Green Nudging

Abstract

Traditional policy-making instruments have been, so far, partly insufficient in promoting sustainable consumption habits. Consistent segments of the population in European countries declare themselves worried about the environment – 93% of EU citizens see climate change as a serious problem and 79% see it as a very serious problem (European Commission, 2019) – and willing to take action in the matter. Notwithstanding this, they often fail to do so. This is partly due to cognitive biases, which the relatively new discipline of behavioral economics is studying and unveiling. By leveraging human cognitive flaws, nudging can constitute a new policy tool to prompt sustainable behaviors and help consumers to comply with their environmentally friendly values. The first section of this paper provides a broad overview on nudging: history of the concept, theoretical background, and main types of nudges. Secondly, the peculiarities of environmental problems which make them comparatively hard to tackle will be presented. The third section presents the concept of green nudges and some instances where they were successfully implemented. Finally, an original proposal will be forwarded to nudge consumers away from over-packaged products. The last section concludes.

Nudging: An Overview

According to the neoclassical economic model, human beings are rational subjects that when engaged in a decision-making process will, by taking into account all the available information, be able to make the decision that maximizes their utility. This model, the homoeconomic model, lies at the fundamentals of mainstream economic theories, most of which would crumble without it. It is therefore of great importance since it enables the development of classical economics models which are extremely useful in shedding light on certain dynamics of our world. Nevertheless, it should always be kept in mind that neoclassical economics models are simply models, they are theoretical speculations that explain reality starting from certain given assumptions, like the perfect rationality of individuals, that are not proper of reality. There are, therefore, approximations of reality from which we can derive important insights but that always have to be adjusted and revised when applied to concrete situations.

Behavioral economics departs from the neoclassical model and bases its approach on strongly empirical grounds. Deriving insights from cognitive and social psychology (Mont, Lehner and Heiskanen, 2014), behavioral economics builds up from an understanding of the individual opposite to that of the homoeconomic doctrine: human beings are irrational, error-prone beings, in most of the instances, uncapable of making utility-maximizing choices. This irrationality, proper of human beings, is commonly explained through the dual process theory (Wason and Evans, 1974) which argues that while making a decision two levels of cognition are at play, one automatic and intuitive – System1 – the other reflective and analytic – System2. What happens is that, since System2 requires more cognitive effort, we often rely only on System1, at least when making simple everyday life decisions. Obviously, though, when it comes to choices that are more significant to us, the two systems work together with System2 sort of checking what System1 suggests.

Most public policy is based on an understanding of people as rational beings. Classical public policies fall within two main categories: mandates (and bans) and economic incentives (and disincentives) (Sunstein, 2014). The former implies no freedom of choice, while the latter appeals to System2 and implies a cost-benefit analysis on part of the individual, therefore assuming, in order to be effective, his/her rational behavior. However, in recent years, and especially since the publication, in 2008, of the book Nudge by Thaler and Sunstein, the idea gained momentum that one could employ nudges as a policy-making tool: one that could “alter people’s behavior in a predictable way without forbidding any option or significantly changing their economic incentives”(Thaler and Sunstein, pushing towards 2008), desirable practices. Nudges, unlike bans and economic incentives, appeal mainly to System1 and might therefore be effective in all those circumstances where the second level of cognition does not at all come into play. At System1 level of cognition – quick, immediate, requiring small cognitive effort – individuals often rely on heuristics: “simple procedures that help find adequate, though often imperfect, answers to difficult questions” (Kahneman, 2012). In other words: mental shortcuts, through which we transform complex, cognitively intensive problems into simpler ones. Such resorting to heuristics makes us vulnerable to cognitive biases: systematic flaws in our thinking (Evans et al., 2017). So, for example, our tendency to primarily factor, into our decision-making, those pieces of information that are more easily available to our mind (rather than the most relevant ones), is defined as availability heuristic and it leads to a number of biases like framing effects (e.g. how the particular choice architecture influences one’s final decision), or the confirmation bias, which makes us deliberately search for elements supporting our previously held beliefs. Another very common instance of heuristics is the anchoring or adjustment heuristic which refers to how we tend to arrive at our final decision, starting our reasoning from an element that might be more or less or not at all significant. The anchoring heuristic also can lead to different biases among which status quo biases, which means that we often prefer, if we can, not to choose at all. As it might appear clear, different heuristics work simultaneously and in combination with other predispositions of our minds to produce different biases. Therefore, for instance, the status quo bias is produced by the anchoring heuristic as well as by loss and risk aversion, two common tendencies that appear during a decision-making process. Many more examples of biases could be mentioned, but the relevant point in this discussion is that nudges work precisely by exploiting and leveraging such biases and systematic fallacies of human thought, towards desirable outcomes for society, and – arguably -for the decision-maker himself.

