Regulatory and other related government policies primarily aim to alter people’s incentives and hence change their behavior. If the government wants more people to wear seat belts in their cars, it legally imposes a penalty for driving without a seat belt. If the government wants people to consume less sugar, they propose a regulation that limits the amount of sugar in products being sold on the market or they impose sugar taxes.
However, there is another way of influencing citizens’ behavior. People can be nudged in a certain direction without the government introducing public policies or implementing high taxes. As any changes in default options, framing or social influences may have a great impact on the choices people make, public policy creators use insights from psychology to create nudges and as such influence people in a subtler way.
One of the most powerful instruments of nudging is a default rule. People tend to stick to their current position, even when a change would be beneficial to them. If inertia and status quo bias have a great influence on behavior, then a default option plays an important role even if individuals are completely free to choose otherwise.
Serbia and Croatia decided to use the influence of default to nudge their citizens towards being organ donors. As such, Croatia has passed a law that presumes peoples’ consent to be organ donors unless an individual explicitly makes a decision not to be one. In Serbia, a bill is being proposed with the same content. In both cases nothing will be legally prohibited, and no changes in economic incentives have been introduced, though presumed consent to be an organ donor has shown to result in higher rates of organ donation.
This kind of government intervention raises a series of questions regarding personal freedoms. On the one hand, some authors use the term ‘libertarian paternalism’1 to describe policies based on nudging. The word ‘libertarian’ is used because freedom of choice is formally preserved. ‘Paternalism’ means that despite having freedom of choice, decision-making is still influenced in a direction that increases the wellbeing of people2. On the other hand, there are serious critiques of nudging as a new form of influence on behavior that does not respect individuals as independent and capable of following their own goals3.
Human Behavior and Choice Architecture
Many seemingly unimportant and small factors can have a significant influence on our decision-making process. For example, consumers are more likely to buy products that are positioned on the shelf at eye level. Also, people are influenced by what others are doing: if government sends a message that many people support organ donation, it makes us think about becoming a donor.
The way options are framed has a great influence on how people make decisions. As an example, individuals are more likely to accept an operation if the doctor tells them that they have a 90% chance of survival than if they were told that there is only a 10% chance they will die4. When estimating risks and probabilities on their own, people rely on how well they remember events. That is why they estimate that death from a tornado is more likely than from asthma5. During elections, the order of candidates on a ballot has an impact on the number of votes cast6.
Can we explain these systematic deviations from rational behavior? Author Daniel Kahneman7 writes about System 1 and System 2 reasoning. The former is fast, intuitive, and unconscious. It uses shortcuts to make a conclusion and uses less energy. The latter is slow, deliberative, and requires concentration and uses more energy. When someone gives an answer to the question 2 + 2 = ?, he/she uses System 1. When an inexperienced driver tries to park a car on a small space, he/she uses System 2.
1 Thaler, R. H. and C.R. Sunstein (2008) Nudge: Improving Decisions about Wealth, Health and Happiness. Yale University Press.
3 White, M. D. (2013) The Manipulation of Choice: Ethics and Libertarian Paternalism. Palgrave Macmillan U.S.
4 Thaler, R.H. and C.R. Sunstein (2008) Nudge: Improving Decisions about Wealth, Health and Happiness. Yale University Press, p. 36.
5 Kaneman, D. (2015) Misliti, brzo i sporo. Heliks, p. 129.
6 Thaler, R. H. and C.R. Sunstein, (2008) Nudge: Improving Decisions about Wealth, Health and Happiness. Yale University Press, p. 246.
7 Kaneman, D. (2015) Misliti, brzo iI sporo. Heliks.