Richard Thaler - Behavioural economist HARDtalk

Conservative Party Conference same wealthy people need to pay more tax

Stop smoking, eat less, exercise more and pay your taxes on time. So

many things governments want us to do; so hard to get us to do them.

HARDtalk's Shaun Ley speaks to behavioural economist Richard

Thaler who thinks he has the answer. It's called 'nudge' theory, but

it's not just an academic idea. Britain's Prime Minister is so

impressed, he's set up a whole 'nudge unit' in the heart of his

government. If you live in Britain, you may unwittingly already be part

of a nudge experiment. So is the nudge guru teaching those in power

how to encourage us to live better; or helping politicians to control

Welcome to HARDtalk. What is this theory? Bernard is some feature of

the Environment that attracts attention and influences behaviour.

How does this differ from the traditional approach that has been

adopted to improve behaviour? think the basic idea of the 'nudge

unit' is really just to take all we know about behavioural science and

how people think and behave and make use of that to figure out how

to implement government policy that is effective. A economists have

traditionally thought of people as rational in choices they make but

also rather selfish. Do you think that is being too narrow a view?

think so, I don't like the word rational. We are human. Difficult

problems we will trip up on sometimes. We don't always have the

self-control to do what we think we should do. Many are obese, many

smoke, if you ask most smokers they say they'd like to quit if they

could figure out how. Economists view everyone doing precisely what

is best for them at all times and that's just not accurate. He last

some examples of how this is being used. I have seen a quote about

something the British Government has done with letters sent out to

people that are slow on paying taxes. There is a unit of the

Treasury whose job is to collect from the people who have not paid

tax. Most people who will are on a salary in Britain, the taxes are

done automatically. They pay as they earn. If you have outside him

comes from various sources, it's up to you to write out the cheque at

the end of each year and some people forget or whatever and bears

the division in the Treasury whose job it is to collect from those who

owe money and have not paid. They write letters. They wonder whether

the letter as are effective for pop? The thing we try to teach

people in Whitehall is that nobody knows all these dances in advance.

I don't know what the best plan is. Social science gives us a few hints.

My first guess at what the letter at maybe may well work better than

the current letter. Let's try 10 letters. We've been running very

its random controlled trials. We send out one version of the letter

and other people other versions. We see which works best. Or has been

the most effective technique for getting people to pay up? There are

two principles that seem to be most effective. One is reminding people

truthfully that most of their fellow citizens pay the taxes on

time. That's called the positive social norm. Most people behave and

you should behave. The other one is making a personal, same things like

most people pay their taxes on time and we say most people way you

leave pay on time. That helps a bit more. It will mention some of the

benefits that the town receives from the taxes that will help even

more. That's the basic idea. We do continue to try to find out what

the most effective one is. There is randomised trials, the essential

element of what you persuade the British Government to do, the

analogy is in medical research. You can take part in trials. They know

they are taking part. In this approach, people are part of the

experiment having no idea they are being experimented upon. That's

true, but you know, that happens every day. You get a letter from

the bank. They ask if you die to take a credit card. Thousands of

versions of that letter exist. There's nothing really very new or

sinister about this. The isn't this different because it's the

Government doing this as opposed to a private entity? It's more likely

that it's an attempt to do something that in society's best

interest rather than in the interest of the company sending you

the letter. I don't see it as sinister. We end as motivation

persuading people to improve their behaviour, become manipulation?

suppose manipulation is a pejorative word. I don't know if we

can draw hard lines. One of my favourite nudges, one I make use of

all the time when I spend time in London is the helpful signs that

appear at intersections reminding us to look right, because as you

know you drive on the wrong side of the road over here. Those big buses

come from the wrong direction. I consider those signs helpful nudge.

If you consider them manipulation, I'd say that's inaccurate. That's

it is explicit. The interesting thing about the way the 'nudge'

theory works is that these things are not explicit. You don't say

it's an incentive to do something but you are encouraged to change of

behaviour. Perhaps that explanation is not given in those letters. We

don't tell you this because it's more likely to make you behave in

another way. That right, but we are publishing the research about this.

It's not a big secret. I don't think the letter would work

particularly well equipped told people that we are trying to

manipulate them. You are trying to motivate them? In society's

interest for them to pay their taxes. If you look at the European

governments that are in the most trouble right now, one of the

biggest reasons, perhaps the biggest single reason, is that most

people don't pay taxes. There is and that about the social norm?

It's not a question about whether the Government thinks they sure

that alright or wrong, what society thinks. One criticism I see about

these theories on its own is that it does not work. It only works if

it builds on an existing cultural social accepted form of behaviour.

You cannot go against that. A don't think that's right. In the last few

decades in the US at least, some people have taken to cleaning up

after dead dog. I live across the road from a parked in Chicago. I

see dog owners walking in the park having a little bag with them. I

think there's a law. I've never heard of anyone being arrested for

failing to follow the law. We have changed the social norm. The park

is more pleasant to walk in. I think it would be possible to

change the social norms in a country like Greece where people

felt that they needed to pay taxes as opposed to now where they think

only a fool will pay their tax. does this differ from where some

places in Europe are called the nanny state where the Government

and the machinery of government and the structure of how you should

live your life. A whole idea behind the ball that we wrote, the title

is Nige, we gave that the title of paternalism. It sounds like a

contradiction. It does sound like an oxymoron. He is what we mean by

that. We never forced anybody to do anything. Paternalism means simply

helping people achieve their goals. If I'm lost, I usually am in London,

and I ask somebody the way to Piccadilly? They point me in the

correct direction and they are paternal by definition. They try to

help me achieve my goal. I think the nanny state involves collection.

