More application of "Nudge" theory

Actually read the book, and I wrote my usual half a dozen e-mails with various ideas of how we might apply these concepts to JBU. Here's the very long cut and paste version.

- One of their clear recommendations is something called "Save More Tomorrow" which essentially sets the "default" for future paychecks to have employees save more for retirement. The idea is that people should save and want to save, but have a very difficult time cutting anything they're currently spending on. But if the extra savings come first (via the default choice) before people can start spending the extra money, then inertia takes over and people save more and more. Here's the abstract from the original academic paper attached below.

There is a growing concern that many people are not saving enough for retirement. This paper introduces a saving-enhancement plan called Save More Tomorrow (hereafter, the "SMarT" plan). The essence of the plan is straightforward: people commit in advance to allocate a portion of their future salary increases towards retirement savings. This paper also provides evidence on the first implementation of the SMarT plan. Our key findings are the following. 1. Most people (78%) who were offered the SMarT plan elected to use it. 2. Virtually everyone (98%) who joined the plan remained in it through two pay raises, and the vast majority (80%) remained in it through the third pay raise. 3. The average saving rates for SMarT plan participants increased from 3.5% to 11.6% over the course of 28 months. We are hopeful that the results of this first implementation will encourage other employers to implement the SMarT plan.

http://economics.uchicago.edu/download/save-more.pdf

- Another core argument the authors make is that in situations requiring complex choice, people are better off if an expert can help summarize options and "nudge" people toward certain possibilities. Here are some examples of these problems in the Business Office area at JBU, at least in my estimation.

1) How much should I set aside for my 125 plan? I go to all of the information sessions, I think I'm one of the most knowledgeable people on campus when it comes to health care options, and it's still a pain for me, so I mostly just go with whatever I did last year. That leads me to two thoughts. First, if I am going to just stick with my past behavior, why can't the form that I get just start with what I did last year instead of asking me to recalculate everything again. If I want to make changes, great, but if not, all I should have to do is sign the thing and turn it back. Better yet, if I don't sign anything, my past pattern should just roll forward. Second, why can't our computer system spit out a form with my basic information already on it instead of having me have to ask people all sorts of questions before I can fill out the form.

2) How should I choose my TIAA-CREF percentages? I know that we have experts with whom employees can consult, but it's inconvenient and most don't spend the time (I certainly haven't). Furthermore, there's way too many choices for the vast majority of people to choose from. My 529 plan makes it easy. I have three "risk" options: conservative, moderate, and aggressive. And then I plug in the age of the person involved. The system then picks a mix of investments that fit my attributes. Ethan is in aggressive/age 4, and the "lifestyle" matrix takes it from there. Unfortunately, TIAA-CREF doesn't have such a thing but instead is proliferating possible choices. Again, I'm fairly well educated on such matters, but I'm still at something of a loss as to what to choose. Could we not create our own matrix along the lines of what my 529 does that would help people to choose good portfolios? My understanding is that the federal government now grants employers "safe harbor" in giving such advice, so I think we'd be okay on the institutional risk side, so other than some time to create the basic matrix (and we could pretty much just copy what some of the standard "lifetime investing" plans do), why not do this?

3) What JBU plans and options should I enroll in? Again, I'm pretty well informed, so I think I'm signed up for the best options, but there's so many, that I'm not sure. And some people aren't even signing up for some of the basic plans that they really should be in (retirement match, 125, 529, preventative care, etc.). When we give everyone their paperwork, could we "default" people into the plans that we know they should be doing and not into the ones that are questionable (like cancer, vision, etc.) and then let people choose from there?

4) When do my contracts, health plans, 125 plans, etc. start and stop? It's confusing, especially when people switch from one type of contract to another. Is there any way we can sync these all to the same start and stop dates as the basic default in order to cut down on the confusion?

- Another argument from the "Nudge" book is that trying to mandate from the top changes in "bad" behavior often runs into significant opposition. Even trying to change the incentives is difficult to sell to people. The authors give examples of pollution (banning carbon emissions is very tough and incentive schemes like cap and trade are only marginally easier to sell). But often, simply giving people more information suffices, especially if that information is associated with some sort of positive financial incentive (people "feel" a lot more pain when something is "taken away" than when they "receive"something).

One JBU application is how Facilities and SGA ran that "captain planet" (or whatever we're calling it) scheme. As I understand it, there were only two mechanisms, information about how much each building saved compared to a previous time frame and then rewards to those who did the best.

