When push comes to shove: inside the NSW nudge unit

By Stephen Easton

Tuesday July 22, 2014

The NSW “nudge squad” is recording impressive results. The Mandarin examines the history and future of the psychological approach to public policy.

The “nudge” has become a buzzword in public sector circles around the world. But when push comes to shove, is psychology always the answer to policy problems?

Back in 2010, critics howled with derision when the United Kingdom’s newly elected coalition government set up the world’s first Behavioural Insights Team, or “nudge unit”. Four years and hundreds of millions of pounds in savings later, word of Whitehall’s success has spread.

In 2012, the New South Wales Department of Premier and Cabinet brought in one of the UK’s senior nudgers, Dr Rory Gallagher, to help establish its own taskforce, where he remains as managing adviser.

The NSW Behavioural Insights Unit now claims impressive results of its own. Last month, it hosted the first ever international BI conference in Sydney. Several hundred delegates joined leading academics and practitioners in the emerging field — almost exclusively from the UK, the United States, Singapore and Australia — to discuss ways of gently nudging citizens by exploiting their cognitive biases, rather than coercing them.

“What we’re trying to do is design and deliver government services around the way people actually behave,” Gallagher explained.

Based on the nudge unit’s trials, the NSW Office of State Revenue is rolling out new penalty notices and reminders that are forecast to get an extra $10 million worth of fines paid on time each year, saving $80,000 in printing costs alone. The people encouraged to pay on time are expected to avoid about $4 million in extra penalties.

At Westmead Hospital, the nudge unit helped increase the number of emergency in-patients who use their private health insurance by two percentage points. At Auburn Hospital, the same techniques tripled the number of patients using their private cover and, when used in two more local health districts, are expected to nudge the state’s bottom line to the tune of $11 million.

A trial of ways to nudge injured employees back to work sooner finishes up this month. So far, those in the trial group have been back to full capacity 27% faster than the control group, and are three times as likely to have completed their claims within 30 days.

The idea that, in reality, humans are not purely “rational actors” in the classical economic sense is nothing new. Behavioural economics is underpinned by psychological research going back to the 1970s, but the idea of applying the latest in behavioural science across the whole of government was thrust into prominence in 2008 by behavioural economist Richard Thaler and legal scholar Cass Sunstein in the popular book Nudge: Improving Decisions about Health, Wealth and Happiness.

Barack Obama liked it and the following year recruited Sunstein to start nudging his fellow Americans. He moved on to a professorial post at Harvard Law School in 2012, but his efforts were expanded last year with the creation of a US nudge unit, the White House Social and Behavioural Sciences Team, led by Dr Maya Shankar.

The purpose of BI is not to control people’s minds, as critics fear and proponents counter, but to understand why policy isn’t working as it should in any area of government and work out scientifically how to fix it.

The UK and NSW nudge teams do this in a careful, methodical way, collecting data from the front lines of the policy in question and then designing interventions they think will work based on the scientific literature and previous experience, which they test out using randomised controlled trials wherever possible.

“Unless we run robust evaluations we will never know if we’re successful and we don’t want to get into that mindset of just picking stuff up from the behavioural literature, dropping it into policy interventions and assuming it will work,” Gallagher warned.

“It’s not easy to translate a pure theory or approach from academia straight into your public policy system and that is another reason why we’re always keen to run robust trials. We have an experimental approach, which focuses on continuous improvement and learning.”

An ethical minefield?

Ben Newell, an associate professor of cognitive psychology at the University of NSW, says “nudging” is potentially an “ethical minefield” but is confident that, presently, the small BI community is well aware their work could seem “a bit 1984-ish”.

“The one who’s designing the form or deciding what is the correct decision in each situation has a huge responsibility; the onus is really on them to be able to justify why this is the right course of action that someone should be taking,” Newell told The Mandarin.

“When Cass Sunstein gave a talk at the conference he was very clear about that. It’s not trying to force people; it’s just ways of presenting information that might help them make a better choice.”

Sunstein also pointed to a wide gulf between the “high volume rhetoric” of critics and the way nudges have been applied in the real world thus far, telling delegates that libertarians have nothing to fear as long as nudges are “public and transparent”.

Gallagher says this has been the UK nudge team’s modus operandi from day one.

“When people first hear about the government using behavioural insights or psychology in the abstract, they can be suspicious,” he acknowledged.

“But when they see what this actually looks like in practice – for example a simplified form or process – it makes sense and indeed often seems like common sense, so they are generally very supportive of the approach.”

The political context surrounding the UK government’s championing of BI shortly after it was elected in 2010 is also worth noting. “They were looking for innovative new ways of doing policy, particularly in light of financial constraints and regulatory constraints,” Gallagher recalled of Conservative Prime Minister David Cameron’s government.

“The new government had an ambitious policy agenda, but there wasn’t a lot of money available and their approach was broadly deregulatory in nature, so in this context the application of behavioural insights was particularly attractive.”

This year, growing interest in the original BI team’s services from all over the world meant expansion was needed — but the UK government was reluctant to put more public servants on the payroll. In February, the nudge team was partially privatised, becoming a limited company split three ways between its staff, the Cabinet Office and the “innovation charity” Nesta.

Its director-turned-CEO Dr David Halpern is a Cambridge lecturer with a PhD in experimental psychology and, like Gallagher, a former Blair government adviser. He had co-authored a discussion paper highlighting the potential of behavioural science under Labour, but the concept was attacked in the press early on and met with little ministerial enthusiasm.

Both the British Conservative Party and the UK’s coalition government were much more receptive to nudging and it appealed to the NSW Liberals for more or less the same reasons: it presented as a highly cost-effective, evidence-based way to get results in wide range of policy areas while still proceeding with a mission to cut red tape, cut costs, and make dealing with government simpler and easier.

Last May, Halpern and Gallagher met senior Commonwealth executives through the DesignGov initiative, and representatives of the Department of Human Services and the Australian Tax Office detailed some of their own successful nudges at the Behavioural Exchange conference. Whether cabinet sees the value of a centralised nudge unit, however, remains to be seen.

One of the most persuasive arguments in favour of governments using BI is that “nudges are inevitable”, as Cass Sunstein told delegates when he beamed in to the conference room. All sorts of nudges come at us thick and fast every day, including from government offices, whether they’re deliberately trying to influence us or not.

The reasoning goes: if public servants are going to be nudging people anyway, then it’s best to make sure they are steering people in what seems like the most sensible direction, using the latest tools and scientific knowledge.

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