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<p>Fiona Katauskas</p>

Fiona Katauskas

Ya Gonna Make Me?

An Australian billionaire refuses to pay a $333 parking fine. The Greeks are reluctant to pay their taxes. And those smelly smokers just won’t quit. And you … you! Cue the new art of persuasion.

There are a couple of tricks a tabloid reporter could use to keep you reading this story. Mention asthma. Asthma rates. Everybody knows somebody who has asthma, or has it themselves. ASTHMA ATTACK. Those two words together are enough to keep thousands of you reading.

Bras. A story about how to get a well-fitted bra is a guaranteed ratings winner on tabloid TV. Mothers would let the fish fingers burn under the grill, to stare in rapt attention at the screen. Why men don't change the channel is a matter for speculation.

“Human beings are just as dumb as we always were — just as human.”

But these are standout examples of dead certs. In media, the golden rule for engaging an audience can be summed up in two words: fear and greed. They reckon it's a story-framing strategy one Australian commercial television executive used to preach to his cub reporters, "Fear and greed, kids," he'd apparently chant at editorial meetings, "fear and greed".

Playing the greed factor might mean a story on cheap groceries; or how to pay off your home mortgage faster. Fear is even easier. No-one can resist a scary story about what could happen to kiddies in the cities, preceded by an early evening promo: "The story no parent can afford to miss," from a booming voice-over, heavy on the reverb.

And of course, advertisers might as well have had psychologists on speed-dial for as long as they've been mixing Old Fashioneds from the cocktail cabinets of Madison Avenue.

For decades companies flogging everything from Lucky Strike cigarettes to automobiles have been leveraging off human frailty and weakness.

And now things are really starting to get interesting, with one advertising guru advocating that policy makers everywhere should take a leaf from the ad-department rule book. In his popular TED talk, classics-teacher-turned-copywriter Rory Sutherland argues bureaucrats work themselves into a lather inventing elaborate schemes to "fix" things, using far too much money and effort to solve problems.

For instance, he says, confronting drivers with electronic signs which reveal the speed at which they are travelling — accompanied by a smiley face or a frowning face to indicate whether they are over or under the speed limit — is more effective at stopping traffic accidents than a speed camera, which carries with it the threat of a monetary fine.

So why opt for expensive speed cameras over smiley faces?

"The people with the power want to do big, expensive things," says Sutherland, now vice chairman of Ogilvy and Mather UK. "What happens in an institution is the very person who has the power to solve the problem also has a very, very large budget. And once you have a very, very large budget, you look for expensive things to spend it on."

It's like a kind of "physics envy", says Sutherland, in which top bureaucrats and business leaders "want the world to be the kind of place where input and change are proportionate. And the amount you spend on things is proportionate to the scale of your success."

The problem with this approach is that humans are not always the rational actors imagined in the elegant, classical economic theory of Adam Smith. In the real world — as advertisers know — we are often irrational, emotional creatures who don't act in our own best interests. Don't assume we won't speed for fear of a big fine, show us a smiley face instead.

Sutherland represents his theory on a simple graph (see graph 1) in which the vertical axis represents "stuff that costs a lot of money" and the horizontal axis is "stuff that has a big effect".

Graph 1

In the top right-hand quadrant — stuff that is expensive and has a big effect — would be "strategy".

"I'm not denying strategy has a role," he says. "There are cases where you spend quite a lot of money and accomplish quite a lot."

In the top left — is stuff that costs a lot of money but has little effect — Sutherland plonks "consultants". Boom boom.

The bottom left quadrant is dismissed as "trivia".

What Sutherland wants his audience to concentrate on is the bottom right quadrant — where we'll discover stuff which doesn't cost a lot of money but has a big effect.

"The fundamental problem," he says, "is we don't have a word for this stuff. And we don't spend nearly enough money looking for those things; looking for those tiny things that may or may not work, but if they do work will have a success absolutely out of proportion to their expense, their effort, and the disruption they cause."

“Many of us are planning diets next month.”

In the past few years, this fourth quadrant has, in fact, been given a name. It's called a "nudge", after the bestselling book by US academic Cass Sunstein and Richard H. Thaler, professor of behavioural sciences and economics at the University of Chicago.

They proposed the idea that human frailties, flaws in individual decision-making, might be exploited not to further the interests of corporations or to increase profits, but to enhance the greater good. Could people be nudged in the direction they might have taken themselves had they carefully weighed all the information available, and been free of any biases or quirks?

It's an idea governments around the world are beginning to experiment with, and Thaler seems to enjoy the disquiet it causes among classical economists. Just look at the almost anguished questioning of Thaler in this YouTube video, which is part of an interview series by the University of California.

<p>Illustration by Fiona Katauskas</p>

Illustration by Fiona Katauskas

"Economic theory is simple and elegant and wrong," says Thaler, lounging back in his chair, his open shirt a contrast to the suit and tie of his earnest interlocutor.

Thaler and Sunstein question the basic assumption about human behaviour in classical economic theory, the notion that people are at all times rational, able to search out and weigh the myriad choices available to us on a daily basis; that an individual would "solve any problem as well as an economist would".

"But human beings are just as dumb as we always were — just as human," he says, adding that we are not what the economists assume us to be, which he calls "econs" or "those mythical creatures that populate economic text books".

