Behavioral Economics, Nudge, and the Environment Donna Anderson, Ph.D.

Libertarian Paternalism Present choices to individuals in a way that doesn’t abridge their freedom, but improves the probabilities of making decisions that are good for them or society.

When do we need a Nudge? Sinful goods Smoking, Alcohol & Food Overconsumption

When do we need a Nudge? Investment goods Exercise, Flossing, Dieting

When do we need a Nudge? Degree of Difficulty CHOICE OVERLOAD

Degree of Difficulty CHOICE OVERLOAD Question: why so few of the 900,000 employees covered by Vanguard were participating in their 401(k) savings plans. Analysis of the data revealed that participation fell as the average number of funds in a plan rose. Solution: When plans offered only two funds, 75 percent of employees participated; when plans offered 59 funds, the percentage of participants fell to 61 percent.

Degree of Difficulty CHOICE OVERLOAD Examples Pandora Music School Cafeteria http://www.nytimes.com/interactive/2010/10/21/opinion/20101021_Oplunch.html?th&emc=th

Effective Nudges Feedback

Feedback Learning requires Feedback Question: How much energy are we using? Solution: Thermostat in homes programmed to tell us the cost per hour of raising/lowering temp a few degrees We know price increases offer an incentive to conserve energy, but technology that makes the cost more salient is far more effective

Feedback Ambient Orb – turns energy use that is invisible to visible http://www.ambientdevices.com/ http://ambientdevices.myshopify.com/products/energy-orb Ambient Orb for the shower http://nudges.org/2010/03/08/the-ambient-orb-for-your-shower/ http://gajitz.com/who-you-gonna-call-ghost-busts-you-on-energy-usage/

Feedback Fuel Economy Stairmaster shows calories burned http://nudges.org/2010/08/30/new-stickers-for-car-buyers-do-they-get-an-a/ Stairmaster shows calories burned

Feedback & Peer Pressure Progress Energy, NC will mail notices telling customers how their household power bills compare to their neighbors. “Most people will become engaged if they find out their neighbors are using half the energy and spending a whole lot less each month,” says Karen Ehrhardt-Martinez, lead author of a recent report on “residential feedback programs Voting example

Feedback & Peer Pressure Do you recycle hotel towels? http://nudges.org/2011/04/28/no-one-at-the-comfort-inn-in-chicago-reads-the-nudge-blog/ People make social comparisons not just in terms of energy use but other environmental behaviors, …do you recycle your hotel towels or do you steal firewood from a forest - in many of these settings we are influenced by what we're told about what other people are doing in terms of the social norm. http://www.slate.com/articles/business/the_dismal_science/2010/04/nudges_gone_wrong.html

Feedback & Reminders Where does waste go? http://nudges.org/tag/environment/ http://nudges.org/2011/05/02/a-strategy-for-recycling-change-the-recyling-bin-to-garbage-bin-ratio/ http://nudges.org/2008/12/04/can-you-save-100-pounds-of-paper-per-year-with-this-sticker/

Effective Nudges Default

Default Padding the path of least resistance Recommended course of action Automatic Magazine renewal Computer installation: “regular” or “custom” installation “Receive emails about new products?” Putting money into 401K programs

Default Sickle Cell Testing, Unless Athletes Balk The Division I Legislative Council of the National Collegiate Athletic Association approved a new rule Tuesday mandating that all athletes be tested for the sickle cell trait. The rule, however, allows athletes to opt out of testing if they sign a waiver “releasing an institution from liability.“ Murphy Library printer Organ Donation

Effective Nudges Expect Error

Expect Error Run out of gas – warning light appears Don’t buckle seat belt – buzzed Car lights automatically go off when you aren’t driving Gas tank cap Leaving ATM card in machine Forcing Function: in order to get what you want you have to do something else first In order to get cash, you must remove your card

Expect Error Turning off lights Medicine Motion detector In hotel? Birth Control