Magazine article Public Finance

What Makes Us Tick

Magazine article Public Finance

What Makes Us Tick

Article excerpt

Doctor David Halpern lives in the future - albeit by only a few minutes. Like many busy people he sets his wristwatch a little fast to try to arrive for things on time. Altering your own watch is a trivial example of a "nudge", a category of subtle intervention that Halpern has pioneered in government over the past decade - initially in the Prime Minister's Strategy Unit under Tony Blair, but more recently as leader of the Behavioural Insights Team (BIT) set up by Number 10 early in the coalition government.

The notion behind nudging is that small changes can have a disproportionate impact on the effectiveness of policies, especially if they can tap into our subconscious workings as human beings. "Nudges are particularly powerful where they are reminding people to do things that they sort of want to do anyway," Halpern explains. "If they're running with the grain of your motivation or intentions they tend to be consistently effective."

Perhaps the best-known nudge to date has been BIT's work with HMRC, employing insights from behavioural science to rewrite tax reminders. Simply inserting the line, "Most people in your local area pay their tax on time," into letters succeeded in raising payment rates by 15 percentage points. In the context of £600m in unpaid tax, that is a huge return on very minimal investment. The above sentence tickles the brain on multiple levels - exploiting the recipient's tendency to follow social norms, as well as their sense of self and allegiance to those around them.

Another reason to think about behavioural insight is that ignorance can be risky. A campaign against knife crime might accidentally increase the problem, by nudging people to think that carrying knives has become normal, Halpern warns.

In the case of the wristwatch, the small change of winding your watch into the future shouldn't logically make any difference, given that you know the time shown is wrong. However, particularly when stressed, people have less capacity to make mental calculations and so tend to take their watch at face value. As a result, the change can positively influence punctuality. Evidently it doesn't always work, because Halpern showed up for our meeting, in BIT's slightly shabby offices between Westminster and Victoria, a quarter of an hour late. But he admits that setting his watch to the correct time tends to make matters worse.

The fact that he has assessed the impact of different timings on his watch underscores an important aspect of successful nudging. People are complicated, and guessing how they might react in a given situation can be hit and miss. Experimentation, carefully measuring the outcome of different hypotheses, is a big part of Halpern's work.

"There was a view in government that experiments take ten years, cost five million, and tell you your ideas won't work," he observes. "As opposed to something much more routine, like you see in the commercial world." He adds that BIT has helped engender a more positive view of experimentation within Whitehall.

In addition, he argues that testing new ideas should be a process that never finishes. "If you're trying to figure out the best way to collect council tax you can come up with some alternatives, run a trial, and find that one approach is better than another," he says. "But that's not the end of the story, it's the beginning. Because then you can say, that was pretty good, it boosted results by 10%, but what if we try something else? What you want to do is set up your systems, your management information, your way of doing everything you do, to build-in this ceaseless variation and experimentation."

Halpern explains that this approach, known as radical incrementalism, can lead to striking changes brought about by the gradual accumulation of tiny improvements. The starkest example is probably that we can all expect to survive beyond retirement age, but not because of one big medical breakthrough.

"It's all the many small increases in knowledge about treatments and diagnoses and dosage and so on that have brought about big jumps in lifespan," Halpern notes. …

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