Nudging in Behavioral Decision Making - Example

Nudging in Behavioral Decision Making By Student’s Name Code+ course name Instructor’s Name University Name City, State Date Nudges in Behavioral Decision Making Introduction An organization may be either simple or complex in structure, but the idea of decision making in both cases is inevitable. One of the most complex forms of decision-making techniques is the behavioral decision making. Approaches such as training and development, organizational culture change and organizational behavior have been used to moderate the behavior of people within an organization (Hansen & Jesperse, 2013). Nudging is one technique that can be used to manipulate choice and formulation of the behavioral decision. Most policy makers use specific contexts for decision-making purposes to catalyze behavior change and interests of the individual. Such approaches have often shown how challenging it is to make behavioral decisions in an organization. It is believed that nudging helps manipulate the choices people make in an organization, which can face opposition from Democratic philosophies. Manipulating the decision that people make is against the principles of democracy in the modern world. Despite the democratic consideration, nudging has some advantages and disadvantages. , therefore this paper will, delve into the concept of nudging in behavioral decision-making. In addition, the paper will look into principles of nudges and libertarian paternalism. Strengths and limitations of nudges will also be discussed with specific case studies provided. Nudge Approach behavioral change Thaler and Sunstein (2008) are the brains behind the use of nudge in behavioral decision-making approach. The approach recommends development of behavioral decisions basing on the particular context. Nudges aim to influence choices people make without necessarily limiting the option of choices from which they select. The best nudging process is where one individual referred to as a change agent moderates the entire process. In using nudges as a tool in behavioral decision-making, there are often choice architects who have various responsibilities. Choice architects are tasked with responsibilities to ensure that they formulate and organize contexts that the people use to make decisions. Many people can be choice architects either voluntarily or involuntarily depending on the professional field in which they operate (John, et al., 2013). For instance, the individuals who have the responsibility of deciding election ballots can be classified as choice architects for an electoral process. Choice architects are required to develop logical combinations that will offer a variety of choices for people within an organization to choose from. To avoid the notion that nudges infringe democratic rights, the choice architect must be conversant with the possible choices that the individuals in a society prefer. The architects are responsible for ensuring that all social, cultural, political and sensitive issues are not offensively addressed in the contexts they develop. Choice architects must intelligently influence choices of people within an organization. Several factors should be considered by choice architects when structuring tasks. The choice architects should adequately consider the number of alternatives they avail to the respondents. Many architects face a challenge of deciding the number of options they should include as choices. In determining the number of choices, architects have to balance options since the more the options, the more the chances of providing preferences match. In addition, the choice architect also has to recognize that more options increase the cognitive burden on the intended respondents. Information technology systems can be employed in cases where the choices in place are plenty (Johnson, Dellaert, Golstein, Larrick, & David, 2012). The use of information technology can prove to be useful in aiding to solve the choice task. Architects can also use decision aids such as adverts to ease the burden of making choices. However, the influence of some decision aid tools on respondents can be easily predicted. Another important tool that architects can deploy in developing contexts is the default tool. Defaults are typical settings within the context that will apply to respondents who take a little initiative to alter them. The concept of ‘choice over time’ since most individuals responds to choices depending on the various experiences over time. Using nudges effectively Nudges can effectively be adopted and implemented by considering some important aspects. It is important to ensure that the approach deployed is in line with the local needs and preferences. Nudging needs to involve a strategic leader who understands the local environment to act as the choice architect. Nudging should ensure that impact of every intervention deployed is proportionate and not over-emphasized or under-emphasized. Behavior change intervention strategy through nudging should be efficient at creating and maintaining behavioral change. The