Richard Thaler, a professor of economics and behavioral science at the Booth School of Business at the University of Chicago, details how the Brits are using behavioral economics to nudge people to pay on time.
One early success story involves an attempt to collect taxes from people who fail to pay on time. Most British citizens pay their taxes promptly because it is a simple tax system with few deductions, so that most taxes are collected via payroll withholding. (That’s “make it easy” in action.) But small-business owners and individuals with significant nonpayroll income are expected to save up the money to write a check to the government, and some of them fail to pay on time.
In such cases, the government’s first step is to send a letter asking for payment within six weeks, after which sterner, more expensive measures are taken. The tax collection authority wondered whether this letter might be improved. Indeed, it could.
The winning recipe comes from Robert B. Cialdini, an emeritus professor of psychology and marketing at Arizona State University, and author of the book “Influence: The Psychology of Persuasion.”
People are more likely to comply with a social norm if they know that most other people comply, Mr. Cialdini has found. (Seeing other dog owners carrying plastic bags encourages others to do so as well.) This insight suggests that adding a statement to the letter that a vast majority of taxpayers pay their taxes on time could encourage others to comply. Studies showed that it would be even better to cite local data, too.
Letters using various messages were sent to 140,000 taxpayers in a randomized trial. As the theory predicted, referring to the social norm of a particular area (perhaps, “9 out of 10 people in Exeter pay their taxes on time”) gave the best results: a 15-percentage-point increase in the number of people who paid before the six-week deadline, compared with results from the old-style letter, which was used as a control condition.
The Brits are so convinced that behavioral science is the right path that they've included it in the required curriculum for civil servants.
|Still curious? If you haven't read Influence, you're missing out. If you want to learn more about evidence based policy, read uncontrolled.|