“Once you have a very, very large budget, you look for expensive things to spend it on.”

"One of the unstated assumptions of economics is that people have perfect self-control because they choose just what they should choose. So an "econ" never has a hangover; never has to go on a diet."

Another bit of predictable human irrationality, Thaler says, is that we assume we will have more self-control in the future. We are unwilling to sacrifice our salaries now to save for our retirement. But we believe we will do so at some time in the future. The same goes for weight loss.

"Many of us are planning diets next month," he jokes.

Understanding these foibles, he says, allows behavioural economists to alter what they call the "choice architecture" in order to nudge people's behaviour in predictable ways, without limiting their options or offering them any financial incentives.

For instance, Thaler was involved in a scheme that allowed employees of one company to commit now to saving more in the future. Their savings rates tripled in two-and-a-half years.

"Nobody complained," he says. "People signed up for it. According to economic theory, it shouldn't have worked, no one would have signed up. They were already saving just the right amount. So that's a perfect example of a nudge — a successful nudge."

“We don’t spend nearly enough money looking for ... those tiny things that may or may not work, but if they do work will have a success absolutely out of proportion to their expense, their effort, and the disruption they cause.”

In Britain, Thaler is advising David Cameron's Behavioural Insights Team. Known as the Nudge Unit and based in the Cabinet Office, it has been experimenting on the British public for more than a year, with some success.

Rather than send the bailiffs to collect unpaid fines, the Nudge Unit found miscreants were more than four times more likely to pay their fines if they were sent a text message warning that if they didn't pay up the bailiff would be round in a jiffy! They were more than six times more likely to pay up if the text message began with their first name.

The Nudge Unit also expects to double the percentage of people joining the organ-donation register by requiring them to choose, to tick a box — yes or no — when they renew their licence.

Another nudge was used to get people to pay their taxes. People who had failed to pay their taxes were sent a letter stating that "9 out of 10 people in Britain pay their tax on time", and informing them that most people in their local area had already paid. It brought about a 15 per cent increase in compliance.

This particular nudge, derived from a list of seven insights the team put together to inform their experiments. Insight number five, for example, states: "Tell people what others are doing." In other words, positive social norms can be used to encourage anything from recycling to energy and water efficiency, to reducing littering.

Thaler calls this "libertarian paternalism". Libertarian he says because it respects freedom of choice. "By paternalism," he says, "we simply mean helping people achieve their goals as defined by themselves. This is a new type of paternalism that doesn't require coercion. It's not the nanny state."

8 comments on this story
by Pam

Great article - and obviously you did 'make me'!! An enjoyable read, however most importantly it shows how some of the best solutions are the most simple and elegant.

Only question is how and when can we get our decision makers to start and take these ideas on board?

Though the sad reality is if they do they will most probably just corrupt the ideas and use them to manipulate and deceive us.

Depressingly Abbott's appalling, yet 'simple' campaign of 'fear & greed' which is bereft of policy came to mind as I read the article

May 31, 2012 @ 11:36am
by Nick

My vote is '?' = 'vision'.

Stephen Covey's habit 2 is "Begin with the end in mind".

If we don't work out where we should be going, we won't know the route or when we've arrived.

Trouble is, those with vision lack the money to act, and those with money often lack vision.

Thus it always was. Till now. It's called The Internet. If you have a vision, you can, for almost $0, put it out there for the world to read.

The challenge is getting them to do so, which is where Ellen's email teaser:


... is quite instructive!

So, with equal cheek, if you'd like to see how this crazy race might just still have a future, please read my pretentiously titled little treatise 'A Zillion Year Plan ... For Humanity'. It'll cost you $0 and a mere 3.5Mb:

May 31, 2012 @ 12:19pm
by Peter B

Sack all classical economists from Treasury, Reserve Bank, ATO etc...they will all be picked up as commentators by the media anyway just like retired footy players and just as useful too!! The Rational Man never existed we are all creatures that generally live by heuristics creating our own narratives as we go along, only paying attention to logic and facts when we really think hard about it.

May 31, 2012 @ 8:48pm
by Terry

Great stuff from Thaler ... both original and brilliant ... it's just that the original stuff is not ...

It's "spin" around some very good research based work, Izek Ajzen's "Theory of Planned Behaviour" [].

Why people do what they do is complex and attempts at reductionism will always be condemned to failure.

June 1, 2012 @ 9:39am
by James

Seriously, you're just discovering this nonsense? Thaler, "nudge", and "libertarian paternalism" have been around for years, and comprehensively debunked as creepy technocratic claptrap long ago. No wonder no one's reading this thing.

June 1, 2012 @ 4:32pm
Show previous 5 comments
by Michael

Anything that increases the availability of donated organs is worth doing. Anything.

June 2, 2012 @ 7:39am
by Bonzo

Soooo Ellen, did more people read this article than the others in your excellent magazine? If so there's your proof James, assuming you're interested in proof of course.

June 2, 2012 @ 3:57pm
by Sasha

As someone who works in mental health I think that often people do not act in their best interests some of the time and wonder why everything seems to be out of control. I wonder if what we do at times is try and ''nudge'' but we call it other things like support, recovery based practice or normalizing.

Like the Mail, like the piece

June 4, 2012 @ 4:00pm
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