Photo: Chihuahuan Desert, Big Bend National Park. © 2017 Delena Norris-Tull
Nudges
Summaries of the research and commentary by Dr. Delena Norris-Tull, Professor Emerita of Science Education, University of Montana Western, September 2020.
In the book, Nudge: Improving decisions about health, wealth, and happiness, Thaler and Sunstein, 2009, promote what they term “libertarian paternalism.” This is the idea that human beings should be allowed a lot of freedom of choice, but that because humans often make choices not based on scientific evidence or logic regarding what is best for them, individuals who design the choices, the “choice architects,” can give humans “nudges,” to steer humans toward beneficial choices. Among many examples listed in their book, they discuss the fact that humans are given too many choices in regards to healthcare insurance, such that the choices can be overwhelming. Thaler and Sunstein find that organizations can nudge employees to make better choices by limiting the number of options, and by pre-selecting the most beneficial or most cost-effective options.
They also point out that human beings, when presented with a variety of options, tend not to make choices at all, but rather tend to stick with whatever the default choice might be. Thus, for example, if an employer provides a default retirement plan, that all new employees will automatically be enrolled in, while providing employees options to modify that plan, most employees will never modify the plan at all, even if research would show them that they could improve their long-term retirement by modifying the plan.
Thaler and Sunstein (2009, pages 197-198) provide an example of an effective way the Federal Government has encouraged companies to improve energy efficiency, not by penalizing them for wasting energy, but by rewarding them for saving energy. They point out that one would think that if energy efficiency could save companies/corporations money, those companies would have figured that out on their own. But companies are composed of human beings. And human beings tend to be too busy to research the most economical choices. And because human beings tend to stick with the default, they often do not look for ways to change current practices, if those practices are already making them plenty of money.
It takes champions to question the status quo, and to nudge companies to adopt practices that help the environment. In 1991, the EPA adopted a surprisingly effective nudge by establishing the Green Lights program. The agency entered into “voluntary agreements with both for-profit and nonprofit firms (including hospitals and universities)…firms pledged to implement energy-saving lighting improvements.” In 1992, the EPA adopted the Energy Star Office Products program, in which firms pledged to use energy-efficient office products, including copiers, printers, computers, and other appliances. Adherence to the EPA’s voluntary performance standards “allowed participating firms to use the agency’s Energy Star logo. In addition, the agency publicized the cooperation of industry groups, adopted substantial media campaigns, and offered awards to companies showing particular gains in energy efficiency.”
These voluntary agreements should not have worked, but they did. Companies found that the energy-efficient appliances saved them money, which gave them higher profits. And individuals quickly became aware of the cost-savings to themselves by purchasing appliances with the Energy Star ratings.
Thaler and Sunstein repeatedly make the point that humans/corporations are more compliant with government oversight when presented with incentives than when penalized. However, they also point out that Federal taxes on fuels has been successful in promoting the development and purchase of fuel-efficient vehicles.
The cap-and-trade system (Thaler & Sunstein, 2009, pages 189-190), not always a politically favored approach, is another example of an effective system to encourage the reduction of pollution and greenhouse gases. In this system, companies that reduce pollutants gain the right to “trade their ‘emissions rights’ for cash. In one stroke, such a system creates market-based disincentives to pollute and market-based incentives for pollution control. Such a system also rewards rather than punishes technological innovation in pollution control, and does so with the aid of private markets.”
The emissions trading system incorporated in the 1990 amendments to the Clean Air Act, in which corporations can trade emissions rights in order to control acid deposition, “ranks among the most spectacular success stories in all of American environmental regulation. Because the costs of the program have been so much lower than anticipated, the cost-benefit ratio seems especially good, with compliance costs of $870 million compared to estimates of annual benefits ranging from $12 billion to $78 billion – including reductions of nearly 10,000 premature deaths and more than 14,500 cases of chronic bronchitis” (Thaler & Sunstein, 2009, pages 189-190).
For a report on the status of cap and trade programs in the USA, refer to the Wincele, 2019, report, Cap-and-Trade ambition renewed in 2019 after a decade of decline.
If applied to agri-businesses, nudges could be used with Federal or State regulations, designed to encourage energy, soil, and water conservation measures, which would ultimately save farmers money. Incentives to encourage farmers to reduce the use of herbicides and pesticides will save them money, reduce the potential harm to the environment and to humans, and encourage them to use more effective methods of weed and pest control. Refer to the sections on “Herbicides" and "Pesticides” for a review of the effectiveness, or lack thereof, and the detrimental effects of a number of herbicides/pesticides.
References:
Links to return to Innovative Solutions:
Nudges
Summaries of the research and commentary by Dr. Delena Norris-Tull, Professor Emerita of Science Education, University of Montana Western, September 2020.
