The Behavioural Insight Team – or 'nudge' unit, as Ministers call it – is about applying behavioural economics and social psychology to policy in a systematic way.
In the words of the coalition agreement, it is about 'finding intelligent ways to encourage support and enable people to make better choices for themselves'. It builds directly on the Institute's MINDSPACE report, originally commissioned by the previous government.
How nudges can make a difference
Though behavioural economics has a long history, it has better known in recent years through books such as Cialdini's Influence; Thaler and Sunstein's Nudge, and Ariely’s Predictably Irrational. Richard Thaler is also working with the team, while Sunstein is working with Obama in Washington [see link below].
Will nudges change the world? No, at least not alone. But given that most policy issues have a strong behavioural component – from healthy lifestyles to crime, and from carbon footprints to paying our taxes – they can make quite difference.
When behavioural approaches are combined with the social network effects and transparency, they can be genuinely transformative. The link with social networks – 'Big Society' – comes from the fact that other people are normally the most powerful influences on us – we’re profoundly social creatures.
We drop litter, help each other, get drunk, or pay our taxes if we think that’s what other people around us are doing. We reciprocate kindness, or cruelty. We live longer, and happier, if there’s someone who cares about us.
Application for Public service reform
Behavioural insights and Big Society have immediate application for public service reform. When you look across the world at public service innovations that somehow manage to achieve 'more for less', in most cases this is because they have found a way of unlocking the hidden capacities of individuals, families and communities to help themselves and others – what I’ve sometimes called 'Hidden Wealth'.
Patient hotels achieve better clinical outcomes, higher patient satisfaction, and lower costs because relatives and friends stay with the patient, together learning skills and supporting each other.
France's program to create 'agents locaux de mediation sociale' (local agents for social mediation) has reduced fear, crime and racial tensions – such as reducing train emergency cord pulls by a third in areas they are operating - by giving thousands of people the skills to diffuse conflict instead of relying on the police.
Singapore’s 'yellow ribbon' programme halved their offender recidivism rates from 1995 to 2005 by creating a movement to welcome offenders back into the community – a program itself now entirely funded by the efforts of ex-offenders, their families and voluntary contributions.
The well-being agenda
Another angle to watch is the 'well-being' agenda. As I explain in the Hidden Wealth of Nations, if you’re interested in behavioural economics or the Big Society, you’re probably also interested in well-being, for what makes us happy depends much more on our relationships with others than it does on how much we earn or own.
Subjective well-being measures also have a democratic edge, in that they lead to questions about what makes citizens happy rather than presuming that what’s in conventional targets and indicators (including GDP) are what citizens want.
If you are going to tweak the ecology of factors that affect everyday behaviour, you ultimately need some kind of guide as to whether you are making things better or worse. It’s no coincidence, then, that the subtitle of nudge is 'improving decisions about health, wealth and happiness', or that Danny Kahneman – who won the Nobel prize for his work on behavioural economics – shifted into the study and measurement of subjective well-being. (And as I write, rumours abound that another Nobel prize may soon go to a behavioural economist).
Similarly, those of us who have done a lot of research on social capital – such as Bob Putnam, John Helliwell and I – have ended up doing a lot of work on subjective well-being, since the empirical stories are so closely entwined.
On three busy years at the Institute
It’s three years since I left No.10; then asked by Lord Sainsbury to scope out and set up an institution to help make government work better. It's been pretty busy.
The Institute has supported the development of Ministers and Opposition. It has led the debate on how to reduce the deficit and get re-elected, the reshaping of Whitehall and beyond, and how to make minority or coalition government work.
And it has been on hand to advise policymakers on the constitution, arm's length bodies, Total Place, civil service pay and rewards, and – of course – the application of new approaches to policy, such as behavioural economics.
It’s important that government is an institution that learns. It needs places like the Institute at its edges, where policymakers can be exposed to new evidence and ways of working, and where a broader community interested in the challenges that governments and our society face can interact and argue. With Andrew Adonis, dedicated Governors and great staff, the Institute is in good hands.