Governments across the world are creating units and institutions with the task of studying how behavioral sciences and especially nudging could inform public policymaking (Mont, Lehner and Heiskanen, 2014). The rising interest and attention devoted to nudging as a policy tool produced a vivid debate on its ethical dimension: the basic concern of many critics is for the autonomy of decision-makers – in this case, citizens – which might be jeopardized by subtle government interventions. The scholarly debate is rich and ongoing, and many criticisms seem highly significant, but I argue that, at least for the purposes of this paper, two main points, highlighted by Sunstein (2014, p.2), justify nudging as a legitimate tool. Firstly, if it is true that nudges are elements of the choice architecture, deliberately designed to push the individual towards certain behavior, it is also true that choice architecture is always in place and is always influencing the decision-making process: our bounded rationality is significantly influenced by the context in which we make our decisions. The second point is that nudges adopted by governments should always be transparent, as in principle should be for any other kind of governmental measure. Therefore, a deliberate attempt to design the choice architecture so that it favors a specific outcome if made transparent, should not raise serious threats to people’s autonomy.

Moreover, nudges present several advantages compared to traditional policy-making tools. Firstly, some kinds of nudges are extremely cheap to implement and, in some instances, can produce much larger results than traditional measures, like for example economic incentives (Sunstein, 2014). Secondly, and crucially, nudges ensure freedom of choice and might avoid the need for unpopular and explicitly paternalistic policies while, at the same time, delivering similar results. Lastly, nudges are not only cheap but also easy to implement and these two elements together allow for the possibility to frequently check and if needed adjust them, in order to increase the effectiveness. Obviously, as any other instrument nudges also have some disadvantages. Although some nudges proved significantly effective in the short-term, doubts remain about their effectiveness in the long term and more research is needed at this point. It has also been shown (Evans et al., 2017, p.16) that the effect of some types of nudges is mediated by ideology, therefore delivering very good results in some segments of the population while none or even negative ones in other segments. For this reason, nudges have to be highly targeted and context-specific. However, all policy instruments present both advantages and disadvantages, what matters is to identify the right tool for the right policy matter and to employ a winning combination of different tools working together towards the same goal.

I would like at this point, in order to clarify what nudges are, to mention some of the main types of nudges, accompanied by a relevant example. Arguably the most cited and the most effective way (Sunstein, 2014) of nudging are default options: the desirable option, the behavior that one wishes to promote, is set as a default. This measure, due to the status quo bias, to cognitive inertia, and to implicit recommendation (e.g. the idea that the default option has already been endorsed by somebody, for instance, policymakers), can be implemented at virtually zero costs and has shown remarkable results (the most famous instance of a successful implementation of a default option policy is probably the switch, implemented by several European countries, from an opt-in to an opt-out policy in the matter of organ donations: by setting organ donation as a default option, these countries have been able to bring organ donors to an average of 90% of the population, against the 15% average in countries where citizens have to actively register to be donors. Source: https://sparq.stanford.edu/solutions/opt-out-policies-increase-organ-donation).

