Using the power of nudges is better rather than pushing us to revolt
Ebrahim Patel should know that behaviour can be shifted by simply informing people what others are doing
As the country nears its ninth week of lockdown, South Africans are increasingly frustrated with being confined to their homes and having their civil liberties curtailed. Across mainstream and social media, the overwhelming initial solidarity and support for the lockdown has mutated among many to outright rage and rebellion.
It is therefore little wonder that people have been infuriated by trade, industry & competition minister Ebrahim Patel’s Soviet-like restrictions. His regulations on not only what clothes consumers can buy but how they should wear them have, quite correctly, come under heavy criticism.
That said, I have a lot of sympathy for government policymakers at this time. Faced with a crisis for which there is no policy playbook, they have had to experiment and learn by doing. Of course, this is no excuse for not thinking things through properly or for applying a brute-force algorithm to nuanced public policy problems.
The real policy problem Patel is trying to solve is: how do I modify consumer choices and decisions so the outcome results in people socially distancing for as long as possible? Luckily for him, behavioural economists have long been seized with a variation of this very question. One of those, Prof Richard Thaler of the University of Chicago, was awarded a Nobel prize in economic science in 2017 for his work on the theory of “nudging”.
Thaler’s theory is as simple as it is powerful, but let us start with a definition. A nudge is defined as any choice that modifies people’s behaviour without explicitly forbidding any options or significantly changing the economic incentives.
For an intervention to count as a nudge, it must be easy and cheap to avoid. Nudges are also not mandates — for example, placing fruit at eye-level in a store is a nudge for consumers to buy food that is more healthy, but banning junk food is not.
A choice architect is someone who has responsibility for setting the context in which people make decisions — much like a doctor describing alternative treatments, the person designing a form for a store account, or a salesperson laying out a car showroom.
The theory posits that by effectively deploying both incentives and nudges, you can improve people’s lives while still retaining everyone’s freedom to choose. This is described by Thaler and others as libertarian paternalism — the idea that it is legitimate (and sometimes necessary) for a choice architect to influence people’s behaviour to help make their lives longer and healthier while preserving freedom of choice.
Patel, who has been a central actor in SA’s economic policy for more than a decade, should know by now that economic theory assumes humans are rational agents who make most decisions in pursuit of their own self-interest. He should also know that human beings cannot be entirely rational. People act on heuristics, a fancy word for “rules of thumb” — anchoring, availability and representativeness or similarity.
It is also true that consumers often make mindless choices and follow the herd, sometimes to their own surprise. So, when choice architects want to shift behaviour with a nudge, they can often achieve their goal by simply informing people what other people are doing.
A study by the Harvard School of Public Health found that in the US, adult males often engage in binge drinking because of an exaggerated understanding of how much other people drink. The university advised legislators that the most effective way to reduce drinking would actually be to emphasise the statistical reality, which is that most Americans don’t drink at all. The same reality applies to SA.
In another study, the World Bank found that when Brazilian households were told how much electricity they had used in previous weeks and were given (accurate) information on the average energy consumption by households in their neighbourhoods, in the following weeks above-average users tended to decrease their energy usage, though below-average users also increased their usage.
The government of Spain has successfully used nudging to increase organ donation rates and now boasts a donor rate more than double that of the US and the EU.
To borrow from Vladimir Lenin, it is neither possible nor desirable for the state to control everything. We know from behavioural economics that small changes in context greatly influence behaviour. Patel should pivot from writing edicts about what we should wear and rather engage in the much more difficult job of influencing South Africans positively, while helping to preserve their precious liberty.
• Khoza is principal in Absa Corporate & Investment Banking’s investment banking division.
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