Monday, February 8, 2016

Nudge Theory - How UK government's Nudge Unit saved a 100 million dollars

Nudge theory  is a concept in behavioural science, political theory and economics which argues that positive reinforcement and indirect suggestions to try to achieve non-forced compliance can influence the motives, incentives and decision making of groups and individuals, at least as effectively – if not more effectively – than direct instruction, legislation, or enforcement. src Wiki

The UK government set up a department called the Behavioral Insights Team (BIT) in 2010 which is also known as the Nudge Unit. The purpose of the Unit was to apply Nudge Theory to try to improve government policy and services as well as to save the UK government money.

Some of the initiatives involved adding a simple line in unpaid tax notices stating that "9 out of 10 people pay taxes on time". This resulted in many people actually paying taxes and saving the government 100s of millions of dollars annually.



The BIT team had 4 simple principles. If you want to encourage a behavior, make it Easy, Attractive, Social and Timely.


Easy: Auto-enrolment into pension schemes. In the first six months after employees in large firms were automatically enrolled into pension schemes, participation rates rose from 61 to 83%

Attractive: Drawing the attention of those who fail to pay road tax. When letters to non-payers of car tax included a picture of the offending vehicle, payment rates rose from 40 to 49%.

Social: Using social norms to increase tax payments. When people were told in letters from HMRC that most people pay their tax on time, it increased significantly payment rates. The most successful message led to a 5 percentage point increase in payments.

Timely: Increasing payment rates through text messages. Prompting those owing Courts Service fines with a text message 10 days before the bailiffs are to be sent to a person’s home doubles the value of payments made, without the need for further intervention.



Inside the Nudge Unit is David Halpern’s first-hand account of the Behavioural Insights Team



Reading material

BIT site: EAST
NYTimes Story



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