PM&C leader makes case for ‘nudging’ people with public policy

By Shannon Jenkins

Wednesday October 9, 2019

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The Deputy Secretary of the Department of the Prime Minister and Cabinet has called for the use of behavioural insights in policymaking to subtly influence public behaviour.

Dr David Gruen gave a lecture to the Canada-Australia Public Policy Initiative last month on the art of “nudging”.

Nudging is a behavioural economics strategy designed to influence someone’s decisions in an easy and low-cost way. Gruen discussed the use of nudging in a public policy setting, and challenged the notion that influencing someone’s behaviour could be unethical.

“For those with a strong libertarian bent, any attempt by governments to do this is unacceptable. But I think that criticism is too all-encompassing.  It is almost unavoidable that government policies will influence behaviour, whether or not this is consciously intended,” he argued.

“Importantly, the government interventions we are talking about (‘nudges’) preserve the freedom to choose rather than mandating or outlawing any particular option. What we are talking about is making it easier for people to make choices we have reason to believe will benefit them and/or the wider community.”

He referred to a set of “reasonable” ethical rules for nudging, created by the founder and director of Harvard’s program on behavioural economics and public policy, Cass Sunstein.

According to Sunstein, nudges must:

  1. be consistent with people’s values and interests,
  2. be for legitimate ends,
  3. not violate anyone’s individual rights,
  4. be transparent, and
  5. not take things from people without consent.

One successful “nudge”, according to Gruen, was a project by the Department of Health’s Behavioural Economics Research Team. It aimed to lower the number of doctors claiming their after-hours care visits as urgent, which were more than double the reimbursement cost than a non-urgent visit. 

The department suspected doctors were incorrectly classifying visits as urgent. It sent randomised letters to the 1200 doctors with the highest urgent after-hours claims, Gruen explained, to test which letter would influence the most doctors.

“One letter compared that doctor’s billing practices to her peers, showing she was claiming the urgent category far more often than others … The second letter emphasised the consequences of non-compliance, including administrative penalties and legal action … The third letter was the control. It was a standard bureaucratic compliance letter – which ran to three pages,” he said.

While all three letters reduced claims, the peer comparison letter was the most effective and reduced claims by 24%, which Gruen argued was a “great example of how a simple and cheap nudge can yield big dividends”. The 1200 doctors eventually reduced their claims by more than $11 million, and 18 admitted to more than $1 million in incorrect claims.

“What I like about this trial is that the softer ‘nudging’ approach — simply highlighting how a doctor compared to his/her peers — was more effective than the harder ‘compliance’ approach of threatening sanctions,” he added.

Read more: Cass Sunstein’s Bill of Rights for Nudging

He gave another example, where the Behavioural Economics Team of the Australian Government (BETA), Westpac, and the Treasury identified 24,000 consumers who had consistently made low credit card repayments, and sent them a random text message or email reminder. They found that email reminders had no effect on repayments, while the text messages increased credit card repayments by around 28%. 

“What’s more, there was no significant difference in effect between the carefully crafted messages. It was simply the reminder that had the effect, not the specific words,” Gruen noted.

“This is another example of how small, low-cost nudges can have a positive impact on people’s lives.”

He added that in other countries, nudges have been used to encourage a range of behavioural changes such as washing hands, reducing water usage and undertaking physical activity.

“These nudges represent worthwhile improvements in government service delivery and public engagement. They also have the added bonus of making the government’s interactions with the public simpler and more user-friendly,” he said.

Gruen called for an early application of behavioural insights to a range of policy areas, such as retirement savings policy, consumer protection and preventive health strategies. He argued that the nudge approach should inform the development of policy responses to a wide range of issues, rather than trying to “regulate them away”.

“Early in the policy process, we can now start with a richer understanding of human behaviour and build this into the design. We can create space at the outset for faster testing and iteration in policy implementation. We can measure and adapt to the realities of people’s behavioural responses to our policy frameworks as they’re implemented,” he said.

“Behavioural insights can make our policy frameworks more effective, more user-friendly and cheaper to operate. Importantly, they achieve this by supporting people to follow through on their intentions, helping them lead more fulfilling lives. It’s an exciting time to be working in public policy.”

Read more: 

▪ When nudge comes to shove: making e-health opt-out was always a risky venture
▪ Why Martin Parkinson wants a second generation of behavioural economics
▪ Reflections from the founder of Australia’s national nudge unit
▪ New journal delves into behavioural approaches for public administration
▪ The OECD’s six principles for spreading behavioural insights across government

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