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An Interview With Richard Thaler
An Interview With Richard Thaler
p u b l i c s e c t o r p r a c t i c e
The Quarterly: What’s your sense of how the Nudge Unit came about
in the first place?
Artwork by Sandra Dionisi
1 David Cameron and George Osborne have been, respectively, the prime minister and
not to be just a campaign gimmick. When they got in office they said,
“Let’s try to do something.”
People in Downing Street call it the Nudge Unit, but the official term
is the Behavioural Insight Team. A bunch of bright civil servants on the
team are going around trying to get agencies to think about how they
incorporate this tool kit into the things they do. It’s hard to know whether
this is early days of a new administration or people being polite to me.
But I’ve been very pleasantly surprised with the openness—almost the
eagerness—of people to talk to us. I’m sure that there are skeptics.
But they are keeping that skepticism to themselves, at least initially.
One general principle is that lots of good things can happen if the govern-
ment just releases data it already has in machine-readable, download-
able format. A good example of this is in San Francisco, where the Bay
Area Rapid Transit system has for years had GPS locators in all their
buses and trains. There was some big control room someplace where you
could see all these things moving around. They took that data that
they already had and put it online in real time in a format that app
designers could tap into. Now there’s an iPhone app that knows where
you are and will tell you when the next bus is coming.
So that’s one part: government releasing data. The second part is getting
firms to release data. One goal there is to get complete price transpar-
ency. Another initiative is getting companies that are collecting data on
your usage to share that data with you. When it comes time to renew
my smartphone calling plan, I’d like to be able to get a file that I could
upload to some Web site that would tell the search engine the way I
use the phone and, so, what features I should be looking for. It might even
be able to tell me, if I’m about to switch to some new model, how much
more my data usage is likely to jump based on past experiences.
The Quarterly: What are the business implications of the data policies
that the Nudge Unit advocates?
Right now, it’s very easy to find what the best airfare is from Chicago to
San Francisco. It’s not so easy to find all the charges that might
come associated with that, especially if you have a big suitcase. And
there are plenty of stories of credit card companies that are making
all their money on late fees and increases in interest rates, and debit card
companies that will stick a big charge that puts you over the limit at
the head of the queue, so that the next six times you swipe your card for
a coffee, you get charged 25 bucks each time.
Many firms view this with fear and trepidation, and some of them should.
But others should view this as an opportunity. There’s an opportunity
for firms that want to compete on the basis of fair dealing. If we really
succeeded with all these initiatives about transparency and making
it easier to shop, then we’re going to make it possible to compete on
a completely different level. Firms that honestly can say to themselves,
“We succeed by having the best products and treating our customers
fairly, and we’re getting screwed by the unscrupulous guys”—they
should welcome this initiative. The ones who are doing the opposite
should fight me tooth and nail.
3 See www.saferproducts.gov.
6
Now, there are companies that are fighting this because, they say, some
of the information that will be posted will be malicious. While of
course it is true that some people may post bad reviews of products—
and even the greatest products have some detractors—a good prod-
uct will manage to overcome some bad-mouthing in the social media.
If you’re really proud of your product, then you won’t mind a complete
airing of people’s opinions.
We’re all going to make some mistakes, and nobody builds a crib that’s
intended to strangle toddlers. But sometimes they’ll build a crib
that human parents will set up wrong. A crib’s got to be designed in a
way that nobody can possibly set it up wrong. And if somebody fig-
ures out how to set it up wrong so that it’s dangerous to kids, the manu-
facturer should want to know.
The strategy of dealing with these things by settling lawsuits with the
unlucky consumers, subject to nondisclosure, is not one that’s good
for the world. Strategies that are based on obscuring the consumer’s
choice are not good long-term strategies. And I would encourage
firms that are making their money that way to think long term and think
about how they can survive in a world where everything is trans-
parent and obvious.