When I was studying economics in the 1980s, it was quite vulnerable to the criticism that the entire edifice was built on a shaky assumption: homo economicus. But now that Kahnemann, Thaler et al. have slain h.e., economics is that much stronger.
We’ve been working on nudges, randomized controlled trials and systematic reviews for years. Now, with big data, we’re proposing experimentation. This is what governments in the developed economies are doing. Perhaps even more than new ideas, the behavioral group is bringing a new approach to government. Experimentation is the key: Different nudges are tried systematically, results are quantified and, even after the best approach is selected, the team goes back to see how things are working.
We at LIRNEasia are seeking to apply nudge principles to how utilities (and governments) communicate with their customers (citizens). Therefore, it was not surprising that this caught my eye when reading about Google’s employee perks: So the candy (M&Ms, plain and peanut; TCHO brand luxury chocolate bars, chewing gum, Life Savers) is in opaque ceramic jars that sport prominent nutritional labels. Healthier snacks (almonds, peanuts, dried kiwi and dried banana chips) are in transparent glass jars. In coolers, sodas are concealed behind translucent glass. A variety of waters and juices are immediately visible.
Behavioral economics is becoming a major component of LIRNEasia’s toolkit. The discussion below refers to the decision architectures that appear to keep the money flowing into Google. But most people, of course, never make that single click. Defaults win. The role of defaults in steering decisions is by no means confined to the online world.