monograph · The Skeptical Razor
Keeping democracy fit, or policies of proven effectiveness
Our governments have squandered enough time on ideologies and clichés concerning the Italians. If they ceased to assume that they know what they are doing and began to check the effectiveness of their assumptions, we could make use of the knowledge of the behaviour patterns underlying our decisions and, in general, exploit the behavioural sciences for our own benefit.
In other words, we could frame and implement more effective and efficient policies, because they would be based on evidence (and not on somebody’s convenience). This is what is becoming increasingly well known as ‘nudge theory’ and its benign practice (from the book by Sunstein and Thaler – 750 000 copies sold, translations into 32 languages): the nudge strategy is a new way of governing which is currently being applied with considerable success around the world.
Small and carefully crafted changes in the environment in which our everyday decisions are taken can produce enormous effects on our choices. Not surprisingly, private businesses which seek to maximise their profits were quick to grasp this. The public authorities, which ought to maximise the wellbeing of citizens, are now beginning to catch up. Nudges – of a more or less gentle nature – now come from all sides on a daily basis and, more or less visibly, have an impact on everybody’s decisions. The world is full of ‘cognitive predators’, who exploit the limits of our rationality. And you may rest assured that the ‘industry of human frailty’ is always in business. The nudge industry is an invisible force (like electromagnetism or gravity), which has always existed and always will, which we cannot genuinely resist but which – so long as we understand it – we can pragmatically apply for more worthwhile purposes for the betterment of society.
Behavioural approaches to policy-making aim to create environments for choice structured on the basis of the complexity of the cognitive and social factors that influence decision-making. They are applied in the light of evidence of the results achieved by implementing measures. In this way, if policy-makers are properly motivated and well-intentioned, and do not merely act for purposes of propaganda and electoral advantage, they could indeed effectively acquire an instrument to promote virtuous behaviour by individual citizens and by people collectively, increasing freedom of choice and simplifying regulatory policies.
How can we ensure that certain public-policy measures will have the desired effects? How can we tell whether a nudge is working? What tells us that this choice architecture is effective?
Here is a quite new project: psycho-economics as a guide to formulating ideas about good governance measures, with evidence on the ground as a test. Simple and at the same time revolutionary. This is the way to do it. First, exploit the cognitive processes which govern people’s choices and decisions. Second, check that the measures that we believe to be effective will actually have the desired effect once put into practice. Third, adopt suitable legislation to implement them.
However, traditionally, the planning of economic and other public policies has neglected two important factors. On the one hand, little use has been made of results obtained from the behavioural and social sciences. On the other hand, policy-makers have not succeeded in exploiting the strengths of the experimental method. The practice has been rather to follow the line suggested by neoclassical economic theory, which regards each individual as a rational calculator of his own anticipated advantage. As a result of using this abstract model, which in the light of recent experimental findings is a poor match for the real mainsprings of human choice, policy-making has sought to regulate individuals’ behaviour mainly by altering economic incentives and using prohibitions and rules.
However, in the past ten years, the fertile combination of two innovative approaches has sought to transform this panorama. The nudge revolution shows how to exploit social and cognitive factors which influence decisions to promote virtuous behaviour by guiding individuals’ freedom of choice without restricting it. Evidence-based policy introduces experimentation to assess which policies really work and which do not, on the basis of evidence provided by results gathered, thus removing the planning of public policy from the sphere of sterile debates governed by prejudice and ideology.
Choice architecture is the way in which options are presented in a decision-making process. Just as the structure of a building places physical limits on the possibility of moving and interacting with it, so the way in which choice space is structured influences the outcome of a decision. Any detail may prove to be important, and the scope for conditioning is ubiquitous and never neutral. In the case of the disposition of food at a meal, for example, the way in which dishes are presented and the size of the plates and glasses affect what people choose to eat and in what quantities. It has been found that placing healthy dishes in a prominent position increases their consumption, while reducing the diameter of servings reduces the amount of food wasted.
In general, we never take decisions in a vacuum but always in a particular context. Structuring the context is the task of every architect of choice. In policy-making processes, institutions have the option of exploiting cognitive mechanisms – which are increasingly well understood by the neurosciences of decision-making and increasingly applied in cognitive (or behavioural) economics – to guide people towards ‘virtuous’ behaviour by means of a nudge, to the benefit both of the individual concerned and of society.
This being so, it is necessary to define an appropriate skill set for those who draw up plans and design choice architectures. It should be noted that there is no question of allowing the abstract and idealised economic theory of rational choice to dictate public economic policy: rather, it is a matter of designing measures on the basis of how we actually take our decisions. It is the awareness of how limited our rationality is that can help us to control it, placing the transparency of policy measures at centre stage. This is the main point of an epistemological analysis serving as a background to the correct use of nudge theory, based on two elements: (i) the training of competent architects of choice, equipped with method and methodological awareness; (ii) the gathering of evidence concerning the effectiveness of action and, ultimately, its transparency.