target population should be in the location where they practice a behavior that requires change. Adequate funds and time should be allocated to enable the activity since some resources are needed to complete a nudging process. Training of staff cannot be disregarded since they can play a crucial role in ensuring the nudging process is a success. Principles of nudges and libertarian paternalism Many individuals have drawn the assumption that nudges are similar to libertarian paternalism regarding limiting the thinking of people. It can be argued that both nudges and libertarian paternalism have disadvantages, but they also have principles on how the can be adopted and applied. The principles are discussed below. Choice architecture When an organization decides to use nudges, as at tool for behavioral decision-making, it is important to have a choice architecture. Choice architectures are useful in developing contexts that can be used in the nudging process. Nudge architectures have to possess leadership skill and a great sense of understanding. Without good choice architectures, poor contexts may be developed leading to poor outcomes of the expected results. Paths of least resistance Choice architects have to establish contexts that contain options that might meet less resistance from the targeted respondents. Some aspects of an organization might meet resistance, and thus, the nudges can be branded as dictatorial. It is one of the areas that architectures have to develop a good understanding of the organization they plan to aplly a nudging process. Social issues, cultural issues and political issues can have varying opinions and thus prone to resistance. Heuristics and anchoring It is available to anchor certain perceived values using previous activities. At times, the anchors involved may be inappropriate activities that relate to an initial activity. In addition, heuristics must be avoided as this can lead to biases in the use of nudges. Organizations have individuals who can have complex personalities and ideas. For instance, people love shortcuts but in the end, the shortcuts can be misleading. Availability Choice architectures must select options that are more conversant with the respondents. In addition, the choices should have more influence to the on the behavior of the individuals within an organization. Recent events are preferred since the scenario may still be available in the minds of the targeted respondents. Loss aversion and framing It is important to consider that presenting two options that complements each other is preferable. Loss aversion should be considered by choice architects when developing contexts to be used in nudges. Framing is a technical approach that should be used by choice architects to influence decision-making. However, choice architects should be careful not to reduce the choice options that respondent has to select. Status quo bias and emotion of decision-making Status quo refers to the state of affairs in an organization and what people believe in at the moment. Choice architects should be careful not to include bias choices that would create factions within the organization. Nudges are efficient when respondents are more active to provide the good mood for decision-making. Emotions can significantly influence the decisions that people make or the choices they make during nudges. Mindless choosing and mental accounting Individuals should be advised to avoid mindless choosing since the situation can lead to weak results. Even though nudges may influence respondents to switch off from thinking mode, it is advisable that the respondents consider the choices provided. Mental accounting is a necessary step that should be exercised when using nudges for behavioral decision-making. Mental accounting will help determine logical relationships and status of context. Feedback and comparison People will feel the effect of a nudge once feedback is provided via the right channel, within a short time and in the recommended quality. Organizational behavior is easily nudged when the mentioned qualities are adequately observed. Feedback helps the individuals within the organization to develop issues of concerns. Comparisons are important as they help behavioral decision-makers make decisions concerning other experiences. Decision-makers should be careful not to use comparisons that can lead to contradictory decisions. It has been established that the use of irrelevant comparative sources can be the primary root for inconsistent decisions. Too many choices can pose a challenge when it comes to a comparison since some of the choices are closely related. Real examples of nudges This section will provide examples of how nudging can be used to change the behavior of individuals. Nudge and the wider behavior change policy family According to Whitehead et al. (2014), tthe field of behavioral sciences has made the most of the nudges to change the public policies. The idea originally developed by Thaler and Sunstein has gained prominence in a behavioral scientist who target to modify the behavioral decisions people make. The two scholars brought nudging into the limelight when they introduced their book that talked about improving the way people make health decisions, wealth, and happiness. The book identified that human beings behave in non-rational ways that can plunge them into debts, poor health, and environmental degradation. Behavioral advocates to alter the environments within which people make unhealthy decisions have used nudges. Nudges have been used to create a belief that various problems can be addressed at a very low cost and preserve the freedom of the people at the same time. Even though some approaches are not called nudges, they have adopted the nudging approach and principles. For instance, the aspect of social marketing is an area that makes the most of the nudges to change behavioral decisions clients make. In the US, a software company, Opower collaborated with energy companies to control the behavioral decisions on energy consumption and saving. Energy data was presented to customers in a salient manner that would portray a dictator-like situation. With time, there was a significant behavioral change in energy use and consumption. The initiative resulted in almost 3 percent saving on energy consumption. Department of Management Public Lecture Another example where nudging was used to stir behavioral changes is seen during the talk delivered by Dr. Halpmen at the old Theatre (London School of Economics, 2015). A historical review of a scenario where small changes made a difference was narrated. The insight behavioral team came up with an experimental nudge unit that targeted Ten Downing Streets. The approach was never predicted to last but it persisted over a year. Most of the critics were disapproved with Dr. Halpmen taking charge to change the status quo. The main aim was to adopt a model that made use of behavioral economics to influence the decisions people make. The use of nudges proved to be a success in the in a small area and gained prominence in many other areas. Strengths and limitation of nudges Advantages of nudges in behavioral decision-making Nudges have been used in many organizations and positive results linked to this tool regarding the moderating behavioral decision (Thaler & Sunstein, 2008). Nudges aim to rectify some behavioral characteristics within an organization. One of the important behavioral aspects targeted by nudges is ignorance of individuals within an organization. Most public policy formulators advice the government to use nudges in cases such as derivation of retirement plans. In most cases, the government may have insufficient knowledge of a matter prompting the use of nudges. Nudges aim to cover for uncertainties that exist within an organization. Criticism of nudges in behavioral decision-making Nudges have been used to influences the changes that individuals within an organization make (Jonathan, 2011). The choices presented by the choice architects may not be efficient in representing a broad range of options that people can choose from. For this reason, when nudges are used in behavioral decision-making, some people may view it a way of infringing on their democratic rights. The modern world has allowed most people to have liberal choices. Limiting such individuals to a few choices is an implication that freedom of making choices has been barred. Such notions can easily erode the morale of individuals within an organization. People will equally portray reluctance in participating in decision-making processes within an organization. Criticism of ethical and political positions of using nudges in behavioral decision-making has been raised. The main word the face opposition in the process of nudging is ‘manipulation of people’s choices.’ It has also been established that related principle of oxymoron contained in libertarian paternalism (Abbandonato, 2013). Many individuals have made conclusions that nudges is a typical reincarnation of libertarian paternalism and has adopted all its doctrines. In addition, some individuals have a notion that nudges are only practiced without consent and disappear when the public discovers their limiting capacities. Nudges have been linked to having the tendency of impairing the capacity of individuals within an organization to make liberal moral choices. When nudges only provide option provided by the choice architects, individuals within an organization are only tied to select from the choices presented. The condition does not allow people to think and make moral decisions or contribute to the same. Several issues such as individual differences have been touted as the major challenge in using nudges as too for behavioral decision-making (Jung & Mellers, 2016). Most of the areas where nudges are used have seen complaints presented that nudges ignore the individual differences that exist within an organization. An organization may have people from different cultural, religious and social background hence their decisions; philosophies may vary. Nudges cannot adequately incorporate all this difference, as this will widen the number of choices included in the