The Rise Of ‘Nudge Units’ And How They Use Psychology To Manipulate Your Decisions

It was an economist named Dr. Richard Thaler who defined the idea of the nudge, beginning with the idea that human beings are not rational creatures, in contrast to the previously held idea that humans always made rational decisions to optimize their outcome. Thaler was the recipient of the Nobel Prize in Economic Sciences in 2017 for his contributions to Behavioral Economics. This was met with a degree of controversy due to the merging of the field of Psychology with Economics.

Bounded Rationality and Libertarian Paternalism

Dr. Thaler stressed the importance of the things that economic theory tends to ignore, most crucially the fact that human beings are not perfectly rational. Humans have bounded rationality and bounded willpower, and will, more often than not, submit to temptation in the moment rather than act for the long-term good. This is because, for most of human history, people did not live long enough to worry about saving, and so long-term planning is evolutionarily one of the spheres where rationality falls short. 

Thaler used his work to nudge people into choosing the optimal pension plan that would allow them to save the most in the long run. Instead of having people select to opt into the program, they were automatically enrolled as the default option and would have to opt out. It was highly successful in getting people who normally wouldn’t have saved to acquire a retirement fund. 

According to Thaler, nudging is not taking away choices, but rather, it is choice preserving, or “libertarian paternalism,” which, he stresses, is not an oxymoron. Essentially, we are encouraged to act a certain way, but the choice is still ours. Or is it?

Types of Nudges

There are nudges all around us, more than we think, and not often as nobly applied as in the pension-plan case. In the right hands, the nudge can be used to influence productive and beneficial behavior in individuals, but, more often than not, it is simply a marketing tactic, whether of a product, behavior, or idea. Here are some common examples of nudges in our daily lives. 

The Default

One of the most powerful types of nudge is the default, the type of nudge Thaler used for the pension plans. By changing the default option, we can change people’s choices. Because of people’s tendency toward loss aversion and their resistance to change, the desired outcome happens if people simply do nothing. Thus, a new default, like automatic enrollment, can achieve the optimal goal. The pre-selected “subscribe and save” option on Amazon is another example of the default. 

Nudging is not taking away choices. We’re encouraged to act a certain way, but the choice is still ours.

Psychological Anchor

The psychological anchor method involves a starting piece of information for people to base their subsequent decisions on. A psychological anchor could look like a visible before and after price on a good. 

Reminders

The simple reminder is, in fact, a type of nudge. Pop-up reminders on websites, email reminders from companies, and more are all nudges. These reminders can either be reminding you of information you already know, or reminding you to do something, like completing your online purchase. 

Ease of Access

This type of nudge involves either making an undesirable option harder to access or placing the desired choice in a more noticeable position, or both. This can encourage people to make healthy eating choices in a cafeteria, simply by putting unhealthy foods more out of the way. Grocery stores also use this phenomenon by strategically designing the layout of the store to get you to spend the most amount of money. 

Information

Sending out targeted information with an intended purpose is a type of nudge. This can be used as propaganda, like flyers for a political candidate, or as part of a program to promote desired behavior, such as putting up signs about the risks of drinking and driving. 

Nudge theory comes with a series of implications: first, nudges are very powerful, and second, the effects are long-lasting. The work of Richard Thaler shows us that human nature is key to understanding any human decision, and that we can nudge for good. But this leaves the question, can nudges be used for ill?

The Rise of the Nudge Unit

The concept of the nudge gets the murkiest when it comes to the government and policy enforcement. Although Thaler published a paper defending libertarian paternalism, our instinct is to see it as something dystopian. Needless to say, the nudge has not been without its fair share of criticism. It’s human nature to bristle at the thought of a powerful entity subtly influencing us into making the desired choice. Where do we draw the line with the nudge? Ultimately, who determines what the “right” decision is? The nudge can be used for good, but like any phenomenon, it can also be abused. 

Already, we have witnessed the rise of the Behavioral Insights Team (BIT), also known as the “Nudge Unit,” which is a “global social purpose company” founded in 2010. The BIT has offices around the world, including in the UK where it began, in America, Australia, New Zealand, Singapore, and Latin America. The BIT uses social engineering based on behavioral insights and tactics from psychology and marketing to influence public thought and decision making to be in compliance with government policy. The goal is to minimize costs related to poor compliance with government policy and regulation. 

Elements of nudge theory contributed to people complying with mask mandates and mass vaccination.

The BIT has done work in a variety of concepts, from assessing the risk of gambling, to more overtly progressive political goals, like designing ways to get people to drive less to reduce emissions, studying how to establish diversity task forces, and running numerous experiments to find the most effective way to use social norms to get people to wear masks during Covid. 

Nudge theory has also been used to nudge people into getting the Covid vaccine. Researchers used reminders that were “carefully designed to reduce barriers to following through,” in addition to “behaviourally informed messaging designed to amplify individuals’ desire to get vaccinated” and “information-provision intervention aimed at correcting the misconceptions that drive vaccine hesitancy.” The fact that elements of nudge theory contributed to people complying with questionable policy like mask mandates and mass vaccination is concerning, and makes us wonder what else could be achieved by nudge units if they so desired.  

Due to the Nudge Unit’s success, a number of similar organizations have since popped up around the world. According to OECD, there are 202 institutions across the globe that have applied behavioral insights to public policy. Most people don’t know that these organizations exist or that they are influencing compliance and promoting their goals all around us. 

The thing about nudge units that is most off-putting is the fact that they’re not transparent about their objectives. Instead of being forthright about their desired policy, they instead rely on manipulative methods to achieve their goals. At what point does the nudge become deceit? When does it become subversive? At what point does it become unethical? Governments and corporations see the need to act as a parent-figure and guide us in the “right” direction, as if we are not worthy of hearing a logical argument and making a decision based on evidence and reasoning.

Closing Thoughts 

Originally used to help clients save for the future, the concept of the nudge has since been adopted in politics, finance, retail, and beyond. It’s important to be aware of this phenomenon, how it can not only help you, but also how it can hurt you. 

Due to human nature and imperfect information, it’s impossible to be perfectly rational. We should, however, learn all that we can and ultimately strive for rationality. Only then will we be free to make the best decision for ourselves, not the decision that other entities nudge us toward. The first step is to identify and accept that we are at times irrational or uncritical, and understand how these irrationalities can be manipulated for a desired outcome. Then, we can consciously, rather than subconsciously, choose whether to follow or resist the nudges we encounter. 

Don’t miss anything! Sign up for our weekly newsletter and get curated content weekly!