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How Nudges Can Save Governments Money

A new study finds more evidence nudges can prove an effective policy tool. But what's the fate of social science-informed policy in the Trump administration?

In social science parlance, a "nudge" is a simple intervention that shapes people's behavior without restricting their choices or costing them money (so no bans or fines). Perhaps the most famous nudge involves automatically enrolling new employees in retirement-savings plans, with the ability to opt out, instead of requiring people to opt in. One 2001 study found that, after a Fortune 500 company started auto-enrolling new hires, the proportion of their workers to took part in 401(k) plans jumped from 37 percent to 86 percent.

Heartened by such research, national governments have invested in nudges to get their citizens to do things like enroll in college and pay fees on time. The United Kingdom established its Behavioral Insights Team in 2010, while the Obama administration created a United States Social and Behavioral Sciences Team in 2014. Both are colloquially referred to as "nudge units" (although U.S. nudge unit alumnus Bill Congdon points out "that group was never defined or limited to nudges"; it was meant to work on "translating behavioral science insights into policy, more broadly"). Now, a new study, conducted by a team of university social scientists and former and current folks in government, suggests nudges have been a worthwhile investment. Compared to traditional government urging, such as public-awareness campaigns and tax incentives, nudges in the realms of retirement savings, education, energy conservation, and flu vaccines can offer more bang for the buck, the study finds.

"This approach does seem to be worthwhile and it's probably useful for governments to continue to use this approach and maybe, if anything, invest more in it," says Congdon, one of the study's authors.

Congdon and his co-authors drew their conclusions by examining all the nudge research, published in 12 top journals between 2000 and 2015, about achieving certain goals in which the U.S. and U.K. nudge units have been especially interested. Here's just a sample of what they found:

In absolute terms, the difference nudges make tend to be small: getting 4 percent more people to get a flu shot, for example, or 8 percent more low-income, high-school seniors to enroll in college. But because nudges are cheap to implement, the cost-effectiveness numbers can be big. For instance, the checkbox nudge led employees to save $100 more for every $1 in program costs, compared to $15 on the dollar for the benefits fair and $5.59 on the dollar for the 20 percent match.

Not all nudges are more efficient than their more traditional counterparts. Researchers also studied automatically enrolling people in flu-shot appointments, for example, but because people canceled, it ended up being more expensive than an educational campaign. The Social and Behavioral Sciences Team would study dozens of nudges at a time and there were always some that failed, Congdon says. That's why he and his co-authors advocate for nudges to be combined with other, psychology-informed policies. In addition, nudge units are designed to collect data on whether their efforts are working and to tweak or change course as needed.

How are nudges used by the U.S. government now? That's a bit of an unknown. As far as Congdon knows, the Social and Behavioral Sciences Team dissolved when Donald Trump became president. Congdon joined a non-profit, Ideas42, that advises other organizations about how they can use social science. However, some former team members remain in government, working in other agencies, Congdon says. "I think that they are still applying these types of approaches."