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...suggests that yes, we can. Studies of all kinds of human frailties are revealing how to help people change - not only through mandates or financial incentives but also via subtler nudges that preserve our freedom to make choices while encouraging us to make better ones, from automatic-enrollment 401(k) plans that require us to opt out if we don't want to save for retirement to smart meters that warn us about how much energy we're using. These nudges can trigger huge changes; in a 2001 study, only 36% of women joined a 401(k) plan when they...
...coincidence that Obama's budget proposes an ambitious program of automatic-enrollment pensions for workplaces that don't offer 401(k)s or that his stimulus package has billions of dollars for smart meters. Behavioral science - especially the burgeoning field of behavioral economics that has been popularized by Freakonomics, The Wisdom of Crowds, Predictably Irrational, Nudge and Animal Spirits, which is the new must-read in Obamaworld - is already shaping dozens of Administration policies. "It really applies to all the big areas where we need change," says Obama budget director Peter Orszag. (See the top 10 nonfiction books...
Orszag has been an unabashed behavioral geek ever since he read that 401(k) study. His deputy, Jeff Liebman of Harvard, is a noted behavioral economist, as are White House economic adviser Austan Goolsbee of the University of Chicago, Assistant Treasury Secretary nominee Alan Krueger of Princeton and several other key aides. Sunstein has been nominated to be Obama's regulatory czar. Even National Economic Council director Larry Summers has done work on behavioral finance. And Harvard economist Sendhil Mullainathan is organizing an outside network of behavioral experts to provide the Administration with policy ideas...
Social norms help explain the attraction of opt-out 401(k)s as well: it's not just that we're too lazy to check a box but also that we assume the default is the accepted thing to do. Obama's push to weatherize millions of homes - another stimulus bonanza - will require new norms. In Oregon, a countywide program to upgrade windows and insulation at almost no cost to homeowners got a tepid response. But after an intense mobilization campaign - through citizen councils, churches and Girl Scouts who went door-to-door asking residents why they hadn't weatherized...
...need to change our hearts like that. Opt-out 401(k)s, simpler mortgage applications, programmable thermostats and cost-effective medical protocols can help us do the right things even if we remain ignorant, lazy, greedy and obsessed with childish things. It doesn't matter if we save energy because we care about the earth or our money or our neighbors; we just need to save energy. The government just needs to provide the right rules, incentives and nudges to help us make the right choices. It would be nice if Obama could change our social norms so that green...