Nudge vs. Shove: How Governments Use Behavioral Economics to Shape Public Policy

Dear Readers,?

In this late July TB post, we delve into the lawmakers' use of behavioural economics in policy making. Researchers explain how cognitive bias drives us to decide and act in an illogical way, influenced by our values, memory, socialisation and such other personal quirks - making irrational decisions!?

Governments often use a blend of Nudge and Shove policies to guide public behaviour and achieve policy objectives.

A Nudge policy gently encourages citizens to take certain actions while still allowing them the freedom to opt out. Unlike traditional “Shove policies” such as taxes and regulations, which citizens are compelled to follow, Nudge policies do not force compliance.

The main feature of behavioural strategies in Nudge policies is to influence behaviour predictably without restricting options or altering economic incentives. To qualify as a nudge, these interventions must be easy and inexpensive to avoid.?

Here’s how the Indian government implemented nudge policies relating to public health -?

The problem of open defecation in India and improper sanitation services, especially in rural areas, was solved with the Swachh Bharat Mission -?

• Awareness campaigns ran on radios / roads for driving behavioural change.??
• Choosing premium health insurance when one already knows they are sick, thereby demonstrating that people are more averse to losses than profits (using ‘Prospect theory’).?
• In Gujarat, an intensive campaign promoted toilet construction,to emphasise cleanliness and hygiene growth.
• Nagpur based app “Traffic Rewards” launched by Union Minister of Road Transport and Highways to incentivise citizens for exhibiting good traffic behaviour.
• Public dustbins at convenient location, easy access to recycling pins/ Environment friendly design / waste management;
• Making public transport more accessible, by reducing prices and also how often do buses/trains run on routes with heavy footfall.
• Default choices in hospitals for encouraging organ donations - opted in, unless you opt out;?
• Default choice of pension scheme - automatically enrolled, reduced tax rate - opted in;
• Restricted choices - demarcating zones to discourage smoking publically, near schools.

Here are the Government’s sludge policies?

• Like taxes - The problem of multiple indirect taxes was solved by Goods and Services tax as a Shove policy prescribing a single tax structure and ensuring immediate impact but sludge policies often face high resistance and implementation difficulties with compliance etc.
• Online gaming and addiction was tackled by high taxes and bans on Gaming, drugs, and e-cigarettes.

To address issues like gambling and addictive behaviour among youth, a combination of Nudge and Shove policies is employed. Nudges include public awareness and rehabilitation programs, while shoves involve stricter penalties to ensure compliance and deterrence. Effective behavioural change requires both influencing nudges and enforceable regulations to achieve lasting results.

While sludge policies may exploit behavioural biases to push action, nudge policies gently guide people towards beneficial choices while preserving their freedom to choose.

Key takeaway from sludge and nudge policies of the government: For long-term success, it is crucial to prioritise ethical choices and build trust with the public.

We have also published articles by Anupam Sanghi, on?moral policing and gaming, and?gaming conundrum.?

Nudge policies can really help in resolving deep rooted issues, while shove policies could help in overcoming various market failures as opposed to smaller scale nudge related policies.

It has been argued that nudge policies can work best alongside targeted shove policies to achieve the socially optimal level to increase social welfare in the society.

TB Quest is to consider:

• How can the government ensure that nudge policies remain ethical and do not inadvertently become manipulative?
• How can the effectiveness of nudge and sludge policies be evaluated and adjusted over time?
• What role can public feedback and transparency play in the design and implementation of these policies?
• How can the balance between influencing behaviour for public good and maintaining individual freedom of choice be maintained?