William Eichler 14 December 2015

Using the lessons of Digital Nudge

Using the lessons of Digital Nudge image

Shopping on Amazon is always more expensive than you imagine. Select one item and they recommend others: ‘Customers who bought X also bought Y’. You don’t need Y, but others have bought it and you don’t want to be the only one without it, so you add it to your basket. And with ‘1-Click’ shopping it’s easy to complete the transaction without giving it too much thought.

Amazon utilises technology and observations about human behaviour to gently push you into purchasing more than you plan to. In a talk presented to the Socitm 2015 conference, Eddie Copeland of Policy Exchange argued that local authorities could learn from this and use digital innovations combined with insights into human behaviour — what he calls ‘digital nudge’ — to help councils make huge efficiency savings.

‘I first became interested in behavioural sciences’, he tells me, ‘in 2011 when I read Cass Sunstein and Richard Thaler’s book, Nudge.’ Published in 2009, this bestseller found its way onto the bookshelves of power on both sides of the Atlantic. Its central thesis is that insights into human behaviour can be used, as the subtitle puts it, to ‘improve decisions about health, wealth and happiness.’

This has an obvious appeal to those in government. If policy formation and implementation are informed by a better understanding of human behaviour, it follows that legislation is more likely to achieve the required outcome.

Barack Obama was convinced after reading Nudge. And so was David Cameron. He set up the Behavioural Insights Team (BIT) — colloquially known as the ‘nudge unit’—which, as their website informs us, seeks to introduce ‘a more realistic model of human behaviour to policy’. Their chief executive, David Halpern, went on to chronicle their work in Inside the Nudge Unit (2015).

It was reading Halpern’s book that got Mr Copeland thinking about how lessons from Nudge could be applied at the local level. ‘The book recounts’, he says, ‘how a small team in Downing Street has systematically tried to apply behavioural insights to improve policy – mostly at a central government level. There’s no reason why the same techniques couldn’t work just as well in a local government context.’ But, intriguingly, it was a conversation about electricity with his energy and environment colleague at Policy Exchange, Richard Howard, which led to the idea of ‘digital nudge’ being formulated.

One of the biggest challenges for power generation, Mr Howard explained, is being able to meet peak demand. Energy consumption fluctuates. While, say, Downton Abbey is on it might be relatively low; but once the credits start rolling it might suddenly rocket as the nation collectively puts the kettle on. It is this moment of peak demand that the country’s energy infrastructure must be prepared to meet. And this preparation costs money.

The UK’s power stations always need to be ready for periods of peak demand. This means that the majority of the time they are not operating at full capacity. If demand for electricity could be evened out, it would be possible to decommission (or not build new) power stations without risking the security of supply. This, according to Mr Howard, is exactly what is happening.

New ‘smart meters’ are being rolled out. These show consumers how much they are spending on electricity in real time and by doing so influence (or nudge) people to curb their consumption levels at peak times. When Downton Abbey fans go to put the kettle on, they check the smart meter, notice the price is higher, and decide to wait until the demand (and price) has lowered. ‘This is’, Mr Copeland explains, ‘an example of what I’d call ‘Digital Nudge’ – technology being harnessed to influence behaviour.’

Is there a comparable peak demand problem in the delivery of public services? Certainly. As Mr Copeland points out, 80% of all online self-assessment tax returns are submitted in the last few days of January. Just as power stations need to be prepared for sudden surges in demand, HMRC has to have sufficient server power, call centre and back office staff to handle this demand. Similarly, Friday and Saturday evenings are a busy time for A&E. They need enough staff, beds and equipment to be able to deal with the increase in demand for health services. These are just two examples where peak demand exists.

If the problem is the same, reasoned Mr Copeland, might not the solution be too? Just as smart meters influence people’s behaviour in order to spread out demand and reduce the costs of energy production, can’t technology be utilised in a comparable manner by local authorities? Building on the insights of Nudge, and following the work of the BIT, Mr Copeland wants councils to use technology in order to influence the ‘consumption’ of services. This would, he believes, save a lot of money.

As he wrote on his blog: ‘Instead of (or perhaps, in addition to) government departments and public sector organisations scaling back or stopping some services, cost reductions could be found by tackling the peaks in demand. By using digital nudge to spread out citizens’ consumption of public services, the same number of people could be served using fewer resources.’

How would this work? The best way is for local authorities to use technology to make their services easy, attractive, social and timely. This is at the heart of ‘digital nudge’. ‘It soon occurred to me’, Mr Copeland explains, ‘all the key ways that nudge prompts work – making things easy, attractive, social and timely – are exactly the things technology can provide.’

Take the example of Amazon. Its ‘1-Click’ facility makes purchasing a product easy and so people will be more inclined to do it. The website is attractive and so customers will return again and again. Its recommendations (‘Customers who bought X also bought Y’) make it social, which increases the chances of a purchase being made. (As Mr Copeland puts it: ‘Humans have a tendency to wish to confirm to social norms. Telling us that people like us did a certain thing can encourage us to replicate that action.’) Finally, it is timely in the sense that it advertises products at the optimal time, e.g. Christmas decorations just before Christmas.

In Inside the Nudge Unit, David Halpern demonstrates how this can work with public policy. Adjusting the wording of text messages to job seekers increases the chances of them going to job fairs. If you send a standard text, one in 10 people turn up. But, ‘adding the recipient’s name at the beginning of the text increased the proportion turning up by five percentage points, or 15%… What if the adviser also added their own name? The number turning up rose even further, to 18%. And how about if the adviser instead wrote: ‘I’ve booked you a place… Good luck!’ Now the proportion turning up rose to an impressive 27%, a nearly threefold increase.’ (David Halpern, Inside the Nudge Unit, p.121; cited by Eddie Copeland).

Mr Copeland believes something similar can be applied to, say, ease the pressure on A&E departments during periods of peak demand. One million people go to A&E each year because they can’t get an appointment to see their GP. One of the main reasons for this is 12 million GP appointments are missed annually. This wastes doctors’ time, which could be used treating other people. It also costs more than £162m per annum and puts a tremendous strain on hospitals.

Drawing on Halpern’s example and getting all surgeries to start sending out carefully worded texts in order to ‘nudge’ people into attending their GP appointments could save surgeries and the NHS a lot of money, and reduce the burden on A&E departments.

This is just one example in which ‘digital nudge’ can be used to make efficiency savings, and there are many more that can be applied at the local level.

One of the chief criticisms made of ‘nudge’ techniques is that it is, essentially, manipulative. How does Mr Copeland respond to this? Following Cass Sunstein and Richard Thaler, he points out that whatever government does it inevitably influences the choices of citizens. ‘In that case,’ he says ‘they might as well nudge citizens in the most positive direction.’

This makes a lot of sense. I suspect, as local authorities increasingly adopt digital techniques for improving services, many of them will start to apply the lessons of ‘digital nudge’.

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