Cass Sunstein on Simplification and Nudging

David Halpern introduced the event by explaining how the Behavioural Insights Team that he directs follows in the footsteps of Professor Sunstein’s work, both institutionally and intellectually. He commended Sunstein’s fresh thinking, boundary spanning research and the application of his ideas to real-world problems.

Cass Sunstein said how inspiring the work of Dr Halpern’s team has been to him, providing a valuable model to other countries. Until 2012, Sunstein was Administrator of the Office of Information and Regulatory Affairs in the Obama Whitehouse, an important ‘veto point’ for new regulations being introduced by departments and agencies. It was here that he applied some of the behavioural insights described in the book he co-authored with Richard Thaler, Nudge. Sunstein emphasised the principle that evidence consistently outperforms intuition, a principle that has been applied by his Office to generate $91bn of benefits from improved regulation (more than 25 times the value of those generated under President Bush and six times those under President Clinton).

Professor Sunstein talked about the concepts that underpin his work, including the one that forms the basis of his new book, Simpler: The Future of Government, in which he makes the case that complexity is costly and potentially harmful. The link between Nudge and Simpler is a recognition that human beings are prone to some common errors, such as being over-optimistic in our assessment of risk, paying more attention to our subjective experience than to objective evidence, and insufficiently considering the long-term. Drawing on Daniel Kahneman’s distinction between System 1 thinking (fast, intuitive, superficial) and System 2 thinking (slow, rational, deliberate), Sunstein set out the principles of good regulation: make it automatic, simple, intuitive and meaningful. This was illustrated with examples from the Office of Information and Regulatory Affairs, including the replacement of the complex, rationalistic ‘food pyramid’ advice on healthy eating, with the intuitive and clear ‘food plate’ showing the components of a balanced diet.

The core message was that simple ‘nudges’ based on an understanding of how human beings behave can achieve big results, reducing cost and particularly saving on paperwork for citizens. It is estimated that US citizens spend 9 billion hours a year on paperwork related to government requirements – through the use of a simpler approach, Sunstein’s former team has already saved an estimated 100 million hours for people in the US. Their approach has frequently drawn upon the distributed knowledge of ordinary people, submitting their suggestions for simplifications and improvements to an online portal, ‘Let Your Voice Be Heard’, and is reinforced by the development of machine-readable big data.

One frequently cited change is the introduction of auto-enrolment into pensions for workers – preserving their right to not pay into a pension but requiring them to make an active opt-out rather than the previous opt-in. Sunstein claims, citing a Danish study, that this has a far greater positive effect than even very substantial tax incentives offered to savers.

Edward Stourton, interviewing Professor Sunstein for a special edition of Radio 4’s Analysis, explored the origins of the thinking behind ‘nudge’ and some of its implications.

Sunstein explained that he first became interested in behavioural economics when at the University Chicago, because the home of rational choice theory was so full of people who themselves acted non-rationally in everything from relationships to financial investments. The notion of ‘libertarian paternalism’ sought to reconcile two opposed political standpoints; the libertarian instinct of allowing people to make choices, even bad choices, freely, and the paternalistic view that people often need to be helped to make the best choices for them.

Many of the interventions have the added advantage, in straightened times, of being relatively cheap compared to other policy tools such as regulation, or changes to law or taxes. David Halpern echoed this view, saying that the establishment of his Behavioural Insights Team was helped by the fact that there was less money available to government and that the incoming Coalition in 2010 hoped to make less recourse to legislation to solve policy problems.

In answering questions from the audience, Sunstein accepted that there were some necessary limits to the extent to which the public would accept changes to the default options they are offered; for example, you would not want an election system that had a default vote for the incumbent, or even for the party you voted for last time. Where these sensitivities occur, as they do with the idea of an opt-out system for organ donorship in the UK, the best nudge is to promote active choosing to maximise the number of people who give their attention to the choice, e.g. by including the question on driving licence applications.

Against the charge of nudges infantilising citizens, Sunstein argued that by preserving choice there is less of a tendency to treat people as infants compared to criminalising or taxing them. Some potential nudges could infantilise, but that is a good reason not to adopt them. Similarly, far from being covert in their attempts to change behaviour, many behavioural interventions make it clearer what government is trying to achieve. In their attempt to drive simplicity in US government regulations, his office required all new regulations to be published with a short executive summary explaining what the regulation sought to do, how and to whom. This was a major contribution to the reduction of paperwork required by US citizens.