8 / Rotman Management Spring 2017
is to influence behaviour, we are surprised at how few govern-
ments have invested in hiring a chief behavioural scientist.
The reason for the dominance of traditional Economics in
government can be explained by using the language that Rich-
ard Thaler and Cass Sunstein introduced in their 2008 book,
Nudge. In it, they make a distinction between two completely
different types of agents: ‘Econs’ and humans. Econs are highly-
sophisticated decision makers who consume vast quantities of
information with ease and have infinite computing abilities —
much like the robot on the cover of this issue. They also maxi-
mize self-interest, are forward-looking and consider the future
impact of every decision they make — never letting emotions get
in the way. In short, they obey all of the laws of Economics.
In contrast, an abundance of research shows that humans
are emotional, impulsive, cognitively lazy, and have difficulty
dealing with large quantities of information or choice options.
As a result, a number of commentators have referred to Econs
as ‘rational’ and to humans as ‘irrational’ — as if to suggest that
human decision making is inherently flawed.
Our view is slightly different. As one of us (Dilip Soman)
noted in his 2015 book [The Last Mile: Creating Social and Eco-
nomic Value from Behavioural Insights], the fact that humans do
not obey the laws of Economics is not a surprise. Humans were
never designed to solve complex inter-temporal maximization
problems or to sift, curate, analyze and act on large volumes of
data. The very assumption that humans actually behave like
Econs is itself an example of irrationality.
If citizens were indeed robot-like Econs, the task of behav-
iour change for governments would be relatively easy and could
involve three simple instruments:
1.RESTRICTIONS. Bans, legal restrictions and other forms of
regulation limit access to certain options, thereby creating
a behavioural shift towards the desired alternative.2.INCENTIVES. These can be either positive incentives in the
form of ‘carrots’ (i.e. subsidies or fee waivers) or negative
incentives in the form of ‘sticks’ (i.e. surcharges or penal-
ties).3.INCREASED INFORMATION. The provision of additional infor-
mation and sometimes, more options, is widely believed to
improve decision making.The problem is, governments struggle with making policy deci-
sions work because these three tools are designed for Econs rath-
er than humans — and the research is filled with examples of the
problems that result. For example, the Canada Learning Bond —
a welfare program that supported children’s education with ‘free
money’ — garnered a take-up rate of only 16 per cent in the two
years after its launch; and in the U.S., several welfare programs
have suffered from similarly-low take-up rates.
Elsewhere, attempts to get citizens to pay their taxes on-
line — or to get flu shots, donate organs, eat more vegetables, or
read privacy policies designed to safeguard their online infor-
mation — have all fallen on seemingly-deaf ears, despite large
expenditures on advertising and communication. The reason
is simple: The vast majority of these policies and programs
are designed for Econs, rather than for humans who are forget-
ful, emotional and impulsive; influenced by their peers; con-
fused by too much choice; and loathe to consume too much
information.
The best policy design, then, would assume that people will
likely forget, ignore, gloss over or misunderstand critical pieces
of information — and build safeguards into the system against
such behaviour. Fortunately, recent advances in the world of be-
havioural insights have provided governments with a new tool-
kit to achieve this, and it is being embraced by governments the
world over.The Basics of Choice Architecture
The term ‘choice architecture’ made its debut in Nudge, where
Thaler and Sunstein argued that since we know from Psychol-
ogy that context influences choice, it should be possible to design
contexts to steer choices to a desired outcome. Choice architec-
ture therefore refers to the conscious and careful presentation of
different options available to a decision-maker, and interventions
to change the manner of option presentation are called ‘nudges’.
Choice architecture draws upon findings from behavioural
science to design environments in which humans make deci-
sions. For example, every policy initiative comes to the attention
of citizens with a pre-chosen default status: you either check the
box to donate your organs, or you don’t. And studies have shown
that changing that default has significant effects on behaviour.
Enrollment in 401(k) pension plans in the U.S. is a prime
example. Signing up for a 401(k) can be a hassle, and retirement
seems far off in time for many people. By using a default ‘opt-in’Like businesses, governments and non-profits should
be constantly iterating on their service offerings.