· 2 min read · Features

Woolfson on Westminster: nudging people to make decisions that are in their own and society's best interests

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Last summer, top of every politico's reading list was a book on behavioural economics written by Chicago University academics Richard Thaler and Cass Sunstein. Their book, Nudge: Improving Decisions About Health, Wealth, and Happiness, was widely lauded after being endorsed by Conservative leader David Cameron.

‘Nudge' theory was positioned as a new political framework - a key to understanding the direction the Conservatives might take once in power. Commentators drew clear parallels with the ‘Third Way' theory proposed by Anthony Giddens in the late 1990s, which influenced much of the early New Labour policy-making.

For those who are unfamiliar with the subject, nudging works by creating environments in which individuals are encouraged to make decisions that are beneficial to themselves, those around them and society as a whole.  The basis of this theory is individuals do not always make decisions that are rational and in their own best interests, and therefore should be motivated and encouraged to do so by government.

For example, a greater supply of transplant organs could be created if we had to opt-out, instead of opting in through the donor card scheme currently in operation. Another is the use of rewards and incentives to encourage people to recycle more household waste, eat more healthily and do more exercise.  

With the ascendant Conservative Party now likely to form the next government in the UK, attention is turning to how they will be able to balance social and environmental reform with their more traditional notions of individual freedom and choice. By encouraging positive behaviour, or using nudges, the Conservatives may have found a solution to this challenge. By creating incentives to encourage decision-making that supports policy objectives, the Government would avoid the need to legislate to outlaw problematic behaviour. In addition, nudging need not cost government much money - a pivotal factor for an incoming Conservative administration.

A key example, cited last summer, was shadow chancellor George Osborne's support for a recycling reward scheme, set to be piloted this May by Windsor and Maidenhead Council. Through the scheme residents in the borough will be rewarded for the amount that they recycle through discounts and vouchers to be used at local retailers.

But this is not a purely Conservative-dominated arena. The Government has already made significant moves in this direction themselves. Notably, the latest anti-obesity strategy from the Department of Health contains a number of ways in which employers can become involved in encouraging healthier decision-making by their employees. For example, restaurants (including staff canteens) are being encouraged to publish calorie information on their menus to enable people (and employees) to make healthier choices. The Government is also considering subsidising gym memberships, and in Manchester is piloting an incentive scheme - Points4Life - which will encourage behavioural change by rewarding individuals with points for making healthier choices regarding diet and exercise. These points will be redeemable against healthy goods and services from a range of public and private-sector sources.

For HR practioners and employee benefits specialists, this offers a range of possibilities and opportunities to reinforce the valuable role of employers in delivering government policy. Many employers will already have schemes in place that fit well with the nudge agenda. Bike-to-work schemes, childcare vouchers and automatic opt-in, work-based pensions, for example, are all in line with this theory; but much more could be done to harness the potential of employer-based incentives.  

As we move closer to a general election, the battle for the nudge agenda will undoubtedly heat up, although which party can truly make it their own remains to be seen.

Marc Woolfson is account director at Westminster Advisers