What I might propose for JBU is an expansion of what we did with the dorms to the rest of the campus buildings. Facilities would disseminate information (via the Weekly Beat connected to a website?) on how much energy each building used compared to some past patterns (1 year, 3 year, 5 year?) with some prizes or financial rewards for the people in the building that did the best job of reducing energy consumption. Facilities could then add descriptions of ways to save energy to make it easier for people to know what to do. We might appoint building "captains" to lead the campaign in each building as well.

In short, we'd provide information and small financial incentives but no real coercion or major incentive systems. That seems to have worked for the dorms in the ways these authors contend should happen. Perhaps it would work for the rest of the campus as well?

- Here’s one more idea that came up near the end of the book. Upgrade our Wellness program. The authors refer to Destiny Health’s (http://www.destinyhealth.com/) “vitality” program as an example of what can be done. We’re currently offering a deductible rebate of $200 for Wellness checkups and filling out the on-line information form. “Vitality” expands that idea to a range of “good” activities (taking CPR classes, working out, donating blood, and other “measurable” activities) and then give “vitality bucks” (reward points) based on those activities that can be turned in for various things (airline miles, merchandise, vacations, etc.). I’m not sure I’d like us to go the commercial route that this big-time Midwest health company is doing, but I would like to see two changes in our Wellness program. First, I’d like to see more “measurable” options added to the list of Wellness activities that would be rewarded (including, perhaps, taking advantage of the already existing free Wellness screenings) combined with more reward for doing these additional options (i.e. doing another round of raising the deductible and then giving more deductible credits when people do these various activities). Second, I’d like to see the reward be more tangible than a deductible credit. It’s hard, even for a sophisticated user like me, to know that I really got the benefit of doing these activities, and for many people, it really didn’t matter because most people never met the deductible. As I said, the commercial route is a bit hard for me to imagine here at JBU, but something more concrete would be nice. Obviously, I’d like to see us go to the whole system that a company like Destiny Health is offering (HSAs, Wellness programs, educational efforts), but I’d be happy for now to see us continue down our Wellness road and expand that project another step along the lines of this “vitality” concept.

- One of the ideas is to undermine bad behaviors by bringing the issue constantly to someone’s attention with small payments. One specific example is a “dollar a day” for teenage girls in high risk schools for not getting pregnant. The city involved saves way more money than the program costs because of the reduced number of teenage pregnancies.

Another idea to help people avoid bad behavior is to have a certain amount contributed to some fund. If the person involved fails to meet the terms of that fund, all of the money is lost. The example the authors give is a smoking cessation program over six months in which people contribute the amount of money they would have spent on cigarettes to this fund, and then they have to get tested at regular intervals to see if they have been smoking. If they fail the test, they lose the money. Supposedly, this program has seen great success (53% more likely to stop smoking, even better than the nicotine patch).

So what does this have to do with JBU? Perhaps there could be some application on the SD side with students who have violated some policy or another (like the old cussing jars where people who do something we don’t like have to contribute a “fine” each day/week/month to a pot that they can get back if they avoid any further bad actions for a certain length of time). A Philosophy prof at our sister school Trinity Western in Canada appears to be doing a version of this by rewarding students who foreswear social networking. I can see Preston, for example, leading a campaign to get students to spend more time studying by quitting watching TV in which people contribute a buck a day if they don’t watch TV, a pot that will go to a charity if they do cave and start watching again. (Come to think of it, that’s something I should do!) Maybe SGA or Honors could match the money people contribute for those willing to participate in order to add some additional incentive (or maybe give prizes to the dorm wings who have the highest participation)? The basic idea here is that there are certain behaviors that detract from the educational environment (TV watching, social networks, etc.) that we don’t really want to ban but that we want “nudge” our students away from. The “captain planet” approach showed how this might work when it comes to energy consumption, so perhaps we could replicate that concept to other behaviors using this kinds of incentive systems?

My real thought, however, is that we return to my earlier “pay for graduation” idea. Let’s say we add a buck a day for however long they manage to stay at JBU (roughly $75/semester to a max of $600) that they only get if they actually graduate from JBU. Students in the Aspire program would also have their Aspire fees added to this pot so that their potential “gift” at the end of their career would be even larger. I think I’ve noted this before, but I’ve seen a couple studies in which remediation/academic support was on average only mildly effective in improving graduation/retention. “Pay for performance” plans along the lines of what I’m suggesting were only a little more effective. But it was the combination of the two that proved the most effective. Which brings me back to the idea that ASPIRE might serve as a useful test case if we’re not yet ready to investigate this kind of idea for the campus as a whole.

