Nudge theory: Key findings

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Some interesting research from the world of behavioural economics

- The Institute for Fiscal Studies’ Working paper W16/19, What happens when employers are obliged to nudge? Automatic enrolment and pension saving in the UK, found that the nudge methodology in auto-enrolment substantially increases the probability of participation in a workplace pension scheme, by 37 percentage points.

- The BIT and the Policy Institute at King’s College London are working with a London hospital to hardwire behavioural insights into the procurement process. The project covers almost 2,500 members of staff tasked with stocking the hospital in different departments. Among the behaviours under investigation with
a view to shaping nudges that may trigger behaviour change are: why people habitually order new items even if they have a stockpile sitting in storage down the corridor, and why some struggle to accurately record the removal of stock items.

- The Incentive Research Foundation’s Using Behavioral Economics Insights in Incentives, Rewards, and Recognition: A Nudge Guide says: “Our aversion to loss and risk often distorts our judgment when assessing the risk of immediate loss versus future gain. For example, in experiments most people won’t risk a 20% chance of losing $1,000 for an 80% chance of winning $1,400, even though the latter represents ‘greater utility’ in traditional economics terms, or the ‘better bargain’ in plain speak. This phenomenon is referred to as ‘prospect theory’ and is, perhaps, the bedrock of behavioural economics in that it so clearly refutes standard economic theory (i.e. that humans always do what is in their best economic interests).”

- Non-profit Danish Nudging Network tested a variety of approaches to reduce littering in Denmark’s public places. A third of Danes used to litter regularly even though 90% claimed to be concerned about it. Painting large green footprints leading to litter bins reduced littering by 46%.

- A BIT project that informed doctors they were prescribing more antibiotics relative to 80% of their medical peers reduced the number of unnecessary prescriptions by 3.3% (more than 73,000 prescriptions), helping address what the chief medical officer has identified as perhaps the greatest medical threat of our age.

- The CIPD and the BIT have collaborated on a report called A head for hiring: The behavioural science of recruitment and selection, which draws on key insights from behavioural economics and cognitive and occupational psychology while taking a broad
look at recruitment; from outreach activity and the creation of job adverts through to making final
hiring decisions.

Further reading

To nudge or not to nudge?: Nudge theory in HR

The ethical question of nudging

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