Moreover, since a default option is usually already in place in many decision-making settings, switching it from a neutral to a pro-social one should not raise particular ethical issues. Secondly, social norms nudge consist of inserting, within the choice architecture, information on what most people do (descriptive social norm), presenting such information in the appropriate way so to foster the desirable and desired behavior. The social norms presented can, in other cases, be injunctive and provide information on what is normally considered moral to do. Social norm nudges have already been implemented and proved to be very effective, especially when local and very context-specific, so to produce, in the decision-maker, a stronger sense of belonging, conformity, and fear of social sanctions. A successful instance of nudging through social norms was achieved, in a real-life setting, by a utility company in the USA, which, by mailing to its client’s comparative data on energy consumption in their neighborhood, was able to achieve a reduction in energy use between 1.4% and 3.3% (Mont, Lehner and Heiskanen, 2014, p.28) Simplification and salience of information also represent two very effective ways to nudge people towards certain behaviors. Information is certainly crucial in a decision-making process, but less so when the decision-maker is not perfectly rational or able to understand and process all the available information: when faced with too much or too complex data the individual might disregard it all at once and rush into an irrational choice. Simplification of information can therefore be a precious tool, especially in complex decision-making settings, to help the individual to make a positive choice for him/herself and for society. Salience is another instrument, falling within the broader umbrella of framing that, by highlighting certain elements in a given context, can trigger those values and attitudes that could foster desirable behaviors. Lastly, (although many more types could be included) changes in the physical environment have also been tested to produce significant changes in people’s choices. Being influenced to such a large extent by the context in which we act (ecological rationality) (Evans et al., 2017), its physical characteristics, so vivid to our senses, can play a key role. So, for instance, smaller plates at all you can eat restaurants produced a significant decrease in food waste or the right positioning (physical salience) of healthy products in supermarkets or canteens leads to relevant increases in their consumption (Mont, Lehner, and Heiskanen, 2014).

Environmental Challenges: Their Peculiarities and Complexity

Environmental issues possess certain characteristics that make individual action to address them particularly difficult to implement even when good intentions are present.

Firstly, these problems are typically distant from us, their consequences are usually experienced somewhere far in the world or will be experienced at some point in the future and are, therefore, rarely visible. Given the availability heuristic then, we can explain, at least partially, why people tend not to take significant action in order to address such problems and to avoid or reduce their consequences. The cause-effect nexus characterizing environmental degradation is somehow hard to grasp fully: my daily drive to work does not produce any immediate, tangible negative effect, while it provides me with great comfort every day; conversely, renouncing it would imply a tangible cost that I would have to bear without being able to experience the resulting environmental benefits.

Secondly, environmental issues are typically complex and of a large-scale, out of reach for average citizens, and they appear unsolvable so that it seems that individual pro-environmental action, even if pursued, would not be able to produce any significant result, leading to the tendency not to take any action at all and to justify passivity. Finally, many of the things we could and should do in order to preserve the environment, often involve changes in our daily lives, in our very routines, to which we are so deeply attached and from which it is so difficult to depart. Most of these actions are not simply routinized but practically automatic, done without giving it a thought, (e.g. switching off the lights, driving to work, buying overpackaged food, etc.), which, given the human aversion to mental strain (Evans et al., 2017, p.12), makes it virtually impossible to change since doing so would require a great effort and cognitive effort. These, together with other reasons, create the so-called value-action gap, a concept which refers to the fact that even when people have pro-environmental attitudes and values and would like to take action in the matter, in most of the cases they fail to do so, displaying a fundamental inconsistency between attitudes and behaviors. So, for example, in a survey commissioned by the European Commission, while 75% of respondents declared themselves ready to buy environmentally friendly products even if they were more expensive, only 17% had actually done so in the previous month (Special Eurobarometer 295, 2008, p.27).

Green Nudges: An Opportunity

In a context such as the one just described, nudges appear to be a promising new tool that could contribute to bridging the value-action gap. Traditional environmental policies are constituted predominantly by bans (e.g., no cars allowed in certain areas of a city) and information or incentive-based regulatory instruments (Schubert, 2016). For instance, the above-mentioned report includes virtually only economic incentives and quality and quantity of information as potential explanatory variables for the value-action gap (Special Eurobarometer 295, 2008, p.30). As we have seen, information and incentives’ effectiveness depends on the individual’s ability to make rational, informed decisions, which in practice they are often not able to do. The same report concludes that “transforming green attitudes to green behavior is one of the main challenges” revealed by their research (Special Eurobarometer 295, 2008, p.30).

Green nudges – nudges aimed at promoting environmentally sustainable behaviors – might therefore represent a very interesting opportunity: implemented side by side to traditional instruments they can be effective where the latter is not and help to address the value-action gap issue. Green nudges have already been tested, both in experimental and real-life settings and they have often displayed significant positive results. I have already included a couple of examples (e.g. the all you can eat restaurants and the USA utility company examples both fall within the category of green nudging) but the list is much longer and differentiated, I will therefore mention a few more, in order to give a broader perspective on the matter. Nudging has been applied mainly to three personal consumption areas, believed to be those where the new tool could bring the highest results: energy, food, and transport (Mont, Lehner, Heiskanen, 2014).

