Home Economics & PolicyComment A nudge in the right direction

A nudge in the right direction

by Fadi Makki

From preventing simple traffic violations to curbing rampant corruption, ensuring compliance with the rule of law in Lebanon is a serious challenge for policymakers. Heavy-handed controls often do not work, as they rely on individuals making rational decisions, and financial incentives are not sustainable in the long-run. What else can the government do to improve compliance and promote a rule-of-law culture?

Part of the answer lies in a concept known as nudging: using cost-effective policy tools to steer people in the right direction by making small changes in the environment, without restricting their freedom of choice. Effective nudges include placing healthy food items at eye level in cafeterias to increase healthy eating habits, telling households about their neighbor’s energy-consumption levels to encourage them to reduce their own consumption, or texting parents about their children’s progress in school to engage them in their kids’ academic performance. The trick to getting people to change their behavior is, as the 2017 economics Nobel laureate Richard Thaler put it, to “make it easy.”

Irrational beings

The theory behind nudging integrates psychology and other insights from behavioral sciences into policymaking, designing policies with realistic assumptions about how people behave.

Classical economic theory is premised on the core belief that humans are rational and base their choices on unbiased beliefs. But books such as “Nudge” by Richard Thaler and Cass Sunstein and “Thinking Fast and Slow” by Daniel Kahneman question that rationality, and provide much of the intellectual backbone for nudging in the past decade.

Former UK Prime Minister David Cameron’s Behavioral Insights Team was the first government agency focussed on nudging, or nudge unit, in the world, and was soon followed by other governments, including former US President Barack Obama’s Social and Behavioral Science Team. In the region, Qatar’s Behavioral Insights Unit led the way in 2016 and was soon followed by Lebanon and Kuwait; Saudi Arabia, among others, is looking to create its own unit in the future. This global explosion of nudge units is driven by the desire to experiment with what works—data-backed interventions—in policy areas such as health, education, inclusion, and finance, rather than rely on intuition.

The impact of such interventions is tested through randomized controlled trials, a common experimentation method traditionally used in clinical trials. Lebanon’s first nudge unit, Nudge Lebanon, has tested numerous small behavioral interventions and demonstrated the profound impact it has on increasing citizen compliance with the law.

In one experiment, Nudge Lebanon partnered with Electricité du Liban to improve timely payment of electricity bills in Saida by sending customers letters informed by behavioral psychology. Among the intervention letters was one that read, “Your country needs you. Be a good citizen and pay your due electricity bill on time,” priming people’s sense of patriotism. Another informed people when 90 percent of their neighbors had already paid, asking if they wanted to join them. These nudges increased timely payment by 15 percent and 13 percent respectively, compared to the control group.

Nudge experiments

In an experiment aimed to encourage drivers and passengers to fasten their seatbelts, hotel valet parking attendants delivered a verbal prompt, “Be safe; please don’t forget to put on your seatbelt.” This increased  the number of those who wore their seatbelt by 82.8 percent compared to the control group. Another experiment reduced the amount of plastic cutlery that restaurants gave out with delivery orders by 79 percent simply by asking people if they actually wanted them.

Other nudge experiments currently underway include efforts to increase payments in Lebanese lira (in line with the central bank’s strategy to reduce dollarization in Lebanon), promote voluntary compliance with the smoking ban in restaurants, reduce illegal u-turns, and encourage victims and witnesses of government corruption to report these incidents and seek legal advice.

Many of Lebanon’s policy challenges have underlying behavioral roots that cannot be addressed with traditional tools: for example, people might have limited willpower to act on their intentions. Policy levers like command and control—threatening punishment to secure compliance—or financial incentives and subsidies fall short in addressing these behavioral pitfalls. Nudging people in the right direction using simple changes in context can help close the gap between people’s intentions and actions.

These evidence-based methods have their efficiency gains for government as well: They could nudge citizens into complying with traffic rules and regulations, bring in much-needed cash flow by increasing on-time payments of taxes and utility bills, get people to save more for their pensions using default rules (rather than relying on people to opt-in to pension schemes), and encourage regular health checks with timely reminders via SMS. While these interventions might not solve all the problems plaguing Lebanon, they can provide inexpensive, measurable improvements that can be built on in the future.

You may also like

Leave a Comment