Applying Nudge Theory to increase health and wellbeing

What is Nudge Theory?

Thaler and Sunstein, the preeminent experts in Nudge Theory define a nudge as “any aspect of the choice architecture that alters people’s behaviour in a predictable way without forbidding any options or significantly changing their economic incentives”.[1] This evidence-based policy tool has been used to encourage individuals to make choices that are in their broad self-interest. Oftentimes this overlaps with desirable aggregate economic outcomes, such as collecting unpaid tax. However, broad application of Nudge Theory ranges from automatic enrolment into pension programs, to designing roads to make drivers feel that they are travelling faster than they are so that they are inclined to drive more cautiously.[2]

Nudge Theory encompasses elements of psychology, public policy and marketing to become an increasingly important component of policy design. Fundamentally, the theory upholds that by creating small environmental changes, better decisions can be prompted whilst retaining free will.  Despite this, nudges have been criticised for being too paternalistic by opponents who suggest that everyone should have the ability to make their own unbiased decisions.[3]

Nudge Theory in action

Behavioural economics is becoming an increasingly important component of policy design. In 2010, the Cameron Government introduced the Behavioural Insights Team (BIT) in the UK to investigate how desirable behaviour can be encouraged.[4] The BIT has implemented Nudge Theory by ensuring that policies are designed which are easy to implement, cheap and are not mandated. Many of these experiments focused on acquiring lost tax revenue by targeting overdue tax payers in different ways. Instead of using standard letters requesting outstanding payments, different clauses were included which explained how tax contributes to public services. A similar scheme was used for overdue car rate payments with personalised letters specifying an individual’s car model, leading to increased repayments. Whilst the effect size of these studies was small, these minor tweaks contributed to £210m in overdue tax being recovered. This has a considerable cost-benefit consequence because there are minimal expenses involved in altering the phrasing of letters.[5]

Australia’s obesity crisis

Obesity rates continue to rise in Australia with economic consequences including increasing health care costs, lost productivity as well as decreased quality of life.[6] There has been much debate around the role of governments in preventing obesity spanning sugar taxes and ‘junk food’ advertising bans. Yet, this may not be the most effective way to encourage people to make healthier choices as individuals do not conduct complex cost-benefit trade-offs when making purchasing decisions. Instead fellow Nobel Prize recipient Daniel Kahneman suggests that decisions are made instantaneously which is why contextual cues can contribute to individuals making better choices.[7]

Subtle design changes may contribute to big shifts in the health and wellbeing of Australians. VicHealth and Victoria Walks have demonstrated how subtle design changes can contribute to increased health and wellbeing by encouraging walking instead of other transport alternatives. In a trial focused on the mode of travel school children use to and from school, overall there was a 9% increase in active travel choices.[8] This is consistent with an earlier program which saw an increase of up to 42% in the physical activity engagement of program participants.[9]

Furthermore, research suggests that menu design has a significant impact on the food choices that consumers make. The simple act of changing the order in which options are presented can prompt consumers to make healthier choices without removing any of their options. A study carried out through McDonald’s franchises in England and Wales reported an 8% decrease in the purchase of Coca-Cola when it was moved from the first drink option to the last on a touch-screen menu kiosk, with a 30% increase in the purchase of sugar-free alternatives.[10] Similar results have been observed in the order of food presentation at cafeterias. When healthy options are the first food that individuals see, they are more likely to choose the healthier alternative.[11] Whilst such design changes will not reverse the obesity epidemic, Dr Schmidtke says that “nudges should be considered as just one part of a multifaceted approach to helping consumers make more healthful choices”.[12]

The ethics surrounding Nudge Theory remain contentious as its core principles can be leveraged to increase company revenue. Yet concrete action on reducing Australia’s obesity rate requires innovation. If small policy design interventions could contribute to a healthier Australia, it is hard to argue against adopting Thaler’s theory and nudging people to make better choices.

[1] Thaler, R. H., & Sunstein, C. R. (2009). Nudge: Improving decisions about health, wealth, and happiness. Penguin.

[2] Chu, B. (2017). “What is ‘nudge theory’ and why should we care? Explaining Richard Thaler’s Nobel economics prize-winning concept.” Retrieved from https://www.independent.co.uk/news/business/analysis-and-features/nudge-theory-richard-thaler-meaning-explanation-what-is-it-nobel-economics-prize-winner-2017-a7990461.html

[3] Hooker, L. (2017). “Have you been nudged?” Retrieved from https://www.bbc.com/news/business-41549533

[4] Ibid.

[5] Ibid.

[6] Veerman, L. (2018). “Obesity is a market failure and personal responsibility will not solve it alone”. Retrieved from https://theconversation.com/obesity-is-a-market-failure-and-personal-responsibility-will-not-solve-it-alone-101038

[7] ABC. (2017). Retrieved from https://www.abc.net.au/radionational/programs/healthreport/nudging-you-towards-healthy-choices/9121766#transcript

[8] Woodruff, A. (2017). Applying nudge theory to walking: Designing behavioural interventions to promote walking, Victoria Walks, Melbourne.

[9] Victoria Walks (2017). Change to Walking, Using ‘nudge’ interventions to get more people walking, Victoria Walks Inc, Melbourne.

[10] Schmidtke, K. A., Watson, D. G., Roberts, P., & Vlaev, I. (2019). Menu positions influence soft drink selection at touchscreen kiosks. Psychology & Marketing.

[11] Thaler, R. H., & Sunstein, C. R. (2009). Nudge: Improving decisions about health, wealth, and happiness. Penguin.

[12] Manchester Metropolitan University. (2019). Retrieved from https://www2.mmu.ac.uk/research/news-and-events/story/?id=10783