Gareth's Blog

OK, so I'm a 12 months behind the curve, but I've just finished last year's political must-read "Nudge: Improving Decisions About Health, Wealth and Happiness" by Richard Thaler and Cass Sunstein. The central thesis of the book is that we humans like having choices rather than being told what to do, but paradoxically we're not that good at making the best choice for ourselves or society if the issue is complex. Thaler and Sunstein introduce the rather clunkily titled concept of "libertarian paternalism" which translates into plain English as "the choice is yours, but if I were you I'd pick that one", the second part of this being the 'nudge' of the title.

The book is long on examples and arguments and a little short on the 'how to' aspect, but I've gathered that the three main types of 'nudges' are:

1. The default choice is chosen carefully to be the 'best' one eg should we have to opt out of organ donation rather than opt in?

2. The 'best' choice is the easiest, cheapest or most obvious one eg lower car tax for less polluting vehicles.

3. Sufficient information is disclosed to help the chooser make a good choice (would the current MPs expenses scandal have happened if they all had been forced to disclose their expenses claims to the electorate?).

On some levels this may appear manipulative, but the authors make a strong argument that the alternatives are to either ban undesirable behaviour (the infamous 'nanny state'), or to abandon people to make suboptimal choices.

Chapter 12 of the book is entitled "Saving the Planet" and examples of eco-nudges include:

1. Cap-and-trade for industrial carbon emissions (not cutting emissions is going to cost you, but the choice of how to cut them is yours).

2. Information provision through disclosure, labelling or feedback eg the US Toxic Release Inventory, domestic smart meters, and cars that tell you if you're overdoing the accelerator.

3. Voluntary schemes and standards for industry (the authors use the US 'Green Light' label as an example).

I can think of many more cases where these have been, or could be applied. The EU's energy label (below) has been brilliantly effective in transforming the white goods market, raising the market of share of the most efficient A-rated models from 0 to 76% in a decade. It's easy to see why this nudge works - you can buy any washing machine you like, but as you're spending the money you might as well go for an A-rated machine rather than a D. Who wants a D? And, if no-one is buying Ds, why would anyone manufacture one? The market is transformed, but the only rule is that showrooms have to display the certificate.

Kerbside recycling shows how communities can nudge themselves - once a certain proportion of a street puts out their separated waste participation suddenly shoots up. In contrast, when UK councils started trying to reduce residual waste collections from weekly to fortnightly by dictat there was uproar in the media and some councils changed political control due to this issue alone. Maybe if councils had introduced it by saying "you can keep your weekly collections, but you have to opt in for this on an annual basis" the uproar would have been subdued and the laggards would have gradually caught up with the mainstream as those neighbours who went with the default option demonstrated that the system is OK. Actually, it strikes me that local authorities could benefit most from the 'nudge' approach - they tend to bear the brunt of media attacks on any change ("Town Hall Bullies/Loonies" etc) and this could deflect most of that initial ire and transform behaviour more gradually.

Having read Nudge, I'm not surprised it caused such a fuss in the political sphere and there is a huge opportunity to use it to transform environmental behaviour both within industry and consumers alike. Highly recommended reading.