Understanding the principles of behaviour economics is useful for marketing and brand managers as it helps them to design effective marketing and communications that influence behaviour and decision making.
You may have heard headlines talking about the Government’s use of nudge theory. If you’ve not heard of Nude Theory before, it refers to the work of Cass Sunstein and Richard Thaler. Thaler is a professor of Behavioural Science and Economics. He was tasked with developing the UK’s Behavioural Insight Team (BIT) in 2010 to apply behaviour economics principles to government communications to drive positive behaviour change. The BIT, also known as ‘The Nudge unit,’ were allowed to run experiments as long as they were cheap. One of the first challenges that the team was tasked with involved encouraging people to promptly pay their taxes. Thaler explains that:
“All we had to do was fiddle with the wording of a letter that would be sent to taxpayers anyway. We didn’t even have to worry about the cost of postage.”
The teams fiddling worked and they saw an influx in tax returns totaling £9 million in the first 23 days. 136 countries around the world have since incorporated behavioural sciences in some aspects of public policy,
“Businesses are catching on as well, realising that a deeper understanding of human behaviour is every bit as important to running a successful business as is an understanding of financial statements and operations management.” – Richard Thaler, Misbehaving
Thaler was also a close friend of Daniel Kahneman, who, despite being a psychologist, received the Nobel Memorial Prize in Economics for this work in prospect theory. His groundbreaking work showed that sadly, we’re not as rational as we’d like to believe and that we make the majority of our decisions based on mental shortcuts, or heuristics.
“Humans are to thinking as cats are to swimming – we can do it when we have to, but we’d much prefer not to.” – Daniel Kahneman, Thinking Fast and Slow
David Halpern is the Chief Executive of the Behavioural Insights Team. During press conferences in March, he spoke about ‘herd immunity’ and ‘behavioural fatigue.’ Behavioural fatigue refers to the notion that people may become tired of lockdown measures if they’re imposed too soon, and will stop abiding by them. Following Halpern’s comments concerning behavioural fatigue, a group of nearly 600 behavioural scientists signed an open letter to the Government, which raised questions regarding the lack of evidence on behavioural fatigue.
“If the argument of behavioural fatigue is really driving UK policymakers to delay social distancing, this concept had better stand up to scrutiny. We thus urge the Government to provide a clear indication how behavioural fatigue features in the decision-making and modelling, and any behavioural evidence for the phenomenon, so that the evidence and the reasoning from it may be evaluated.”
The Guardian’s columnist Sonia Sodha believes that nudge theory is a poor substitute for hard science in matters of life or death, explaining that,
“… a common critique of behavioural economics: some (not all) members of the discipline have a tendency to overclaim and overgeneralise, based on small studies carried out in a very different context, often on university students in academic settings. It’s extraordinary that Halpern was briefing on what essentially looks like his opinion as if it were science.”
This week, the Lancet’s editor, Richard Horton has described the Government’s handling of the pandemic as ‘the greatest science policy failure of a generation.’ given that the UK has the worst coronavirus death toll in Europe, it’s clear that something has gone wrong. Is the misuse of behavioural economic principles to blame?
We’ll have to wait for the inquiry until we have a better understanding of how behavioural economics were used in shaping Government policy and what impact this had. We may, however, be waiting a very long time. The Health Service Journal called for the inquiry to begin in May and highlighted that delivering findings and recommendations will take some time as the current process for managing inquiries takes three years on average and can cost millions of pounds.