SWOT for Nudging

Dear Valued Customers

In our previous posts, we discussed on the issue of unsustainable lifestyle resulting from higher disposable incomes and the continued practice of overconsumption.  We also mentioned on the effectiveness of a policy of nudging from the demand side of sustainability.  Nudging requires and enables policy makers to take into account human behavior in design and implementation of policies.  To be able to appreciate this policy instrument, it is important that you master the SWOT analysis of nudging.

Strengths of Nudging – The first obvious strength of nudging is its compatibility with ideals of the free market as it more practical and acceptable approach for Government to solve pressing social and individual problems.

Second, nudging helps policy makers to relate complex policy making processes and goals to individuals’ daily decision-making. The understanding of human behavior is at the basis of nudge and is derived from empirical evidence rather than abstract theoretical models.  In fact, it guides us in difficult decision-making processes with the possibility of rejecting choices where they are contrary to our preferences or advantages.  Nudging, therefore, works particularly well where there are immediate or at least short-term benefits for the individual making advantages of nudge evident to him bearing in mind that he can opt out too.

Third, it can allow people to test certain behavior, which could be followed by changes in people attitudes.  Thus it can be a potential “gate opener” for stronger policy making especially introduction of fiscal and other regulatory policies.

Weaknesses of Nudging – One of the main weaknesses is the difficulty to design a policy intervention right and make sure what works in a laboratory or intervention environment (as often used in scientific studies) also has the desired effect on a population level.  In addition, there is lack of evidence on its cost effectiveness while it can be time consuming.

Another weakness is that as we are dealing with heterogeneous humans’ behaviors so that it might prove successful with one group of individuals at one point in time while lose its effectiveness over time.  Also, it might be too subtle a technique, engaging in sophisticated micro-management of markets and society, to counter the powerful impacts of other factors with unintended side-effects.

Nudging has been criticized for placing too much focus on the System 1 Thinking – fast and automatic, while leaving the interaction with System 2 unaddressed. Pro-sustainable values require deliberative processes, societal debates and conscious choices over and above the automatic, intuitive and routinized behaviors.

Opportunities of Nudging – Modern Information and Communication Technologies (ICT) with smartphones and smart watches – the ubiquitous and highly personalized devices, do increase the effectiveness of nudging and make it easier to customize nudging efforts to individuals. These devices include an ever-increasing number of sensors and sophisticated software, able to track, store and process data for analysis.  They are capable of providing real-time information in user friendly ways while offering the possibility to share and compare individual data with one’s peer network or the overall user base.

Also ICT can be used to encourage more resource efficient behavior in private households especially with smart meters, combined with homepages displaying the collected information as a system that makes it easier for individuals to save, e.g. gas and water.  The user interface thus applies several nudge principles to influence consumer behavior.

The usefulness of ICT to nudging individuals is also obvious in many fields such as grocery shopping (e.g. the USA-based ‘GoodGuide’ mobile phone app), food waste (e.g. the UK-based ‘Love Food, Hate Waste’ mobile phone app), transportation (various ride sharing apps), or clothes sharing (e.g. the start-up ‘Share Closet’).

Threats of Nudging – It may be considered as among the choice restricting policies and do not focus on preserving freedom of choice.  Thus being a potential danger to the democratic processes at the basis of Western societies, implicitly having a tendency to manipulate people or at least hold back information.  Nudging can also be understood as unfair. Especially where nudging is applied by policy makers to achieve common goods (e.g. climate change mitigation), there is a risk that these policies will allow a minority of well-informed citizens to free-ride the efforts of the majority. Nudging often works best on the uninformed and uneducated part of society.  There is also the risk in that policy makers regard nudging as an easy and comfortable way out of cumbersome and controversial attempts to implement regulation and legislation.

See you soon.

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