The Why Axis: Hidden Motives and the Undiscovered Economics of Everyday Life (25 page)

My cousin Janice, a mother of two small children, discovered that she needed a new kidney. Twice a week, she had to endure kidney dialysis. Of course, she put herself on an organ waiting list right away. If she didn’t get a new kidney, she would die. Twice over the period of a year, she received a phone call saying that a kidney from an organ donor was available. But these kidneys were not a good match for her, so she had to keep waiting and waiting, becoming sicker and sicker in the process. One day, she received another call. This time, the kidney was a good match. A woman had died in a car accident, and she was an organ donor. That generous woman’s kidney saved Janice’s life.

Given the need for organs, policy makers in some US states and around the world have made it easier to locate donors.
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When you go to conduct some official business, such as getting your driver’s
license renewed, you can “opt in” (meaning that you give explicit consent to be a donor) or “opt out” (if you don’t refuse, you’re going to be a donor by default). Strong evidence suggests default opt-out policies increase donor consent rates. For example, countries with opt-out policies, such as Austria, have higher donor rates—as high as 99 percent, while countries with opt-in policies, such as Germany, see donor rates of roughly 12 percent.
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This kind of default opt-out system is a perfect example of what our colleague, University of Chicago behavioral economist Richard Thaler, calls a “nudge.” A nudge is, very simply, a way of making tiny shifts that change people’s behavior for the better without their being aware of it. In their book
Nudge
, which Thaler coauthored with Harvard law professor Cass Sunstein, the authors take note of policy changes that have subtly coerced people to make smarter choices, like making it easier for kids to choose fruit or salad rather than cookies or chips.

Although an opt-out system has worked quite effectively in various settings (and it sounds like a great way to get lifesaving organs to people who need them), the problem with signing people up in such a manner is that some find it deceitful. Objectors might think that if they are going to be kind enough to give away their precious kidneys following a fatal accident, it might be polite to at least ask them beforehand to make an explicit rather than an implicit promise.

In 2007, we teamed up with Dean Karlan of Yale University to see whether it would be possible to increase donor rates even if we were explicit about it.
¹⁰
In our case, we decided to see what we could do to raise donations of corneas, which are in short supply. We worked with a nonprofit called Donate Life, whose mission is to increase organ donation, and ran an experiment that pitted nudges against a different approach—“nuisances.”

As it happened, the state of Illinois had recently introduced a new system of donor registration. People who had been previously
registered as organ donors needed to reregister as a result of a change in the law. So we ran a test in which our research assistants talked to more than 400 households in various neighborhoods around Chicago. The students told people that because of a new driver registry, they unfortunately might not be registered anymore. Then the students popped the big question: “Would you like to receive information on signing up as an organ donor?” If they chose to opt in to receiving information, they filled in a form with their name, address, gender, date of birth, and so on. Of those we asked, 24 percent signed up, giving us our baseline group.

But what if we changed the default option and households had to opt out in order to
not
receive any information? In another treatment, people who didn’t want the information had to fill out the same form with their names, addresses, and so on if they wanted to opt out. This time, 31 percent of the people we asked signed up. It looked like changing the default was enough of an incentive to get more people to participate.

In yet another test, we made the signup form much shorter. In fact, all people had to do was write down their names to receive information from Donate Life. This time, 32 percent of people signed up to receive the information. This result showed that we could still get more donors this way than we could by directly asking them to opt in.

The results showed that reducing nuisances—and saving people time and hassle—worked slightly better than nudges, which means we do not necessarily need to use default to achieve the same level of success when signing people up. We can be explicit and still achieve better sign-up rates.

These results have potentially important implications beyond donating organs. For instance, Americans don’t save enough for retirement. To increase peoples’ savings rates, many argue that the default trick can work well. Our results suggest that simply lowering
nuisances and explaining savings rules, clearly and simply, might do a similar trick. Likewise, reducing nuisances in helping make the right choice of health plan can go a long way toward getting them enrolled. (Of course, we’d need to do more field experiments to see whether such incentives could work.)

A Threat to Us All: Global Warming

Global warming poses one of the biggest threats to humans. Hurricane Sandy, which devastated large swaths of New York, New Jersey, Pennsylvania, and other areas, was just an appetizer for what looks like a full and endless meal of climate-related disasters coming our way. According to the National Climate Assessment released in January 2013, “certain types of weather events have become more frequent and/or intense including heat waves, heavy downpours and in some regions floods and drought. Sea level is rising, oceans are becoming more acidic, and glaciers and Arctic sea ice are melting.”
¹¹
The experts are more or less in agreement that the future will bring hotter, drier summers; wetter and more devastating storms; shut down power and transportation; and wreak havoc on food and water supplies.

To fight this scenario, inventors around the world are working hard to develop new technologies that can help to mitigate the global warming problem. But it’s sometimes difficult to get people to adopt those technologies. How can field experiments help?

