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At any convenience store, there are now footprint marks on the floor that lead up to the cash registers. People wait on these marks without thinking about them. This behavior has become a part of our everyday lives.
In fact, the marks were introduced to encourage people to social distance during the COVID-19 pandemic, based on what is called “nudge” theory.
In this theory, “nudges” refer to techniques that promote changes in people’s behavior without restricting their choices or significantly changing their economic incentives. Examples of nudges include providing simple and easy-to-understand information and the framing effect, which refers to how people’s impressions and decision-making are influenced when identical information is presented in different ways.
Footprint marks are easily understood to mean that this is where you should wait, and they prompt people to do just that: wait there. If the store simply puts a notice in front of the cash register saying, “Please keep a distance of at least one meter from the person in front of you when lining up,” the effect will likely be more limited. Few would even take the trouble to read this notice. Even those who do are unlikely to feel motivated enough to follow it. Footprint marks, by contrast, seem to offer a way to encourage people to naturally “behave better” without hassling them.
The use of nudges grew significantly after Richard Thaler, a professor at the University of Chicago, won the 2017 Nobel prize for economics.
Thaler was highly praised for applying nudges in various policy areas as he advanced behavioral economics, which incorporates psychology into economics. Nudges now play a role in encouraging individuals to eat healthier and exercise, become organ donors and conserve the environment, among other beneficial behaviors.
Going global
Nudges have spread to public institutions around the world. The Organization for Economic Cooperation and Development reported in 2017 that more than 200 public agencies had incorporated nudges into their policies.
In Japan, too, the central government’s ministries and agencies, local governments, industrial organizations and academia joined hands in April 2017 to inaugurate the Nudge Unit of Japan. Local governments have themselves set up 26 local nudge units and their activities are shared on the Jichitai Nudge Share website.
Nudges are likely favored as policy tools because many of them are less costly and can be implemented at the discretion of civil servants. Taxes and subsidies require approval from legislative organs or budgetary measures. Devising nudges, on the other hand, can be made merely with the clever use of language and is almost cost-free. And in fact, Japan’s laws often include a “mandatory effort” clause, requiring people to try to comply with the law. There is a strong need to promote desirable behavior without coercion, and this may also have had an impact on the use of nudges.
An example of a “mandatory effort” clause in Japan is one requiring cyclists to wear helmets. Even if a cyclist does not follow the rule, there will be no penalty. The policy objective is to encourage “desirable” behavior while guaranteeing freedom of choice, and in such cases, nudges are a natural means of achieving this.
During the pandemic, a mandatory effort clause stipulated people make an effort to get vaccinated, which meant that the decision of whether to get a shot was left up to them. At that time, a study was conducted abroad, focusing on what kinds of nudge promoted COVID-19 vaccinations. The findings showed that one effective message was stating that a vaccine was “reserved for you.” This outcome was due to the “endowment effect,” which comes from behavioral economics theory.
A study jointly conducted by Shusaku Sasaki, a specially appointed associate professor at the University of Osaka; Tomoya Saito, director of the Center for Emergency Preparedness and Response at the National Institute of Infectious Diseases; and myself found that an effective message for motivating the elderly in Japan to get a COVID-19 shot was: “Your vaccination encourages the people around you to get vaccinated.”
In the case of COVID-19, just the effectiveness of the vaccines could not be used in messaging because the vaccines were new to us and the virus was mutating.
Nudges are an important policy instrument that promote socially desirable decision-making and behavior while ensuring people’s autonomy. That said, as Toshiji Kawagoe, a professor at Future University Hakodate, discusses in his book “Kodo Keizaigaku no Shi” (The death of behavioral economics), nudges are not a panacea and in some cases they have been ineffective or produced the opposite effect to what was intended.
George Loewenstein, a professor at Carnegie Mellon University in the United States, and Nick Chater, a professor at Warwick Business School in the United Kingdom, have argued in a joint academic paper that while there are areas where the right approach is to use taxes and subsidies, there are other areas where these should be combined with nudges.
Strengths and limitations
By focusing too much on nudges, governments could end up being slow to implement necessary policies using taxes, subsidies or regulations.
Shlomo Benartzi, a professor emeritus at the University of California, Los Angeles, and other researchers carried out a study to determine the cost-effectiveness of using nudges to increase college enrollment, energy conservation and influenza vaccinations, relative to traditional policy tools such as taxes and subsidies.
The study found that, in these three areas, nudges were more cost-effective than taxes and subsidies. But recent research has suggested that nudges could negate the effects of those measures.
According to a study by Hunt Allcott, a professor at Stanford University in the United States, and other researchers, even if nudges are effective on average, the magnitude and direction of the effect may be different for different people, making them an undesirable tool from a policy perspective. For example, according to their report, health warning labels on sugary drinks cause “health nuts” to excessively reduce consumption, but they can be less effective for “inattentives,” the real target of the health warnings.
There are cases where nudges are ineffective. An article by Cass Sunstein, a professor at Harvard University, notes cases where people with strong preferences or beliefs, as well as companies and organizations with vested interests, take actions to counteract nudges.
It has also been said people who feel their freedoms have been infringed upon become so resentful that they act counter to the nudge.
On the other hand, a nudge intervention that appeals to social norms, such as “Many people are doing this,” can be effective but causes its own problems.
When the pandemic broke out, mask wearing was widely adopted as an infection control measure thanks to the phrase “wear a mask for the good of society.”
However, once the social norm of wearing masks took root, it persisted even after its necessity for wearing masks had diminished.
When promoting good health or environmental protection, there is little change in what is considered desirable behavior. But infection control measures vary depending on the circumstances of the epidemic. Given that nudges related to social norms tend to be so effective, they have to be applied with care.
Lately, there has also been an increase in “sludge,” or the intentional misuse of nudges. For instance, some subscription-based business models that take advantage of consumers’ misunderstandings to get them to sign up for paid subscription plans exploit the “status quo bias,” in which people are likely to continue doing something once they have started. Likewise, certain financial products exploit what is called present bias, or the tendency of some people to prioritize immediate rewards. The government should strengthen regulations on this “sludge.”
It is important to understand the features and limitations of nudges, which have become so ingrained in society, and to make good use of them while evaluating their effectiveness.
Fumio Ohtake
Ohtake is a specially appointed professor at Osaka University, where he served as an executive vice president in 2013-15. He was president of the Japanese Economic Association in 2020-21. He specializes in labor economics and behavioral economics.
The original article in Japanese appeared in the April 27 issue of The Yomiuri Shimbun.
