14-1190b-innovation-managing-risk-evidence

measures have been put in place and they are recognized
to be harmless. Some people interpret these findings from
behavioural science as demonstrating that ordinary people
are irredeemably irrational, or incapable of understanding
risks. But the framing of human thought as irrational is itself
potentially misleading for a couple of reasons.
Firstly, many of these same effects enable us to process
information and act quickly without the need to analyze
information comprehensively. Think about how complex
your life would be if you had to calculate the trajectory
of a falling ball you would like to catch using mathematical
equations rather than intuition and simple rules of thumb.
Secondly, lessons from behavioural science do not just
show us those situations in which individuals are prone to
making errors. They can also show us how to devise systems
and processes that support people (professionals and nonspecialists
alike) in making better decisions for themselves.
This was the central premise behind Richard Thaler and
Cass Sunstein’s book Nudge 6 . They show how policymakers
can change the ‘choice architecture’ to help people to make
choices which are better for them and that they are less
likely to later regret. For example, one of the best and most
effective examples of a ‘nudge’ is to change the way that
a default option is set, in order to overcome our natural
tendency to prefer rewards today rather than those that we
receive in the future (‘hyperbolic discounting’), and more
practically, our dislike of doing paperwork. Recognition of
this tendency was behind the UK government’s decision to
automatically enrol people on to company pension plans,
so that the default switched from having to ‘opt in’ to
having the option to ‘opt out’. The result: overnight, pension
enrolment increased from 61 to 83% — and to more than
90% among those who were eligible.
The Behavioural Insights Team has, over the past four
years, put in place dozens of randomized controlled trials,
encompassing hundreds of variations, which show how
apparently small changes such as these can have dramatic
impacts on how people take decisions. We have shown,
for example, how changing the way that we communicate
messages in areas from tax letters to organ donation can
increase compliance and sign up rates.
We have also shown how to begin embedding this same
kind of thinking in the broader policy making process. For
example, the midata project, which we launched with the
Department for Business, Innovation and Skills, will enable
consumers to access information about themselves that
is held by firms. We believe this will herald the start of a
consumer revolution, as third-party developers design apps
and websites to support consumers’ decisions based on easyto-access
data: for example, your energy consumption data
will reveal which new tariff is best for you. (See the case study
on ‘social machines’ for further discussion of web-enabled
data sharing).
We have also worked with the Department of Health on
areas such as electronic cigarettes (see case study), precisely
because the behavioural evidence shows it is easy for people
to quit smoking if they can substitute cigarettes for another
product that feels and looks the same.
Changing the way that we
communicate messages
in areas from tax letters
to organ donation can
increase compliance and
sign up rates.
Some behavioural scientists rightly argue that we can
educate people to become ‘risk savvy’ by providing people
and professionals with information in ways that they can
intuitively process and understand. Gerd Gigerenzer, for
example, has shown how doctors and patients routinely
misunderstand information about cancer screening. In a study
of prostrate cancer in the United States, Gigerenzer found
that many people, including health professionals, routinely
misunderstand the relative risks of different procedures.
For example, ‘survival rate’ data is often used to show the
relative efficacy of screening, but this can be highly misleading
as individuals diagnosed earlier than they would otherwise
have been as a result of screening will naturally tend to have
a higher survival date, but not necessarily a lower mortality
rate.
Screening for prostrate cancer in the United States does
not appear to reduce the overall age-adjusted deaths, partly
because it increases the number of people who have a
false positive diagnosis that results in unnecessary surgery.
Presenting information in terms of relative risks and survival
rates turns out to be confusing and unhelpful. In contrast,
simple tools like icon boxes that show a population of 100
men and what happens to each can radically improve people’s
understanding of the relative risks of particular actions
In conclusion, the systematic study of how people
estimate risks and probabilities in everyday life has proven
to be extremely rich territory. It has revolutionized several
academic fields and led to Daniel Kahneman being the first
psychologist to be awarded the Nobel Memorial Prize in
Economic Sciences. It has also served as a key element of the
work of the Behavioural Insights Team, established in 2010
in the UK Cabinet Office, and increasingly being applied by
governments across the world.
It should also serve as a subtle caution to all of us:
policymakers and experts ourselves use these same mental
shortcuts. We are prone to overconfidence; to hold to
previous estimates and beliefs, even if arbitrary; and to be
strongly influenced by the dynamics of the group around us.
That is why the Behavioural Insights Team was established
in the first place: to help policymakers understand how
they could draw on ideas from the behavioural sciences to
encourage, support and enable people to make better choices
for themselves.
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