In search of an answer, we conducted a field experiment that revolved around lightbulbs. Currently, only about 11 percent of potential sockets in houses have compact fluorescent bulbs, or CFLs. Protecting the environment, of course, has a lot to do with the small changes we all make in our lives. In fact, if every household in the United States would replace just one incandescent lightbulb, we would prevent nine billion pounds of greenhouse gas emissions per year,
equivalent to those from about 800,000 cars., and save $600 million in energy costs.
¹²

To that end, President George W. Bush signed the Energy Independence and Security Act in 2007. The Act stipulated, among other things, that old-fashioned incandescent lightbulbs had to go away because they were energy-inefficient. Unfortunately, their replacements—compact fluorescent bulbs, or CFLs—were no great shakes. They flickered. Their light felt coldly institutional. Performance was iffy. They didn’t work well in the cold. They contained mercury, making them difficult to dispose of and a problem if they broke. Resenting the new bulbs, a lot of people went on buying sprees to hoard the old ones.

The quality of CFLs has improved a lot since 2007, but many people are still holding a grudge against them, and some in Congress want to outlaw them. So what would it take to get people to get over their prejudices and switch to CFLs? As it turns out, this is a more complex process than one might think, because it involves a combination of peer pressure and pricing.

One big, persuasive tool in changing behavior is applying “social norms”—that is, subtle keep-up-with-the-Joneses cues that get people to follow others. Social norm cues are everywhere. When all the other parents arrive on time to pick up their kids from day care, that’s a social norm cue. When you see a commercial on television telling you that “7 out of 10 customers agree” that a certain kind of cereal, toothpaste, car, or any other item is a good one, that’s a cue. And when you go into a hotel bathroom and see a sign that says “73 percent of the guests who have stayed in this room have reused their towels,” that’s another cue.
¹³

Another thing that persuades people to try something new is, of course, good old-fashioned money. To find out what combination of money and social pressure would work to get people to switch bulbs, we worked with David Herberich and Michael Price on a large field
experiment in which student solicitors—our secret agents—went knocking on nearly 9,000 households in the suburbs of Chicago.
¹⁴

The people who answered their doors were offered up to two packages of CFLs to purchase. The bulbs cost between $3.75 and $7.15, but we set our baseline price at $5.00 a pack. We also tried selling them at $1.00 a pack—about the same price as a pack of old-fashioned bulbs. Additionally, the students plied various households with social pressure, saying, for instance, “Did you know that 70 percent of US households own at least one CFL?” or, if we wanted to really apply the social pressure thumbscrews, they said, “Did you know that 70 percent of the households we surveyed
in this area
own at least one CFL?”

We found that there are two ways to induce people to buy CFLs. One way is to lower the price. Most people think that the government should subsidize CFLs so that they cost as much as traditional bulbs. Unfortunately, that’s not going to happen when government budgets are shrinking. Our results, not surprisingly, show that this approach could work. A second way to get people to buy CFLs is to tell them that their neighbors use them. Reminding people of what their neighbors were doing worked in a way that was roughly equivalent to a 70 percent drop in price on the $5.00 pack. Importantly, when we came back and offered the CFLs at a low price, we found that people kept buying them.

So here’s the big takeaway: if you want people to adopt new behaviors, the best tool is a one-two punch of social norms and pricing, which work as complements and build on each other. Start with peer pressure: people really want to keep up with the Joneses, so let them know what the Joneses have done. This will get them into the market, so that they buy their very first pack of CFLs. Then, once they are owners, peer pressure really does not work that well. At this point, you need to offer the product at a lower price. They will then buy greater numbers of CFLs.

In this way, the combination of social norms and prices can do the trick in convincing people to buy green products. More broadly, when we have green technologies that promise to help the environment, the government (or businesses) should make their first steps into the market with social norms. After reaping the benefits of the social pressure, further social pressure will not work. That is when prices enter the picture.

It’s not often that academic economists studying endemic problems like poverty, homelessness, drug abuse, and crime get the opportunity to go beyond analyzing what has happened in the past, and instead get involved in generating models that could be implemented as public policy. So when we get an opportunity to work with people like Ron Huberman, who asked us how to properly design incentives in order to help solve many of society’s biggest problems, we get pretty excited. And we’d definitely like to see many, many more experiments happen.

Public officials typically focus on programs that have the biggest
average
impact. In reality, though, some programs work very well for some and not at all for others. What if we applied a scalpel to social problems instead of a hammer? Data from our experiments make it clear that no one rehabilitation program will help everyone. It may be that tailored programs like YAP, rather than applying a one-size-fits-all solution, may be more helpful in bringing at-risk people like the gangstas of Chicago around.

For example, what if the programs like the Culture of Calm could be scaled down, but be applied in a more targeted manner? For example, some students may respond strongest to social incentives like a Kanye West concert. Others may need financial incentives. The idea would be to do more than just identify some
students as at-risk, but to run a battery of tests that would allow us
to diagnose more fundamental reasons for behavioral problems and to prescribe interventions based on that diagnosis. That is, tailor the policy to the individual. For example, how can you reduce AIDS transmission, teenage pregnancy, pollution, and high school dropout rates?

Of course, running big field experiments takes time, energy, and courage. In belt-tightening times, it’s hard to think about spending money to conduct field experiments before applying social policies. But this is the wrong way to think about it: only by conducting research do we know what works, so that we can save money in the long run. And many experiments can be done virtually cost free. As Ron Huberman knows, it is possible to use research to improve outcomes for all of us—from children and the poor to planetary health.