In the book, Nudge: Improving decisions about health, wealth, and happiness, Thaler and Sunstein, 2009, promote what they term “libertarian paternalism.” This is the idea that human beings should be allowed a lot of freedom of choice, but that because humans often make choices not based on scientific evidence or logic regarding what is best for them, individuals who design the choices, the “choice architects,” can give humans “nudges,” to steer humans toward beneficial choices. Among many examples listed in their book, they discuss the fact that humans are given too many choices in regards to healthcare insurance, such that the choices can be overwhelming. Thaler and Sunstein find that organizations can nudge employees to make better choices by limiting the number of options, and by pre-selecting the most beneficial or most cost-effective options.
They also point out that human beings, when presented with a variety of options, tend not to make choices at all, but rather tend to stick with whatever the default choice might be. Thus, for example, if an employer provides a default retirement plan, that all new employees will automatically be enrolled in, while providing employees options to modify that plan, most employees will never modify the plan at all, even if research would show them that they could improve their long-term retirement by modifying the plan.
Thaler and Sunstein (2009, pages 197-198) provide an example of an effective way the Federal Government has encouraged companies to improve energy efficiency, not by penalizing them for wasting energy, but by rewarding them for saving energy. They point out that one would think that if energy efficiency could save companies/corporations money, those companies would have figured that out on their own. But companies are composed of human beings. And human beings tend to be too busy to research the most economical choices. And because human beings tend to stick with the default, they often do not look for ways to change current practices, if those practices are already making them plenty of money.
It takes champions to question the status quo, and to nudge companies to adopt practices that help the environment. In 1991, the EPA adopted a surprisingly effective nudge by establishing the Green Lights program. The agency entered into “voluntary agreements with both for-profit and nonprofit firms (including hospitals and universities)…firms pledged to implement energy-saving lighting improvements.” In 1992, the EPA adopted the Energy Star Office Products program, in which firms pledged to use energy-efficient office products, including copiers, printers, computers, and other appliances. Adherence to the EPA’s voluntary performance standards “allowed participating firms to use the agency’s Energy Star logo. In addition, the agency publicized the cooperation of industry groups, adopted substantial media campaigns, and offered awards to companies showing particular gains in energy efficiency.”
These voluntary agreements should not have worked, but they did. Companies found that the energy-efficient appliances saved them money, which gave them higher profits. And individuals quickly became aware of the cost-savings to themselves by purchasing appliances with the Energy Star ratings.
Thaler and Sunstein repeatedly make the point that humans/corporations are more compliant with government oversight when presented with incentives than when penalized. However, they also point out that Federal taxes on fuels has been successful in promoting the development and purchase of fuel-efficient vehicles.
The cap-and-trade system (Thaler & Sunstein, 2009, pages 189-190), not always a politically favored approach, is another example of an effective system to encourage the reduction of pollution and greenhouse gases. In this system, companies that reduce pollutants gain the right to “trade their ‘emissions rights’ for cash. In one stroke, such a system creates market-based disincentives to pollute and market-based incentives for pollution control. Such a system also rewards rather than punishes technological innovation in pollution control, and does so with the aid of private markets.”
The emissions trading system incorporated in the 1990 amendments to the Clean Air Act, in which corporations can trade emissions rights in order to control acid deposition, “ranks among the most spectacular success stories in all of American environmental regulation. Because the costs of the program have been so much lower than anticipated, the cost-benefit ratio seems especially good, with compliance costs of $870 million compared to estimates of annual benefits ranging from $12 billion to $78 billion – including reductions of nearly 10,000 premature deaths and more than 14,500 cases of chronic bronchitis” (Thaler & Sunstein, 2009, pages 189-190).
For a report on the status of cap and trade programs in the USA, refer to the Wincele, 2019, report, Cap-and-Trade ambition renewed in 2019 after a decade of decline.
If applied to agri-businesses, nudges could be used with Federal or State regulations, designed to encourage energy, soil, and water conservation measures, which would ultimately save farmers money. Incentives to encourage farmers to reduce the use of herbicides and pesticides will save them money, reduce the potential harm to the environment and to humans, and encourage them to use more effective methods of weed and pest control. Refer to the sections on “Herbicides" and "Pesticides” for a review of the effectiveness, or lack thereof, and the detrimental effects of a number of herbicides/pesticides.
References:
- Thaler, R.H., & Sunstein, C.R. (2009). Nudge: Improving Decisions about Health, Wealth, and Happiness. New Haven, CT: Yale University Press.
- Wincele, R. (Dec., 12, 2019). Cap-and-Trade ambition renewed in 2019 after a decade of decline. ClimateXChange. https://climate-xchange.org/2019/12/12/cap-and-trade-ambition-renewed-in-2019-after-a-decade-of-decline/
Links to return to Innovative Solutions: