De overheid als keuze architect?

De overheid als keuze architect? Prof.dr. I.D. de Beaufort Prof.dr. M.A. Hajer Prof.dr. M.V.B.P.M. van Hees Dr. A. Klink Prof.dr. H.M. Prast Prof. R.H. Thaler lecture 2009

De overheid als keuzearchitect wrr-lecture 2009 Prof.dr. I.D. de Beaufort Prof.dr. M.A. Hajer Prof.dr. M.V.B.P.M. van Hees Dr. A. Klink Prof.dr. H.M. Prast Prof. R.H. Thaler Den Haag, 2009

Ontwerp: Studio Daniëls BV, Den Haag Coverfoto: Dolph Catrijn wrr / Wetenschappelijke Raad voor het Regeringsbeleid. Den Haag, 2009 isbn 978-94-90186-03-6 Alle rechten voorbehouden. Niets uit deze uitgave mag worden verveelvoudigd, opgeslagen in een geautomatiseerd gegevensbestand, of openbaar gemaakt, in enige vorm of op enige wijze, hetzij elektronisch, mechanisch, door fotokopieën, opnamen of enige andere manier, zonder voorafgaande schriftelijke toestemming van de uitgever.

inhoudsopgave Voorwoord 5 Prof. dr. Henriette Prast Public Policy Nudges: the Government as Choice Architect 9 Prof. Richard Thaler Kan nudging een klimaatramp helpen voorkomen? 23 Een reactie op Richard Thaler Prof. dr. Maarten Hajer Liberaal paternalisme en de waarde van vrijheid 35 Prof. dr. Martin van Hees Mensen moeten voortdurend keuzes maken 43 Dr. Ab Klink Over de sprekers 49 dvd wrr-lecture 26 november 2009, Nieuwe Kerk, Den Haag Lecture en discussie over menselijk keuzegedrag met prof.dr. Inez de Beaufort en prof.dr. Henriette Prast

4 de overheid als keuzearchitect

voorwoord voorwoord De gedragseconomie, die inzichten uit de sociale psychologie en de micro-economie combineert, laat zien dat mensen in drie opzichten systematisch afwijken van het rationele keuzemodel: ze hebben andere preferenties, ze gaan anders om met informatie, en ze zijn voorspelbaar irrationeel in hun besluitvorming. 1 Om misverstanden te voorkomen: het is niet alleen onmogelijk, maar ook onwenselijk om mensen rationeel te maken: irrationaliteit heeft een functie. Dat gezegd hebbende, wat betekenen de afwijkingen van het rationele keuzemodel voor beleid? Ten eerste dat er meer motieven zijn voor de overheid om gedrag te beïnvloeden dan we op grond van het rationele model zouden denken: mensen hebben een wilskrachtprobleem, en de voorspelbare irrationaliteit leidt ertoe dat de private sector de consument meer kan manipuleren dan totnogtoe werd gedacht. Ten tweede heeft de overheid meer methoden om het gedrag van de burger te beïnvloeden. Naast de traditionele instrumenten: ge- en verboden, financiële prikkels, overreding en waarschuwing, informatie en transparantie, is er nu ook de keuze-architectuur, ook wel libertair paternalisme genoemd. Ook is het vrijwel onmogelijk om keuzes neutraal voor te leggen: sturing is er altijd. Zie hier de boodschap van Richard Thaler, hoogleraar Economics and Behavioral Science van de Universiteit van Chicago en key-note spreker van de wrr lecture 2009. Dit alles geeft de overheid een grote verantwoordelijkheid bij de vormgeving van beleid alle aanleiding dus voor de wrr om dit onderwerp te agenderen. Maarten Hajer, directeur van het Planbureau voor de Leefomgeving (pbl), gaat in op de vraag of het gebruik maken van de irrationaliteit van de burger door vegetarisch als standaard, en vlees als dieetwens te presenteren, kan bijdragen tot het voorkomen van een klimaatramp. Zijn pbl heeft uitgerekend dat een vleesloze week zou leiden tot een 3,5 procent daling van de Nederlandse co 2 uitstoot. Martin van Hees, hoogleraar wijsbegeerte aan de Rijksuniversiteit Groningen, gaat in op de verhouding tussen libertair paternalisme 5

de overheid als keuzearchitect 6 en de indirecte waarde van keuzevrijheid, die nauw verbonden is met verantwoordelijkheid: leren van je fouten. Paternalisme is volgens Van Hees alleen liberaal als deze waarde niet in het gedrang komt. Minister Klink (vws), die op deze middag de wrr-verkenning De menselijke beslisser 2 in ontvangst nam, ging daarbij spontaan in op de daarin neergelegde bevinding dat de houding van de burger ten opzichte van de overheid meer wordt bepaald door de manier waarop die burger zich behandeld voelt dan door de uitkomst van de behandeling: dit herkende hij uit de medische sector. In zijn in deze bundel opgenomen lezing behandelt de minister de dilemma s die keuzebeïnvloeding in de gezondheidszorg met zich meebrengt. Aan het slot van de middag interviewde Inez de Beaufort, hoogleraar Medische Ethiek en hoofd van de Afdeling Medische Ethiek en Filosofie van de Gezondheidszorg van het Erasmus mc, op een speelse manier Henriëtte Prast, leider van het wrr-project Keuze, gedrag en beleid, over de mogelijk nadelige effecten van libertair paternalisme: infantilisering en een glijdende schaal. Dit interview treft u, net als de in dit boekje opgenomen lezingen, op de bijgevoegde dvd aan. Namens de wrr, Prof.dr. Henriëtte Prast

voorwoord noten 1 Zie voor een goed overzicht DellaVigna, Stefano (2009), Psychology and economics: evidence from the field, Journal of Economic Literature, v 316 ol. xlvii (June 2009), pp 315-372 2 http://www.wrr.nl 7

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public policy nudges: the government as choice architect public policy nudges: the government as choice architect Richard Thaler Thank you very much for having me. It s wonderful for all of you to come and listen. I hope we have an interesting afternoon of nudging ahead of us. Let me first remind you that much of what I am going to say today is based on my book that was written with a very good friend of mine, Cass Sunstein, who was a colleague at the University of Chicago for many years. He is now working for his former friend and colleague at his law school, president Obama. Cass job or at least the title of his job is quite boring: he is the Director for the Office of Information and Regulatory Affairs. But the media call him the Regulation Tsar and I call him the Nudger in Chief. Cass is busy implementing these ideas and he sends me around to spread the gospel. So this church is a good place for spreading the gospel. 9 Let me start by saying what our goals were in writing this book. We had two ambitious goals. The first one was to try and create a framework for thinking about public policy that employed the idea of behavior economics and could possibly show how these ideas could be applied to many of the important problems that face the world today. So this was the merely ambitious goal. The ridiculously ambitious goal was to create a framework that could somehow span the political debates that, at least in America, are becoming increasingly polarized between the left and the right. We tried to create a framework that might be acceptable to both sides. As was mentioned in the introduction, there is some glimmer of hope for that. Both Cass and I have worked and campaigned on behalf of the Obama team, but I have never been named as an advisor to David Cameron, who is from the Conservative Party. And the president of South Korea, who is actually quite conservative, has also read the book and assigned it to his cabinet. So we are hoping that spanning the political divide might possibly work.

de overheid als keuzearchitect Let me start by explaining what behavioral economics is and let me offer a definition from Herb Simon, who was really a predecessor of the current field. He rightly says that the name seems a bit odd. He calls it a pleonasm; you don t have to be embarrassed not to know what that word means. It means a redundant phrase. He rightly says: one might wonder why we need that term. It isn t economics about behavior after all, so why do we need a special branch that does behavioral economics? As he correctly says, the answer to that lies in the assumptions of standard economics and the way they differ in behavioral economics. 10 In our book we talk about two kinds of creatures. There are humans, like most of the people in this room. And then there are imaginary creatures that appear primarily in economics articles and text books. They are sometimes called by the Latin term homo economicus, but we just call them econs. The difference between behavioral economics and other parts of economics is that behavioral economists study humans and the rest of the fields studies econs. Now what is the difference between a human and an econ? Humans are boundedly rational, to use Simon s term. Again, the contrast helps to explain this. An econ can look at an array of complicated financial instruments and immediately figure out which one has the highest value and choose it without error. A human has trouble doing long divisions if he does not have a calculator handy and humans also have limited attention spans. Econs are always on target. Sometimes we humans have our minds wonder. A second important principle is that humans have self control problems. Econs never do. They have never had a hangover, are never overweight and never splurge on a big tv or a pair of shoes that they don t really need. So they are actually not much fun, these econs. The third characteristic of econs is that they are unboundedly unscrupulous. For them every interaction is strategic. Normally, if somebody just asks you what time it is, you look at your watch and say it is 2.20. Suppose you were outside waiting for the talk to begin and someone asks for the time, an econ would think: what is strategically the best response to this query? And he might say: if I lie and say it is only 2, I would probably get a better seat in the auditorium. So econs are always striving to one-up the other person. Fortunately, humans are a bit nicer than that.

public policy nudges: the government as choice architect Now the final aspect of behavioral economics that makes behavioral economics different from psychology and some of the other fields it draws upon, is that it is bad economics. I spent much of my career and the last 20 years studying financial markets and how they differ from the perfect markets that some of my University of Chicago colleagues write and dream about. I am not going to talk about the official market hypothesis today, but I am instead going to merely show a single picture that I claim is the single best evidence against the basic principle that drives the official market theory, which is the law of one price. Let me just show you this photo, which was taken in Buenos Aires. It shows identical oranges with different prices. Some of my economists claim that this is not a violation of the law of one price, it is rational discrimination against Americans who are too stupid to know the Spanish word for orange juice and too stupid to notice that the photographs of the oranges are identical. But at least until the end this is all I am going to say about financial markets. 11 So the approach that Cass and I take is what we call libertarian paternalism or might in Europe better be called liberal paternalism. And at least in the us both halves of this expression are quite unpopular. So why do we combine two unpopular, contradictory terms and write a book about that? We think that when combined, the terms are compatible and may be even lovable. So by libertarian or liberal, all we mean is we try to devise policies that maintain freedom of choice. We don t tell people: you must do this or you must not do that; we try to give them a choice. By paternalism we simply mean devising policies that are aimed at making people better off, as judged by themselves. It is not that Cass and I think we know what is best for other people or that we think Barack Obama or David Cameron know what s best for other people. We think we can help people make the choices they would make if they had all the information and time necessary to make a good choice. How do we do it? We do it using choice architecture, which is a phrase we coined while writing this book. So what is a choice architect? A choice architect is anyone who designs the environment in which choices are made. Suppose you go to a restaurant and the chef has decided what things he is going to cook that night. There is someone else whose job it is to produce a menu

de overheid als keuzearchitect and there are decisions to make. How to group the food that is going to be served, should cold appetizers and hot appetizers be in separate categories and within each category what is the order of the food. One would think that those things would not matter, but psychology tells us that they all matter. So here is the most important point I am going to make today. You must choose something. 12 Consider the following example which we used to motivate our book. Suppose that the director of school cafeterias for the Netherlands discovers that the order in which the food is displayed in school cafeterias influences what the kids eat. What use should be made of that information? If she knows this, how should she arrange the food? She could arrange the food to make the kids healthier or fatter. Or she could fool herself into thinking that she can avoid choice architecture, perhaps by arranging the food at random. But of course that itself would be a choice, and one that would slow the lines down as people would have no idea where to go. Imagine that the bread is in one place and the things to put on the bread are in a completely different place. It could take hours to find your lunch. Or you could use the strategy of lining your pocket; so just feature the items for which she gets the largest bribes. You can decide which of these you like best. If you like the first one, then you can join the liberal paternalism party with us. You could be the third and fourth members, after Cass and me. But again, the point I want to stress is that you must choose something. It is not possible to have a neutral choice architecture anymore than it is possible to have neutral architecture. The architect who built this church had some constraints probably about this room or the physical location, but there were all kinds of other decisions that influence the way we enjoy the room. The next point to make is that some designs are better than others. Chances are that you have a stove at home that looks like the one on this picture I show you. You have four burners and four knobs and if you want to turn on the left rear burner you have to turn one of those knobs on the left. If you are sitting in the back, maybe you can t read the labels on the two burners, which puts you into the same situation of someone my age who is looking down at the stove. I find that when I am using that stove at home, I m about 60/40 to turn on the right

public policy nudges: the government as choice architect knob. Which is better than chance, but only slightly. Compare that to the stove on the other picture, where we have not even labeled the knobs but no one would ever make a mistake. So we have a good design and a bad design. Our point is: why not choose good designs? Which brings me to the most famous Dutch contribution to choice architecture. Now for the ladies in the audience, this represents your best chance at seeing the inside of the men s toilet at Schiphol airport. You can see that there is something in there. I actually made sure that these flies were still there yesterday when I arrived at the airport. Now this was an innovation introduced by a former economist. I think this may be the best thing economists have ever done. The idea is that when men are taking care of business, they aren t paying very much attention to the task at hand. But if you give them a target, they will aim. According to the people at Schiphol airport, spillage has been reduced by 80 per cent. Now that fly has become my best example of a nudge. 13 So what is a nudge? A nudge is some small feature of the environment that attracts our attention and influences our behavior. It is important to stress that nudges work on humans but not on econs. So econs choose optically without nudges but humans sometimes need a nudge. We have a chapter on the principles of good choice architecture. I do not have time to talk about all of them today, so let me give some examples of the first three principles. The first is default. We have heard that the default option today is to speak Dutch, which I am opting out of. Normally, a default option is just what happens if you do nothing. So normally what happens if you do nothing is that nothing happens. But sometimes for example you walk away from your computer and if you go long enough, the screen saver comes on or the computer locks itself. How long that takes, is itself a default option that came on your computer, and most people never change it. The most important point about default options is that they are sticky. So whoever chooses the default options has a lot of power. Let me give two examples of this. The first we have lots and lots of data about. In the us we have for the last 25 years been switching over from a system of defined benefit plans to defined contribution plans,

de overheid als keuzearchitect known as 41k plans. The employee has to join the plan and decide how much to save and how to invest the money. Some employees never get around to joining. Now a simple solution to that is to change the default. So under the usual regime when you are first eligible to join the plan, you get a big pile of forms to fill out and if you do not fill them out you are not in. What some firms have done is switch to automatic enrollment. You get that first pile of forms, but the first page also says: if you do not fill this out we are going to enroll you at this savings level and this investment plan. Now this greatly speeds enrollment, but there is a downside: whatever the default options are, specifically the savings rate and the investment vehicle, those get sticky. 14 I am going to talk about a solution to that in a minute. Let me give you another example with respect to organ donations. In many countries, including the us and the Netherlands, if you want to make your organs available if you should die, you have to do something, sign some form. Countries are varied in how difficult it is to find that form and turn it in. Some European countries have adopted what is called presumed consent. This flips the default. You are assumed to give your consent unless you opt out. Spain is the world s leader in producing organs that are available for donation and one of the methods they use is presumed consent. That has some appeal, although some people object to this politically. I actually favor a third option, neither opt in nor opt out, but what I call mandated choice. It is actually the system we use in Illinois, where I live. The way it works in Illinois is that every few years you have to get your drivers license renewed and get your picture taken. When you do this, they ask you: do you want to be a donor yes or no? You must answer that question to get your drivers license. So you can say no. You are free to say no, but you can t just say: huhhhhh, I don t know. This has increased the proportion of people who agree to give their organs to 68 per cent. Nationwide in the us it s 38 per cent. This costs nothing. I wrote a column about this in the New York Times a couple months ago and I mentioned that Steve Jobs had recently received the liver transplant. I suggested that our goal should be to make it as easy to sign up to donate your organs as it is to download an app on an iphone. I nudged Steve Jobs to make an app available on the iphone for the people to sign up. Jobs didn t

public policy nudges: the government as choice architect have to do anything: two weeks later I was approached by somebody who said he read the column and was going to do this. So now there is an app for the iphone that you can click on and signup in any state in the us. That is yet another way we could make progress. Second principle: give feedback. People can t learn unless they get proper feedback. One example is this. Suppose you are painting the ceiling at home. You have white paint and you are painting over white paint. It is very hard to see where you have painted. Some genius maybe the same guy from Schiphol airport created a paint that goes on pink but then turns white. This means you never miss a spot because you get feedback. Here is another example of feedback. This little egg-shaped thing on the picture is called the ambient orb. It can be installed in people s homes and it normally just looks like this. But if you start using a lot of energy, it starts glowing red. Simply installing these in people s homes decreased energy used in peak periods by 40 per cent. And energy is all about reducing energies at the peak because that s what determines how many power plants you have to build. Here is another example that is studied by the great psychologist Bob Cialdini and his team. They went around neighborhoods and tried to encourage people to use less energy. I think this was in a hot climate in places like Arizona, where they have air conditioners. They presented these door hangers and encouraged people either to save money or save the environment or be a good citizen. The effect of this was zero. But then they had a fourth condition where they said: truthfully your neighbors are using less power, you should too. That reduced the energy used by 6 per cent. 15 There is a company in the us called O power. We now get these in my home in Chicago. When you get your utility bill, they tell you how much energy you are using compared to your neighbors. They don t name your neighbors, so there is no privacy concerns. They just say: here is your utility bill, it is 300 dollars, your neighbors bill was 200 dollars, the average of your neighbors. It turns out that simply providing this information reduced usage by 2-6 per cent. It costs nothing. So the question is: why wouldn t we do things like that? There is a lot of low hanging fruit. There are a lot of ways to alter behavior on climate change that cost nothing. We don t have to invent

de overheid als keuzearchitect new kinds of energy sources. Behavior change is one of the things we should be investing in. 16 The first time I went to Paris, probably 20 years ago, I went into the metro. You know they give you one of these tickets. It has a magnetic stripe and there is some writing on the other side. I was looking at it and I didn t know how to put it in the machine. I m an experimentalist and put it in with the magnetic stripe up. That worked, and for the next 20 years I religiously did it that way. Then my wife and I spent 4 months living in Paris. And since now I was a native, I was showing some friends around how to use the metro. I said: it s very important when you go on the metro to put the ticket in this way. My wife started laughing. She says: it doesn t matter which way you put it in, it works any way. Which is the only reason why I had gotten it right for 20 years. Now compare that to the parking garages in downtown Chicago. They work this way: you put your credit card in when you come in, and when you are leaving you drive up to the exit. You put your credit card back in, and it takes some money and the gate goes up. There are four possible ways of putting that card into that machine. Exactly one of those four ways works. You often find yourself behind some idiot who gets it wrong more than three times. Not that this has ever happened to me, but imagine you put your card in, it comes out, you look and the gate is still down. Now you don t know what mistake you made; it could be the wrong card, it could have been demagnetized, it could have been put in the wrong way, you don t actually remember which way you put it in. You put it back in and it could be the same way. Now this has gotten so bad, that if you go to the Chicago Symphony concerts, afterwards they have hired someone just to stick the cards in the right way. Without him, people would still be in that garage from last month s concert. So we need to expect error. One quick way people error is by not saving enough. In America we now trust people to save enough for retirement, but many of them don t. A colleague and I developed a method to help with this. It is called Save more tomorrow, and it is based again on basic psychology. One principle of psychology is that

public policy nudges: the government as choice architect we all have more willpower in the future than right now. Now many of us in the room are planning to start diets on January 2; not tonight, not even at the coffee break. So we invited people to join up for a plan where their contributions to the pension plan go up every time they get a raise, and this happens automatically. And it keeps happening until they say stop, or until they hit some maximum. Now the first company that we did this, we tripled saving rates and it is now available in thousands of firms around the us. It is sort of spreading like those flies. Now here are some examples of this principle in the health care domain. You know when you go to fill your car up if you have a diesel car, the nozzle is a different size to prevent you from putting the wrong fuel into your car. It used to be that there was a big problem in operations that people would get the wrong anesthesia. There is a machine with a lot of hoses and if you connect the wrong hose to the wrong slot, the patient dies. They solved that problem by making the nozzles incompatible, so it is just not possible to make that mistake. Another big problem in health care is compliance. There are many diseases where we know the medicine, we know the method to treat someone, but patients just don t do what they are supposed to do. Diabetes is the classic example. For all kinds of things getting people to take their medicine is a problem. Think about the choice architecture of designing a pill. Suppose you want to manipulate the frequency in which people take the pill. The best kind of pill is the one you take every morning. The best would be a shot you get once and you are done. Now there is no compliance. Otherwise the best is once per day. Twice a day is bad, three times a day is terrible, but once every other day is completely hopeless. Is there any human that could master taking a pill every other day? Or every third day? That would be completely terrible. Once a week is not so bad. Some calcium supplements are based on once a week. Most people take it every Sunday morning; that is not too bad. Birth control pills are an interesting case, because you have to take them every morning and then you stop for a week. So the way they are devised is that there are placebos for 7 days, so you don t lose the ritual of everyday. 17

de overheid als keuzearchitect One of the problems people have in hospitals is what is called the central line infection. When a central line is inserted, there are certain procedures that should be followed. If they are followed then everything is fine, but if they are not followed then there can be an infection. These infections kill people and cost tons of money. It has been shown that if they follow a simple checklist in the operating room, you can reduce these infection rates to zero. Interestingly, one of the items on the checklist is that nurses are given permission to remind the doctors to wash their hands. Hand washing is key. Covering up the body except for where the line is going in, is another key. Arming the nurses to remind the doctors to follow the rules, is one of the things on the checklist. There is no excuse for any hospital not to adopt these procedures, but many don t. 18 Here is something that I have been pushing a lot since the book came out. It sounds quite boring but I think is actually quite important. The idea is to change the way we do disclosure. I still have to learn the way it works here, but in the us if I get a credit card, I get 30 pages of fine print telling me all the rules of that credit card, which I presume no one has ever read. Now what we are suggesting is to supplement that with an electronic disclosure. The way it would work is that once a year you would get an email with a file with two types of information. One is your usage data: it will tell how you have used that credit card for the last year. The other would be essentially a spreadsheet of all the ways that credit card can charge you for things. You could use this for credit cards, for mortgages, for cell phones it is a perfectly general idea. Now it is not that we think any human would open those files. But we think that in one click they are able to upload the file to third-party websites, and that would help them shop and turn humans into econs as shoppers. When we wrote this book, these websites would emerge, they have already emerged. Here is another example. There is a website in the us that is called Billshrink.com. It helps people to find a good mobile calling plan. You could use the same system for credit cards. One of the principles that I stress is that we as consumers should have the right to our own usage data. The suppliers have it, they know how many calls we have made, how many text messages we have sent, how many emails.

public policy nudges: the government as choice architect Why shouldn t they share that data with us so we can become intelligent shoppers? Now one of the advantages of this kind of approach is that the alternative is regulation, and regulation is a never-ending game. So for example, I just read an article that in Australia a couple of years ago they regulated how much a credit card can charge merchants for using this card. They cut those fees in half. What has been happening over the last few years is that credit card companies are introducing more and more ingenious ways of charging you for things. In America we call this the whack em game, where you knock something down and something else pops up. The kind of disclosure rules I am talking about, would end that game because all the ways they charge you would be transparent. Let me end with a comment about the financial crisis. Alan Greenspan gave a famous mea culpa speech, where he said he was shocked. Like the character in Casablanca, he was shocked that the people in the financial markets were not paying enough attention to counterparty risks. And he was also shocked that the smartest financial institutions in the world were viewing mortgage securities as a steal. And in his world view they were econs, super econs and would not make this kind of mistake. Here is my take on the financial crisis. I think two of the mistakes I have been talking about today are important to understanding what happened. One is bounded rationality. So the crisis started with people in places like Las Vegas, Phoenix and Miami taking out mortgages that were complicated, and which they could only really pay back if real estate prices kept going up. It is not surprising to anybody really that some people will not understand a complicated mortgage. So the bounded rationality of the borrowers is not surprising. What is surprising is that this bounded rationality worked all the way up, to the ceo s of major financial institutions. What they did not understand is what their traders were doing. So you know, you have companies like Bear Sterns and aig and Lehman Brothers, that were essentially brought down or greatly shrunk by the behavior of a very small part of the organization that was engaged in trading practices that the ceo s could not understand. So we have bounded rationality all the way from the bottom to the top. The second key thing that I would point to is self control problems. Again, it started the crisis with people. Most of the mortgages were refinances. 19