- A couple random final thoughts.

1) Publicity campaigns based on what you might “lose.” I know lots of us dislike some of this type of advertising, but the authors’ argument is that people feel the pain of loss at least twice as much as the advantage of gain, so you’re better off advertising to what people might lose if they don’t do some action (such as finishing your degree or attending your type of institution) instead of what they might get from doing this particular action (“framing” in advertising lingo?). Our recent billboard about the gap in pay between college grads and high school grads, for example, might have been better expressed, according to this theory, as a subtraction (how much people “lose” every year from not having a college degree). Even better, suggest the authors, would be to put this loss in more concrete terms (a new truck every year, for example, though that might be too difficult to express in a billboard). I know Steve Henderson recommends this direction as well in terms of CCCU advertising (highlighting the problems of the “other,” such as safety, undermining of faith, etc.), probably because it works. In my history classes, I always argued that revolutions occurred not because people were poor but because people feared that something was being (or was going to be) taken away from them. Again, the fear of loss is the key motivator in getting people to act.

2) Ways to attract Jr. High and High School students. Often, the big hurdles to applying for college are about procedure and planning. People don’t start saving early enough, then don’t know how to fill out an application or a FAFSA, etc. The authors suggest a few ideas that you might consider exploring.

- An H&R Block study in Ohio where a FAFSA software package was included for people likely to qualify for federal and state money which then took their tax info directly into the FAFSA making that application much easier to fill out and thereby increasing the number of people who applied for college and got financial aid.
- A San Marcos High School/Austin Community College partnership to increase Hispanic applications where the high school required for graduation that every student fill out a college application and take a free standard admissions test. Students were “sold” on the idea with the explanation of how much they would lose if they didn’t go to college (see point #1, and the argument was made on the basis, again see point #1, on what kind of car they could buy). Parents could attend free weekend sessions with tax consultants and financial aid people.
- Another Ohio study to get people to enroll in 529s so that they’ll be more able to pay for college later helps people get over the initial inertia by bribing them with some start-up money and free support to fill out the forms. As with the authors’ “Save More Tomorrow” concept, people think they should save for college, and want to save for college, but have difficulty getting past the initial hurdles. Once you start them on the process, however, they’re much more likely to stick with it, making them more likely to attend college later, which is why this effort is focused on middle school kids so that they have time to save (http://gseacademic.harvard.edu/~longbr/529_Proposal_-_Bettinger_Long_Oreopoulos_6-08_proposal.pdf).

Taken individually, these ideas make some sense, but what about some type of combined effort designed primarily to increase the number of Siloam kids and/or area Hispanic kids coming to JBU. Here’s my thought. We’d create a partnership with at least four entities—JBU, NWACC, Siloam Springs Public School District, and a local tax company (H&R Block?). We’d then do the following six things.

1) The school district would require to graduate that all of their students fill out college applications to NWACC and JBU and take a standardized test. The school district would provide the facilities and the students and be the central coordinating entity. They get to brag about their outreach efforts and their increased number of college-going students.

2) JBU and NWACC would provide experts to help with the applications and the FAFSA. We get additional students coming to our institutions.

3) H&R Block would provide free FAFSA software and tax support. They get to sell their services because if you’ve done your taxes with H&R Block, the software converts that information onto the FAFSA. And we’d likely be doing this during tax season anyways.

4) JBU would offer 529 enrollments, something NWACC probably doesn’t care about. Preferably, there’d be some sort of bribe involved like $100 to do so.

5) It would be great if the city, the school district, some local philanthropist, etc. could help fund all of these efforts (the costs for the standardized tests, the “bribe” money for the 529 plans, our costs for the college applications, etc.

6) And then we could invite more area Hispanics to this project, expanding off of what we’re already doing with inviting some Hispanics to JBU.

Obviously, this is a pretty complicated endeavor with only a hypothetical payback. If we’d like to pilot the idea instead on a much smaller group, perhaps we could start with a version of this for just the Hispanic students that we’re already inviting to JBU? They’re the main group that I’d like to see us find ways to connect to JBU, so perhaps being able to help them get over some of the procedural and planning hurdles that might confront them would be beneficial in targeting these students?