Nudging - Why we do what we do? Nudging and its Applications!!

Professor Richard Thaler was awarded the Nobel Prize for his groundbreaking work in the field of behavioral economics, the cross section where psychology and economics converge ,known as Nudge Theory.It is a relatively new and rapidly growing field, originally explored by psychologists, Kahneman and Tversky in their 1979 publication, “Prospect Theory: An Analysis of Decision under Risk.”

The study of behavioral economics seeks to understand what role psychology, cultural surrounding, and even fads play in both driving why economic decisions are made and how seemingly arbitrary value is determined. Adding a human dimension, behavioral economics challenges the static economic theories, like ‘cheaper is better,’ or ‘more is more.’

Nudge provides a theory for how to persuade consumers to make more efficient decisions for themselves, and furthermore, society. It challenges the idea that rational humans (termed “homo economicus” in Nudge) always choose the option that is 'best for them,’ and unpacks how to ‘nudge’ individuals into making better decisions, based on the new assumptions that consumers are simply irrational.

Literal meaning of the word "Nudge" is a small push.We all have ideologies be it good or bad.Nudging as a theory finds applications in changing those ideologies without hindering the freedom to take decisions on a personal level.In everyday experiences, we can observe examples of campaigns attempting to ‘nudge’ our actions. We are told to buy reusable bags or be charged a premium for a disposable one; scholarships encourage us to apply for something that may not be financially in reach; we even reward people who are better liked – even if there is no rational reason why the Kardashians are good for us.

The EAST Framework: Nudge Theory works only when it is able to bring the required behavioral change in the mindset of target audience.This reads easy but is not an easy task to implement.To make this work effectively, The EAST Framework comes into the picture.

Applications of Nudging:

1)COVID19-In current COVID times,Nudging can play a huge role in changing the behavioral attitude of masses towards using more precautionary measures to tackle COVID 19.We are already seeing advertisements,social campaigns,digital marketing aimed at it.People do get influenced in their decision making process by nudging.What we need is an impact-ful campaign which is able to tell what it is expected to tell.How much influenced you seem to be when you see a mask advertisement on your mobile? Do you think a more impactful campaign or advertisement could have been made to induce people to be more cautious towards social distancing in the current COVID times?

2)Swatch Bharat Mission(SBM) 2014- Do you know that as of 2019, a majority landmass of rural India is defecation free with almost 100 percent villages having toilets.When SB Mission started in 2014,Government started giving subsidy and monetary help to villagers in assisting them build toilets in their homes/community grounds to get rid of open defecation.Seemed promising in the beginning,this method did not work.People started misusing the money for several other purposes other than using it to build toilets.Policy makers at the Central Govt then used the concept of Nudge Theory in bringing the behavioral change in the minds of people towards Open Defecation.Social media campaigns,Bollywood stars like Amitabh Bacchhan and Akshay Kumar were roped in to induce the Nudge effect.This time it worked. Indore, the city which topped consecutively in the Swatch Sarvekshan Mission since 2018 has used this theory through pamphlets,billboards,digital marketing campaigns all across the city.

3)Nudging has been applied to promote walking and discourage escalators in several western world countries.Painting the staircases in bright colors,writing health conscious messages and slogans on the staircases can induce people to use stairs over automated ways.

There are numerous examples of Nudging ranging from Administration to Economics to Policy Making to Corporate to International Politics to Business Administration and what not!!

Limitations of Nudging: Not everything is rosy about Nudging.Nudging is a big bet and plays directly with the psyche of a human being.Imagine the message gone wrong and you are simply gone.Nudging has numerous inherent limitations to it as illustrated below.

1. Miscommunication of message.Message gone wrong.
2. Time taken to impact.
3. Social and behavioral dogmas in the society

Despite the challenges,Nudging is a promising area to explore and can bring revolutionary changes in the way, we humans think,decide and act in our day to day lives.Just imagine how different India would be if there would be a nudging based campaign which induces all of us not to break the traffic signals or how much change you can foresee in your daily life if your child does not make excuses for not going school just because she or he is told the plus and minus of bunking school.

References Used:

1. https://online.hbs.edu/blog/post/nudging-change-why-we-do-what-we-do
2. https://www.victoriawalks.org.au/Assets/Files/Applying-Nudge-Theory-to-Walking.pdf
3. https://www.thehindu.com/data/data-mismatch-is-rural-india-100-open-defecation-free-like-swachh-bharat-data-concludes/article30460909.ece