Who, after all, would willingly take a medicine whose effectiveness had not been rigorously tested? Why should we adopt a different attitude to public policies? They too affect the wellbeing of millions of people and, just as in the case of clinical and pharmaceutical research, it is necessary to check the validity of possible types of ‘treatment’ in practice. The product of this applied research will be policies based on evidence rather than on someone’s convenience. A methodology which, if adopted for public policy measures, also has the major advantage of increasingly bridging the gap between the ‘dismal science’ – as economics is customarily called, being the discipline that studies the allocation of scarce resources – and other sciences ‘which work’. And which makes it possible to separate the stages of planning, implementation and assessment of such measures from a political debate which, not only in Italy, is too often ideological, if not demagogic, and therefore vitiated by criteria and considerations which have little or nothing to do with effectiveness. Heather Smith, President of Rock the Vote – an influential independent political activism association in the USA whose mission it is to provide political representation for new generations – has called them ‘prescriptions for democracy’. The definition is apt, and it cannot be denied that our democracy is to some extent in need of prescriptions. It is true that experimentation costs money; but how much might it cost us to continue not to engage in it?
La psicoeconomia di Charlie Brown. Strategia per una società più felice
¡Political effectiveness and economic growth are linked: the quality and effectiveness of public policies are the key to countries’ competitiveness and their capacity to attract investment. In Italy, it is fair to say that the regulatory context in which individuals, businesses, investors and the public authorities themselves operate is not ideally suited to promoting flexibility, competitiveness and rapidity. Everybody laments the fact. But when people try to change this situation, they do so on the basis of preconceptions, hypotheses or, at best, partial data. Why does it not occur to anyone to commission research to establish what result one measure or another will produce? When it comes to pursuing the common good, reducing energy consumption, paying taxes or preventing behaviour detrimental to the personal interests of the person displaying it, such as overeating, smoking, drinking too much or gambling, the key to the success of any policy measure is correctly predicting how individuals will behave.
In recent years, growing numbers of academic disciplines have encouraged the application of the experimental method to policy-making. In this way it is possible to establish which projects work and to reduce the degree of uncertainty which characterises all measures undertaken in the complex social world. Evidence-based policy bases the practice of policy-making on proven effectiveness. As a result, it is possible for the planning and implementation of economic, public and social policies to cease being guided by intuition, dogmas and prejudices, which typically characterise the ideological debate. This renewal is due both to the transformation of economics, which has become much more open to experimental approaches, and to the successes achieved in the medical sciences. This Randomised Controlled Trials methodology is the basis for the experimental assessment of most of the research so far carried out in the field of behavioural approaches, among which that implemented by the Behavioural Insights Team in Britain is particularly noteworthy. From the use of social messaging to collect taxes to the attempt to create new re-employment programmes, everything is based on the idea of isolating two groups and then applying a measure to one and not to the other. The results obtained – if they are different – are imputed to the variable which has been manipulated, to the application of a nudge. This assessment of effectiveness and understanding of chance factors on the ground can be carried out on various scales, depending on the instruments available and the complexity of the behaviour which is to be influenced.
Nudge theory and its methodology unquestionably raise ethical issues. The mere fact that something is effective does not intrinsically make it right in its specific applications. When something is altered which has an impact on the wellbeing of millions of citizens, it is necessary to be responsible in communicating aims and above all to be transparent about how it is intended that the action should be taken. But is a government really ethical which spends public money on measures based on guesswork? Can we continue to allow ourselves to make do without evidence when trying to select the most effective measures?
Not according to the President of the United States. On 15 September last year, a glorious day for the cognitive sciences around the world, the White House issued an executive order with a title which constitutes a programme: ‘Using Behavioral Science Insights to Better Serve the American People’. It states that there is a mass of evidence to show that the behavioural sciences make it possible to plan better policies, to achieve results at lower cost and to increase the effectiveness of government. The executive order encourages all departments and executive agencies to apply them.
In conclusion, behaviourally informed approaches are just one of the possible approaches to evidence-based public policy, but they have on their side a huge element of originality. Intelligent choice architectures, which are citizen-friendly, are the alternatives to contexts dominated by explicit rules and dictates, with the attractive consequence that it finally becomes possible, to some extent, to do without regulation as a primary instrument to guide behaviour. Empirically, this burgeoning prospect has already achieved its first successes. The aim of future research is to develop a theoretical and pragmatic framework which is methodologically aware and ethically informed and can guide policy-makers, so that those who plan environments of choice that are simpler, sustainable and beneficial to the individual can do so in a responsible manner.
Full Professor of the Philosophy of Science, University of Vita-Salute San Raffaele
Currently an adviser on behavioural and social sciences to the Prime Minister’s Office