context. Alternatively, some important elements that need the attention of behavioral decision makers cannot be solved using nudges. The use of nudges can prove challenging when it comes to evaluation of outcomes from the context used (Johnson, Dellaert, Golstein, Larrick, & David, 2012). It is hard to decide whether the approach by the choice architecture has been efficient in addressing issues that will contribute to behavioral decision making. It is also difficult to establish if the choices made by the respondents is what they had in mind, or they just made the choices due to limited options. Human beings have a wide range of preference and depending on personality; some people may make choices to avoid drawing unnecessary attention. Therefore, such factors prove that the use of nudges has limited application in multicultural organizations. The use of nudges in behavioral has been established to have more effect on a micro level that at the macro level. Nudges can solve minor problems within an organization but fail to duplicate the same effect in developing long-lasting public policy at macro levels. Nudges have only been efficient on modeling short-term behavior within an organization. In some cases, nudges are considered naked, and require a reinforcing legislation to give it a cutting edge. Legislations should be in place to prevent unhealthy nudges from penetrating an organization or aid in implementing healthy nudges. Nudging can contribute to the emergence of public sector problems (Rainford & Tinkler, 2011). Conclusion Human beings exhibit various ranges of behavior, which are hard to change using contemporary approaches. However, psychological approaches have proven to have a more positive outcome in changing the behavioral decisions people make. Nudging is an approach that can be used at both organizational levels and a higher level such as public sectors. Nudging is a technical way of providing people with choices without forcing them on the choices they have to make. Nudging is a process that should be handled with care since it has both advantages and disadvantages. The paper has established that a good nudging process should have a choice architect who develops a context. An architect should be well informed and educated to be able to understand the nature and number of options to be included in the context. The paper also identified the advantages and limitations associated with nudge as a tool for behavioral decision-making. Two examples were further provided where nudging was successfully used in the United States. It is important to recognize that one has to consider several principles when using nudges. The principles are aimed to help choice architects in developing options that are less impact on sensitive social aspects such as culture, politics, and religion. Bibliography Abbandonato, A., 2013. Review of Mark D. White’s The manipulation of choice:ethics and libertarian paternalism. New York: Palgrave . Retrieved from Erasmus Journal for Philosophy and Economics,Volume 6, Issue 2, : http://ejpe.org/pdf/6-2-br-1.pdf Hansen, P. G., & Jesperse, A. M., 2013. Nudge and the Manipulation of Choice: A Framework for the Responsible Use of the Nudge Approach to Behaviour Change in Public Policy. Retrieved March 6, 2016, from EJRR: http://www.lexxion.de/pdf/ejrr/02%20Nudge%20and%20the%20Manipulation%20of%20Choice.pdf John, P., Corterill, S., Richardson, L., Moseley, A., Stocker, G., Smith, G., . . . Nomura, H., 2013. Nudge, Nudge, Think, Think: Experimenting with Ways to Change Civic Behaviour. Edinburgh: A&C Black. Johnson, E. J., Dellaert, B. G., Golstein, D. G., Larrick, R. P., & David, S., 2012. Beyond nudges: Tools of a choice architecture. Retrieved from Mark Lett (2012) 23:487–504: http://www.anderson.ucla.edu/faculty/suzanne.shu/ML%20choice%20architecture.pdf Jonathan, R.., 2011. Transforming Behavior Change: Beyond Nudge and Neuromania. Retrieved from RSA: file:///C:/Users/beryl/Downloads/RSA-Transforming-Behaviour-Change%20(1).pdf Jung, J. Y., & Mellers, B. Y., 2016. American attitudes toward nudges. Retrieved from Judgment and Decision Making, Vol. 11, No. 1, January 2016, pp. 62–74: http://journal.sjdm.org/15/15824a/jdm15824a.pdf London School of Economics., 2015. Inside the Nudge Unit: how small changes can make a big difference. Retrieved from Department of Management public lecture: http://www.lse.ac.uk/publicEvents/events/2015/09/20150915t1830vOT.aspx Rainford, P., & Tinkler, J., 2011. Design for Nudge Efects: How Behavior Management can ease Public Sector Problems. Retrieved from LSE Research Online: http://eprints.lse.ac.uk/37810/1/Designing_for_nudge_effects_(lsero).pdf Thaler, R., & Sunstein, C., 2008. Nudge: Improving Decisions about Health, Wealth and Hapiness. London: Yale University Press. Whitehead, M., Jones, R., Howell, R., Lilley, R., & Pyket, J., 2014. Assessing the Global Impact of the Behavioral Sciences on Public Policy: Nudging Allover the World. Retrieved from Economic and Social Research Council: https://changingbehaviours.files.wordpress.com/2014/09/nudgedesignfinal.pdf Read More