Abu Dhabi, UAESaturday 4 July 2020

Nudge units are just the tool for effective policy

There’s a challenge to economic theories where people base choices on unbiased beliefs. That’s why governments are creating behavioural economics units that 'nudge' towards certain choices. These units are coming to the Middle East.
One of the effective nudges include increasing the prominence of healthy snacks in supermarkets to boost their sales. Brendon Thorne / Bloomberg
One of the effective nudges include increasing the prominence of healthy snacks in supermarkets to boost their sales. Brendon Thorne / Bloomberg

The application of behavioural economics to public policy through dedicated nudge units that conduct policy experimentation and use evidence-based tools, such as randomised control trials, is transforming the way governments design policies as well as operate and deliver services. These units have become powerful models for social entrepreneurship and partnerships in policymaking with academia and social purpose entities jumping on board.

And they are finally landing in the Middle East.

What are nudges? As the name suggests, they are small, cost-effective and choice architecture-type interventions that seek to alter people’s behaviour but without drastically restricting their choices. The use of automatic defaults, for example, to increase employee savings for retirement is perhaps one of the best known nudges. Other effective nudges include simplifying student aid forms to improve student enrolment rates, using reminders to speed up payment of court service fines and increasing the prominence of healthy snacks in supermarkets to boost their sales.

A nudge is neither a heavy-handed regulation nor dictum, neither a costly incentive nor a subsidy. It is another way of influencing people’s behaviour that can act as an alternative, but often times, as complementary option for regulation and incentives.

Standard economic theory is premised on the core belief that humans are rational and base their choices on unbiased beliefs. However, books such as Nudge by Richard Thaler and Cass Sunstein, and Thinking Fast and Slow by Daniel Kahneman, to name a few, question that rationality and have provided much of the intellectual backbone for the rise of nudging.

To date, almost 15 governmental units with dedicated institutional set-ups are in operation, with many more planned. Many of these units – typically made up of policy experts, economists, behavioural scientists, psychologists – are positioned at senior level, including offices of presidents, of prime ministers as well as supreme councils.

The number of such units has more than quadrupled in the past three years. Such accounting does not take into consideration the many ad hoc governmental teams involved in applying behavioural insights to policy issues using randomised trials.

The UK government’s Behavioural Insights Team (BIT), known as the Nudge Unit, is perhaps the first and most successful initiative to date, applying behavioural insights to public policy. BIT started as a unit in the office of the British prime minister, then David Cameron, and is now jointly owned by the UK government, Nesta (the innovation charity) and the BIT’s employees. Its objectives are to reinvent government services by making them more cost effective and easier for citizens to use, as well as to enable people to make “better choices for themselves” by leveraging insights from the behavioural science literature.

BIT has expanded into Australia, Singapore and the US but the “nudge” concept in public policy is spreading fast beyond these geographies and certainly across multiple fields – for example climate change, health, finance, consumer protection, education, finance and utilities.

In one experiment, the UK Revenue & Customs department partnered with BIT to speed up collection of taxes through behaviourally informed letters telling taxpayers that the vast majority of those in their area have already paid. Injecting that social norm message to the letters brought forward £210m of tax revenue in the 2012/13 financial year.

In another experiment that aimed to improve patients follow-through on their hospital appointments in England, the BIT redesigned the appointment reminders that are sent to patients, informing them about the cost of appointments lost by the UK’s National Health Service. The number of missed appointments fell by 25 per cent.

In February 2014, President Barack Obama set up his own Social and Behavioral Science Team (SBST) at the White House. SBST has been particularly successful experimenting with streamlining administrative procedures, simplify forms and reducing regulatory burdens.

Until recently, the Middle East remained far from these developments but the creation of the Qatari nudge unit in August last year, the first dedicated institutional set up of its kind in the Middle East, promises to change the landscape. This unit, which is part of the Supreme Committee for Delivery and Legacy (also known as Qatar 2022), is focusing on areas including sport, health and well-being and labour.

Many of the policy challenges for the region have a behavioural component that if addressed could increase productivity, improve education outcomes, save money, and even save lives. Using simple and cost-effective insights from behavioural science, governments could nudge their citizens into greater compliance with traffic rules and regulations, faster payment of utility bills, better follow-through on medical appointments, higher savings commitments, healthier eating habits and lifestyle, more physical activity.

The Qatar Nudge Unit has charted for itself an optimistic agenda for the country and the region. Being the first in the region puts pressure on the unit to lead by example on policy experimentation and expand adoption of behavioural insights in the region through acting as a centre of excellence.

Other countries in the region are planning similar units, governmental and non governmental, for example, Kuwait at the Secretariat for Development Planning, Lebanon in academia and civil society.

A last observation – albeit not public policy related – concerns the new application of behavioural insights in private sector settings, namely emergence of a new category of professionals, namely behavioural officers and scientists or insights teams.

In fact, some of the world’s most prestigious companies and institutions have advertised for and hired an in-house behavioural scientist, such as Bank of America, Facebook, Google, HSBC, HM Revenue & Customs and Allianz. While this is not yet common in the Middle East, it could soon be.

Fadi Makki is a former director general of the Ministry of Economy and Trade in Lebanon, a member of the World Economic Forum Council on the Future of Behavioural Sciences and oversees the establishment of Qatar’s Behavioural Insight Unit at the Supreme Committee for Delivery and Legacy.

This is an excerpt from the full article that ran in the Arabic edition of Harvard Business Review Arabia. Published with permission of hbrarabic.com and the publisher, Haykal Media.

business@thenational.ae

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Updated: January 9, 2017 04:00 AM

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