Choice Architecture is an important topic within the discipline of Behavioural Economics. Studies in human behaviour have given us insight into decision making. With the advent of technology, we can monitor and learn from brain functions through benign probes and scanning devices.
The basic tenet of Choice Architecture is embodied in the idea that environment influences human decisions. Experiments have shown that dishes that are placed earlier in the queue are chosen over the items that are later in the line. Such studies in choice architecture were used to improve dietary habits in students.
Why does our brain function in this fashion ?
Complex thought or when Einstein figured relativity, this sort of thinking is called ‘higher-order thinking’. Our Prefrontal Cortex is responsible for such activities. However, higher-order thinking is a major fuel burner and requires more energy. Therefore such a system cannot be used all the time. To save energy, routine thinking is delegated to the ‘Limbic System’. One could imagine this system as an autopilot. The Limbic System depends on memory and emotions to make decisions. Driving, for example, is managed by such a system, where you do not have to consciously make decisions. For example pressing the clutch while changing gears. A large number of choices that we make are influenced by this system. We can assume that our decisions are not always led by reason.
So what are the important tools that we can use to build a system of choice architecture? How can we communicate productively with the limbic brain?
This is driven by inertia. People like to maintain the position they are in unless there is an acute discomfort warranting action. Opt in – Opt out are great examples of default at work. Let us understand with the help of an example.
In certain countries when a driving license is issued, her license comes with a default ‘yes’ in the organ donor checkbox. In such cases, the total percentage of donors is much higher compared to countries where the default option to organ donation is set to ‘no’.
This has nothing to do with a particular culture. It is not that one set is more compassionate compared to the other. The tendency to go with the default option is the reason for the high number of donors.
Framing is all about the presentation of choices. Saying 90% fat-free over 10% fat makes a big difference in perception. Framing has various approaches such as – risky choice framing, where you can compare the risk of losing 10 out of 100 lives or the opportunity of saving 90 out of a hundred. Goal framing, where you have to choose between giving reward or penalty. The above example with fat is called attribute framing.
Tversky and Kahneman, leading behavioural scientists have been known to apply Framing in their study of Prospect theory, a Nobel price winning effort.
The idea of feedback is about generating self-awareness, especially post behaviour self-awareness. If you approach a person with concrete feedback after he has acted there is a much higher possibility of a behaviour change.
Comparative feedback seems to work the best. For example, a program in Paolo Alto would send energy bills that would graph electrcity consumption compared to your neighbours.
Majority of the users found a comparison report to be helpful and action provoking. Over a period of time reduction in energy consumption was noticed.
One should be careful while devising such a system and ensure that the feedback is productive and constructive.
Incentives give better results if the benefit is short term. When you place short term rewards the point of reference changes. For example, monthly incentives may work better compared to an annual program. Cash-based incentive seems to work but social incentive is equally effective. Facebook Likes making us happy are a good example of social incentive. However, incentive should only be used for short term behaviour change related to routine work.
When devising an incentive framework it is critical to have an understanding of Who Uses, Who Chooses, Who Pays and Who Profits. By incentivising the wrong leverage point you may get an undesirable outcome.