Admittedly, the phenomenon I am about to describe will most likely immediately resonate with men more than women; however, I promise I will bring it back to a more universal point. If you have ever had occasion to visit the men’s room at JFK airport, Schiphol Airport in Amsterdam, or any number of stadiums across America you may have noticed in the urinals, right above the drain, an image of a house fly. No, they are not a trademark of a particular urinal manufacturer, nor are they some sort of art deco statement. They serve a very real business purpose. Sounds crazy, I know, but get this. The manager at the Schiphol Airport reported a drop in “spillage” rates of 80%!
Imagine the impact on maintenance costs and overall cleanliness at a large airport over the course of a year from such a decline. Those $.50 stickers have a serious ROI! In case you are interested, the manufacturer Urinal fly (not making that up) also sells bulls-eyes, trees, and even ducks. So what, you ask? Other than writing a blog post my 14-year-old son would enjoy reading, I really do have a serious point I am attempting to make.
I first heard about the impact of the urinal fly in the book Nudge, by Richard H. Thaler and Cass R. Sunstein. The authors argue that it is possible, and in fact desirable, to create an environment that encourages individuals to make better choices. You can find an excellent introduction to the concept here.
The person or person(s) who create that environment are referred to as choice architects. The first and most obvious question is whether it is advisable or appropriate for choice architects to use nudges to influence choices. It can seem a bit distasteful, biased, or maybe even’ big brotherish’ to influence people’s decisions without their direct knowledge. Clearly, many choices which are more trivial, such as which flavor of ice cream to pick, don’t warrant nudges. But others, such as which Medicare prescription drug program to choose, can have a profound impact on the individual making the choice.
In particular, in cases where the choices are complicated and made infrequently, you can make a solid argument that choice architects may even have a responsibility to help individuals make good choices. The authors of Nudge espouse a concept that they call libertarian paternalism. It aims to help individuals make better choices (as defined by the individual making the choice) without forcing any particular choice on anyone. I believe several areas of education finance could benefit from better choice architecture that embraces the notion of libertarian paternalism; financial aid, the college selection process, financial aid refunds, and developing an education payment strategy to name a few. These are all complex, infrequent decisions in which school administrators can have a positive impact in helping individuals make better choices while maintaining the freedom for individuals to make choices based on personal preferences.
Choice architects have a number of tools to encourage individuals to make better choices including defaults, expecting error, understanding mappings, giving feedback, structuring complex choices, and creating incentives. For the sake of brevity, I will focus on two nudges in particular, defaults and structuring complex choices. I am focusing on these two because I personally see the most potential for these two nudges in the education finance space. I will use more general examples and leave specific uses for nudges in education finance up to your imagination. The link above contains explanations for all of the nudges listed; however, if I have really piqued your interest I encourage you to read Nudge in its entirety.
Defaults are a nudge we are all very familiar with. If you have ever installed a software program, you have been presented with an option to accept the default settings or to choose your preferred settings manually. This is a good case of the choice architect (the software manufacturer) making the process simpler for the user. Most of us don’t understand what the various settings actually do and are more than happy to accept the default values. We would most likely even be annoyed if we were forced to configure the various settings for software programs we wanted to install. Every pre-checked box on a website is another common example of a default. Defaults are extremely powerful nudges since so many people take the path of least resistance. To quote the great Geddy Lee, “If you choose not to decide, you still have made a choice”.
Choice architects often take the “safe” route when determining defaults, the choice they feel will be least offensive not necessarily what would be most beneficial to the most people. Take company 401K plans for example. Most companies default to no contribution for employees even though by doing so, many employees forego free money (the corporate contribution). It is easy to imagine a scenario where companies defaulted to a contribution rate equal to the company match. Think how many more people would be saving for their retirement likely without even missing the deduction from their paycheck. And what would be the harm? The company would not be forcing employees to enroll in the program, and employees could easily opt-out if they consciously wanted to not contribute.
Structuring complex choices is a particularly effective nudge when there are large numbers of potential alternatives. Most of us are familiar with a very ubiquitous example of this from online shopping where we are told that “people who liked this, also like this”. Another example from online shopping is where you as the shopper select filters based on what is most important to you (price, color, size, etc.) and you are given a narrowed list of results. They make sorting through the millions of items for sale on the internet simpler and more time efficient. Choice architects can sometimes fall into the “more choice more better” trap where the choice architect feels that people want choice therefore by providing maximum choice you are giving people what they want. The reality is most people are overwhelmed by choice and would appreciate a little guidance. The structuring complex choices approach can help individuals make better choices based on their own personal preferences while maintaining complete freedom to choose. You can see where a new student or first-time parent would appreciate this sort of guidance to help them navigate the myriad of choices they face as first-year students. One of the most used descriptions we hear to describe students and parents that call into our contact center is “overwhelmed”.
Since reading Nudge, I have become, in the most non-political way possible, a libertarian paternalist. I believe in relationships where there is a wide gap in knowledge between provider and consumer, institution and constituent and yes, even school and student, that choice architects have a responsibility to be mindful of how they design choices. By examining the design of your choices, you may find that you were already unwittingly nudging and therefore introducing bias and impacting outcomes. By being aware of nudges, you can consciously decide to design choices to benefit the most people, or at least avoid unconscious nudges to better achieve neutrality.
Just be careful, with great nudging comes great responsibility!