Green electricity programs set as the default options lead 95% of participants to stay with such options (Mont, Lehner, Heiskanen, 2014). The display of a streetlight image on food packages, signaling a sustainable (green), neutral (yellow), or unsustainable (red) product, is an instance of simplification of information that has produced a significant decrease in consumption of “red” products (Mont, Lehner, Heiskanen, 2014). Finally, an app program that displayed descriptive social norms and compared it to users’ habits resulted in a 64% increase in walking among participants (Mont, Lehner, Heiskanen, 2014). Many more examples can be found in the literature, but I would like to focus now on issues pertaining to food consumption that seem particularly relevant and prone to be successfully targeted through a set of different nudges. Implementing the latter, in concert with other categories of policy instruments, might be expected to effectively foster environmentally reasonable behavior on the matter.

Over-packaged food: an easily avoidable option

As I mentioned before, 75% of Europeans declared they would rather buy slightly more expensive but environmentally friendly products, but generally fail to do so. Such inconsistency can be tackled by nudging consumers towards more sustainable options and helping them meet their expressed preferences.

One major instance of highly unsustainable consumption in the food sector is that of unnecessarily packaged or over-packaged products. That plastic is extremely detrimental to our environment is a very well-known fact, to virtually everybody nowadays. What is interesting to note is that supermarkets often offer two options of the same product, one packaged in plastic boxes and bags and one packaging free. Why is this the case? Why would people prefer a clearly unsustainable alternative when a sustainable one is there in the very same shop? When going grocery shopping, people are usually in a hurry or do not want to spend too much time in the store and therefore tend not to put in much cognitive effort, ending up relying mainly on System1, which is not the “place” for an environmentally conscious decision-making process. Moreover, consumers can be overwhelmed by the quantity and diversity of information displayed and might therefore not be able to take it all into account – like homoeconomics would do -, ending up making a poorly informed choice (mental strain aversion). Several nudges (most of which have already been tested in similar contexts and lead to positive results) can be inserted into the choice architecture of a supermarket to promote the purchase of non-packaged food.

Priming nudges consists of exposing the individual to a stimulus before a decision is faced. Such a stimulus will be held unconscious and will affect subsequent decisions (availability heuristic) (Evans et al., 2017). Priming consumers at the entrance of supermarkets with visual stimuli on the catastrophic consequences of plastic on our environment and on that of other species might be expected to affect their immediate subsequent decisions, thus reducing purchases of overpackaged food.

Nudging through salience can be implemented by displaying the non-packaged alternative in a more visible or better-selling area of the supermarket. This is a well-established technique that supermarkets use constantly in order to increase sales of certain products.
Signs signaling a positive social norm on packaging-free products can be positioned over the latter, triggering ecological values – presumed to be already present in most the consumers -, as well as social ones. An example of a sign could be: “20% of our customers prefer plastic-free products!” (i.e. a descriptive social norm). Conversely, signs presenting injunctive social norms can be placed next to packaged options. For instance: “75% of the population think that buying food in plastic is a bad habit”.

These (and more nudges) have the potential to bring significant positive outcomes if implemented consistently and carefully. The food sector is already largely regulated, especially at the European level (e.g. production, distribution, retail sales) (European Commission, 2002). Therefore, introducing mandatory requirements for retail stores to include nudges of this kind would be just another regulation on an already highly regulated market. Moreover, sustainable development is a declared top priority of the EU, which makes the aims of legislators clear and known to everybody, contributing to the legitimacy of this category of nudging. Finally, the examples of priming, salience, and social norm nudges, listed before, all appear to be a pretty explicit attempt at fostering a pretty explicit goal, therefore contributing to transparency, a prerequisite for ethical nudging.

Conclusion

EU policymakers (as well as policymakers at other institutional levels) should systematically take into account behavioral economic insights when designing environmental policies for the food sector (as well as in other policy areas). Private companies have been nudging us for a very long time and nobody seems worried about the consequences of this for people’s autonomy. This is definitely not an argument that justifies, altogether, the use of nudges in public policy, but I believe it is significant to point it out. Governments should assess the ethical dimension of nudges on a case-by-case basis – given their great diversity and the fact that they can be applied to virtually all policy areas –. Moreover, like any other governmental action (at least in principle), nudging at the institutional level should be transparent and public authorities should be accountable for its use. Finally, pro-environmental nudging seems particularly justifiable given its explicit endorsement by policymakers and the widespread positive attitude of citizens towards sustainability.