Home and abroad, profs ‘nudge’ policy

University professors continue to advance the use of behavioral economics in the field of public policy.

By Tiantian Zhang

Since their 2008 book on psychology and behavioral economics excited nerves among policymakers in Washington and overseas, two U of C professors of law and economics have found major new applications for their theories, including at the White House and in the British government.

Booth School of Business professor Richard Thaler and former Law School professor Cass Sunstein wrote Nudge: Improving Decisions about Health, Wealth, and Happiness in 2008, explaining that by framing choices for each individual in a certain way, people would be “nudged” toward more optimal and efficient decisions.

In 2009, Sunstein was appointed Administrator of the White House Office of Information and Regulatory Affairs, where his ideas about how to encourage people to pay their taxes, for example, have already found nationwide applications.

Meanwhile, Thaler has been advising policymakers in several countries since the book’s publication, including Denmark, France, and Britain where Prime Minister David Cameron established a Behavioral Insights Team, nicknamed the “Nudge Unit.” Thaler and Sunstein are currently working with the government to implement an initiative of “smart disclosure.”

“Basically, the idea is that disclosure comes in the form of electronic files uploaded on companies’ websites, making markets more transparent and easily accessible to the public,” Thaler said.

Behavioral economists have found that various psychological and neurological biases cause people to make choices that seem contrary to their best interests, according to an article in The Economist last month. Using this assumption, policy makers can subtly persuade people by structuring choices in such a way that they make decisions beneficial to society.

In a presentation at the Law School earlier this week, Sunstein used the Department of Agriculture’s newly redesigned “food plate” to illustrate this idea. The old food pyramid confused people trying to make healthy decisions about what to eat; by providing a clearer diagram of a healthy diet, Sunstein said, the government is encouraging people to make healthier decisions.