A few weeks ago I walked past a busking harpist in Lausanne’s main train station. The busker was good but as I was pulling out some loose change, I noticed that there weren’t any coins in the instrument case that lay open in front of him. This made me worried that maybe he was just doing it for pleasure, so I put my Swiss francs back in my pocket.

Poor guy. In retrospect, he was clearly playing for cash but he had failed to learn the most basic rule of busking: always leave a few coins in the hat or instrument case as a way of suggesting that others should do the same thing.

This is the sort of anecdote that would interest Richard Thaler and Cass Sunstein, two University of Chicago academics who have authored a book called Nudge: Improving Decisions About Health, Wealth and Happiness. They are preoccupied by the ways in which businesses and policymakers influence behaviour by controlling the framework within which choices are made.

They call these people “choice architects”. My busker was a lousy example of the breed.

At their most effective, the authors argue, these choice architects can dictate what the masses do through the use of subtle cues, or “nudges”. For instance, if you etch the image of a fly on a urinal, man’s aim will improve, reducing the need for cleaning. Meanwhile, tax authorities are wasting their time threatening non-payers with punishment - on the other hand, citizens are more likely to comply if told that the vast majority of the population has already done so.

The authors, who also have a blog, contend that policymakers can use nudges such as these to construct a “libertarian paternalism” that shepherds citizens towards good decisions in areas such as nutrition and financial planning without constraining their liberty. Fans include Britain’s David Cameron. Prof Thaler has also been seen as an influence on Barack Obama’s team.

Much of the book may bore non-Americans, unless they have a vicarious interest in the depressing complexities of the US health and pension systems. At least one other new work - Sway - explores similar territory (it seems that book titles and hip bar names are interchangeable this season).

But the choice architecture concept is a good tool for analysing a murky area of business practice. Magazine publishers, for instance, know that recipients of free subscription offers will, out of sheer inertia, often become paying subscribers when the offer ends. Jewellers profit from the notion that engagement rings should cost a certain multiple of one’s salary. At the most basic level, the order in which products are listed in a catalogue or displayed on a shelf is an act of choice architecture, subtly influencing purchases.

I’d love to hear more examples from readers of commercial nudges used for noble or dark ends, as well as any insights into choice architecture and the human behavioural traits that underpin them.

June 26, 2008 4:33pm in B-schools, Governance/CSR, Marketing/sales | Comment