the welfare of their intended audience rather than improving it.

Cass R. Sunstein, founder and director of the Program on Behavioral Economics and and Public Policy at Harvard Law School, recently published an article titled “Nudges that Fail,” describing different ways that nudges are ineffective, or sometimes a bad choice for behavioral interventions. In the article, Sunstein examines a particular kind of nudge called default rules, which are often used in promoting certain behaviors. Default rules are guidelines that dictate what happens if someone does not actively select a different option, or choices that are automatically made available to users.

Although many studies have shown default rules to have positive effects in behavioral change, they are far from perfect. Sunstein makes two main arguments that help us understand why and when default rules may fail:

  • Default rules may be overridden should the chooser have strong contrary preferences to an alternative choice.
  • Many interventions are nullified by “counternudges,” or offers and actions taken by self-interested third parties that have stake in the choosing population’s outcomes.

Procrastination may be a leading factor in the success of default rules. Why take an action now if you can put it off until later? Default rules allow for choosers to either postpone or take no action. However, there are often alternatives to the default rules that, although require more action, have a powerful cultural or reasoning behind motivating the chooser, such as a woman changing her surname after marriage. Changing your name requires updating numerous accounts, addresses, and other documents, but has compelling cultural preferences that motivate people to make the change.

In addition to cultural preferences, third-party intervention may also threaten the effectiveness of default rules. For example, the Federal Reserve Board (FRB) passed a default rule stating that banks could not automatically enroll their customers in to any sort of “overdraft protection plan” in 2010. These plans often do not actually protect customers and tend to disproportionally effect low-income customers. However, many banks who earned fees from such programs provided “counternudges” to enroll these programs. Banks facilitated “opt-in” from their customers by “exploit[ing] a behavioral bias” and making customers to feel that they will be better off enrolling in a protection plan. In this case, the efforts of the FRB to protect customers ultimately failed due to the interest of third-party corporations.

Sunstein’s article helps us to understand that while nudges can positively impact behavior, interventions must carefully consider the pitfalls associated with their use. These threats need to be addressed in the experimental design to achieve the most accurate results.

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