If we banned cigarettes, that's fine to call at a nanny state. If

we help people and make it easier for you to create somehow, then

that creates as a nudge. The presumption is that all governments

are doing things for the right reasons. I don't run any

governments. You're being quite in falling short in one at the moment

was mark set up in a heart Britain. Influencing the way government

makes decision and say you save millions of pounds in taxpayers'

money. You're an influential figure. That's right, but when people asked

me to sign a copy of my book I signed it Nigel Goode, which is a

hope Nanjing us every day taking our money and put it in their

pockets. I think that those who live in democracies, we elect a

government to help run society. If they know just for evil we should

vote them out. The way it normally works traditionally is that the

Government comes up with an idea putting it forward. They establish

legislation and regulations because of the process. There's a debate

and an argument. There is a vote and its upfront and visible. There

is the potential risk that the Government is enthusiastic about

this theory that much of this is done and very subtly in a way that

people cannot necessarily see. That's when the ethical doubt is

raised. I think that's a complete misconception. We'd been working

Jobcentres. They are there to help people find a job. We had a few

members of the team spend a few weeks in various Jobcentres

watching what they do. The end result of that is that we will be

running experiments to help the people who work in those places be

more effective at finding people jobs. There are everybody there in

government trying to do the job. Someone at the BBC has coached you

on the best way to conduct this interview. You have not revealed

that to me or the audience. You are manipulated me. You're manipulating

the audience. I would not use that word. I'd say you're doing your job.

You're trying to make this interview as useful as possible. I

think manipulation is just a red herring. But no case of

manipulation providing a motive? You say this is for the good? It

He thought it was a kind of minor trickery into getting the people of

Britain to adopt a state ordered lifestyle. There is no big brother.

There is no secret plan. One of the most important things we are doing,

this is in the process of working its way through Parliament right

now. Getting consumers to have the right to see their own usage data

from the suppliers. If you go to a supermarket and they have a

shoppers club, they are collecting data on all the things you buy.

They now achieved by changing the arrangement of things... -- nudge

you. We want you to be able to have that data, say you are a kid with a

peanut allergy, by allowing you access to that data someone will

write an app, you'll be able to upload all of your purchases and

get back a list of things you can stop buying. The nudge unit mantra

is make it easy. We are trying to make life easier for the citizens

of Britain. There are areas this has not been used in so far. It is

not being used for foreign policy, macro-economic policy. Might it

help with things like tax? In Britain they cut the highest rate

of tax from 50p in the pound down to 45p in the pound. I do not know

if your unit was used to provide evidence for that. Might there be a

case to say that big policy decisions like that could be held

fully influenced by using the sort of information you used to decide

on what will nudge us to do the right thing? If we are more

effective at getting people to pay the taxes they go, we can reduce

the rates. The second thing is, Britain is about to launch a new

pension scheme that has all kinds of behavioural principles delve

into it. It has been in the works for several years, Lord Turner was

involved in this. People will be automatically and rolled into the

programme. That is not a nudge. It is compulsion. Precisely not. Not

compulsion. They are and rolled and they are free to get out. --

enrolled. If everyone pops out, it will be a useless programme. --

opts out. Most people think they should be saving for retirement but

navigate around to it. If we make it easy, our mantra, fell out all

the Fonz, more people will join and fewer people will become wards of

the state in their older age. -- fill out all of the forms. What

does codger have won this theory. A behaviour scientist is doing

similar work with the French government, he says the French do

not comply easily with social norms. He says it will not be enough to

get them to change their own behaviour. Their cultural limits?

As a rule there is a vast literature on cross-cultural

differences. A great simplification would be, they tend to be second

order. The first order results that people are more sensitive to losses

than gains is a fact about the human condition. Whether the

Chinese are less loss averse than the Ethiopians, perhaps. As things

spread out, one of the young guys in a unit is going off to do a year

in Australia because they want to try some of these things over there.

If the Australians are different to the Brits, maybe things will have

to be done differently. That is why we test. A longer term question, if

you change behaviour can be sustained the change in behaviour?

My little dog walking example works. When I was a kid, you had to nudge

people to buckle up their seatbelts. Now people do not think about it.

Kids grow up buckling their seatbelts, now they do it. You can

change cultural norms. In 2010, a columnist said it has become a case

study in how big ideas get corrupted. Politicians who are

looking for a short-term fix, cost- effective solution, take an idea

like this and run with it. Actually, they take it away from what it was

intended for. Some people may do that. I would say precisely the

opposite is true of the behavioural insight team in Britain. Everything

we do we test. There is no rush into anything. The first trip over

here when I was taken around to see one minister after another, the

phrase I kept saying, we cannot do evidence-based policy without

evidence. Everything we try to do we try and test. The alternative to

what we are doing is arrogance. It is arrogance to think that you know

what the right way of doing things is. I do not think I know. I am

pretty sure if you automatically n'roll people into a pension plan,

most of them will join. We have millions of data points in America

to support that because companies have adopted it. You know, not

everyone of my ideas is right. That is why I insist that we test

everything that we do. I am human. Everybody on the nudge unit is

human. We are just trying to help British citizens go about their

lives more successfully. One of the famous examples you have quoted is

the one of putting a fly inside a urinal, a toilet, improving men's

game. I have not seen any new data. But, you know, it is a fine example.

It is one sentence in the book. I think it is an illustration of an

intervention that was nearly costless and helpful, if you want

to say we are manipulating men to aim were they should, then I plead

guilty. There has been a breach inquiry into this, the hayfield

change is a good thing, Nige is useful. But people need 20-25 years