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Behavioral Economics_ Nudge_ and the Environment

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									Behavioral
Economics,
Nudge, and the
Environment
Donna Anderson, Ph.D.
Libertarian Paternalism
Present choices to individuals in a way that doesn’t
abridge their freedom, but improves the
probabilities of making decisions that are good for
them or society.
When do we
need a Nudge?
Sinful goods
Smoking, Alcohol & Food
Overconsumption
When do we
need a Nudge?
Investment goods
Exercise, Flossing, Dieting
When do we
need a Nudge?
Degree of Difficulty
  CHOICE OVERLOAD
Degree of Difficulty
  CHOICE OVERLOAD
Question: why so few of the 900,000
 employees covered by Vanguard were
 participating in their 401(k) savings plans.

 Analysis of the data revealed that participation
  fell as the average number of funds in a plan rose.

 Solution: When plans offered only two funds, 75
  percent of employees participated;
   when plans offered 59 funds, the percentage of
    participants fell to 61 percent.
Degree of Difficulty
   CHOICE OVERLOAD
Examples
 Pandora Music
 School Cafeteria
   http://www.nytimes.com/interactive/2010/10/
    21/opinion/20101021_Oplunch.html?th&emc=
    th
Effective Nudges
Feedback
Feedback
Learning requires Feedback
 Question: How much energy are we
  using?
 Solution: Thermostat in homes programmed
  to tell us the cost per hour of
  raising/lowering temp a few degrees
 We know price increases offer an incentive
  to conserve energy, but technology that
  makes the cost more salient is far more
  effective
Feedback
Ambient Orb – turns energy use that is
 invisible to visible
 http://www.ambientdevices.com/
      http://ambientdevices.myshopify.com/products/
       energy-orb
Ambient Orb for the shower
    http://nudges.org/2010/03/08/the-ambient-
     orb-for-your-shower/
Feedback
Fuel Economy
    http://nudges.org/2010/08/30/new-stickers-for
     -car-buyers-do-they-get-an-a/
Stairmaster shows calories burned
Feedback & Peer Pressure
Progress Energy, NC will mail notices
 telling customers how their household
 power bills compare to their neighbors.
    “Most people will become engaged if they
     find out their neighbors are using half the
     energy and spending a whole lot less each
     month,” says Karen Ehrhardt-Martinez, lead
     author of a recent report on “residential
     feedback programs
Voting example
Feedback & Peer Pressure
 Do you recycle hotel towels?
  http://nudges.org/2011/04/28/no-one-at-the-
  comfort-inn-in-chicago-reads-the-nudge-blog/
People make social comparisons not just in
 terms of energy use but other environmental
 behaviors, …do you recycle your hotel towels
 or do you steal firewood from a forest - in
 many of these settings we are influenced by
 what we're told about what other people are
 doing in terms of the social norm.
http://www.slate.com/articles/business/th
 e_dismal_science/2010/04/nudges_gone_
 wrong.html
Feedback & Reminders
Where does waste go?
 http://nudges.org/tag/environment/

 http://nudges.org/2011/05/02/a-strategy-
  for-recycling-change-the-recyling-bin-to-
  garbage-bin-ratio/


http://nudges.org/2008/12/04/can-you-
 save-100-pounds-of-paper-per-year-with-
 this-sticker/
Effective Nudges
Default
Default
Padding the path of least resistance
Recommended course of action

Automatic Magazine renewal
Computer installation: “regular” or
 “custom” installation
“Receive emails about new
 products?”
Putting money into 401K programs
Default
Sickle Cell Testing, Unless Athletes Balk
 The Division I Legislative Council of the National
  Collegiate Athletic Association approved a new
  rule Tuesday mandating that all athletes be tested
  for the sickle cell trait. The rule, however, allows
  athletes to opt out of testing if they sign a waiver
  “releasing an institution from liability.“

 Murphy Library printer
 Organ Donation
Effective Nudges
Expect Error
Expect Error
 Run out of gas – warning light appears
 Don’t buckle seat belt – buzzed
 Car lights automatically go off when you
  aren’t driving
 Gas tank cap
 Leaving ATM card in machine
    Forcing Function: in order to get what you want
     you have to do something else first
    In order to get cash, you must remove your card
Expect Error
 Turning off lights
   Motion detector
   In hotel?
 Medicine
   Birth Control

								
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