Description
This module explores additional sources of ideas for policy options beyond the failure frameworks and the system map.
The concept of “targeted transparency” refers to the use of information to address problems.
The concept of “nudging” recognizes that information is often not enough to make people adopt more beneficial behaviors. The field of behavioral economics has blossomed over the past few decades by identifying how the human brain takes short cuts to make decisions and the ways in which those shortcuts can be “nudged” to yield better decisions.
You will need to cover :
1. Summarize at least three key points from the required materials. Look for ideas that bridge across the assigned readings or videos.
– Please identify which reading(s) or video(s) you are discussing in each of your points.
– When you see a similar or related (or conflicting) point being made across two or more different readings or videos, be sure to point that out!
2. Articulate one question, puzzle, or point of confusion prompted by the assigned material.
Required materials :
– Weil (et al) – targeted transparency
– Thaler & Sunstein (LA Times)
– Japanese Train Stations :
https://www.bloomberg.com/news/articles/2018-05-22…
Unformatted Attachment Preview
From the Los Angeles Times
https://www.latimes.com/archives/la-xpm-2008-apr-02-oe-thalerandsunstein2-story.html
Designing better choices
By Richard H. Thaler and Cass R. Sunstein*
April 2, 2008 12 AM PT
*Richard H. Thaler and Cass R. Sunstein teach at the University of Chicago and are the authors of
“Nudge: Improving Decisions About Health, Wealth, and Happiness.”
The director of food services for a big-city school system hatches an interesting idea: If she changes the
arrangement and display of school food, will it alter kids’ decisions about what to eat?
Without modifying menus, she decides to place the desserts first on the cafeteria line in one school, last
in another and on a separate line altogether in others. She varies the location of other foods as well. The
results are dramatic. Simply by rearranging the cafeteria, the consumption of many items increases or
decreases.
This example is a product of our imaginations, but we know from similar real-world experiments — in
supermarket design, for example — that the arrangement of settings is important to the choices
consumers make. Behavior can be greatly influenced by small changes in the context. And the influence
can be exercised for better or for worse. In the cafeteria, no doubt a careful designer could get kids to
eat more healthy food and less junk.
Those who design supermarkets and school cafeterias are engaged in what we call “choice
architecture”: the organization of the context in which people make decisions. Choice architects are
everywhere. If you design the ballot that voters use to choose candidates, you are a choice architect. If
you are a doctor and must describe the alternative treatments available to a patient, you are a choice
architect. If you design the form that new employees fill out to enroll in the company healthcare plan,
you are a choice architect. If you are a parent, describing possible educational options to your son or
daughter, you are a choice architect. If you are a salesperson, you are a choice architect (but you already
knew that).
There are many parallels between choice architecture and more traditional forms of architecture. A
crucial parallel is that there is no such thing as a “neutral” design. Cognitive psychology and behavioral
economics have shown that small and apparently insignificant contextual details can have a major effect
on people’s behavior. Researchers tell us that if a candidate is listed first on the ballot, he may well get a
4% increase in votes. If a doctor says 90% of patients are alive five years after a certain operation, far
more people will have the operation than if the doctor says 10% of patients are dead five years after
having it.
One memorable example of the power of choice architecture comes from the men’s rooms at Schiphol
airport in Amsterdam. There the authorities have etched the image of a black housefly into each urinal.
It seems that men usually do not pay much attention to where they aim, which can create a bit of a
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mess, but if they see a target, their attention and accuracy improve. Spillage at the airport decreased by
80%!
Let’s return to the cafeteria line. If, all things considered, you think the arrangement of food ought to
nudge kids toward what’s best for them, then we welcome you to our new movement: libertarian
paternalism. We are keenly aware that both those words are weighted down by stereotypes from
popular culture and politics. Why combine two often reviled and seemingly contradictory concepts? The
reason is that if the terms are properly understood, both concepts reflect common sense. They are far
more attractive together than alone — and taken together, they point the way to a whole new approach
to the role of government.
The libertarian aspect of the approach lies in the straightforward insistence that, in general, people
should be free to do what they like. They should be permitted to opt out of arrangements they dislike,
and even make a mess of their lives if they want to. The paternalistic aspect acknowledges that it is
legitimate for choice architects to try to influence people’s behavior in order to make their lives longer,
healthier and better.
Private and public institutions have many opportunities to provide free choice while also taking real
steps to improve people’s lives.
* If we want to increase savings by workers, we could ask employers to adopt this simple strategy:
Instead of asking workers to elect to participate in a 401(k) plan, assume they want to participate and
enroll them automatically unless they specifically choose otherwise.
* If we want to increase the supply of transplant organs in the United States, we could presume that
people want to donate, rather than treating nondonation as the default. A study by social scientists Eric
Johnson and Dan Goldstein showed that “presumed consent” could save thousands of lives annually.
* If we want to increase charitable giving, we might give people the opportunity to join a “Give More
Tomorrow” plan, in which some percentage of their future wage increases are automatically given to
charities of their choice.
* If we want to respond to the recent problems in the mortgage market, and do something about credit
cards and loans in general, we might design disclosure policies that ensure consumers can see exactly
what they are paying and make easy comparisons among the possible options.
We find ourselves these days mired in political battles that pit laissez faire capitalism, with its reliance
on unrestricted free markets, against heavily regulated capitalism, which favors government mandates
and bans in an effort to ensure “good” outcomes. But this opposition is false and misleading. Any system
of free markets will include some kind of choice architecture, and that means libertarian paternalism
can offer a real “third way” around the battleground.
The most important social goals are often best achieved not through mandates and bans but with gentle
nudges. In countless domains, applying libertarian paternalism offers the most promising alternative to
the tired skirmishing in the increasingly unproductive fight between the left and the right.
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POLICYFORUM
SCIENCE AND REGULATION
Research explores how policy goals might be
reached by simply requiring that information
be made public.
Targeting Transparency
W
hen rules, taxes, or subsidies
prove impractical as policy tools,
governments increasingly employ
“targeted transparency,” compelling disclosure of information as an alternative means
of achieving specific objectives. For example,
the U.S. Affordable Care Act of 2010 requires
calories be posted on menus to enlist both
restaurants and patrons in the effort to reduce
obesity. It is crucial to understand when and
how such targeted transparency works, as
well as when it is inappropriate. Research
about its use and effectiveness has begun to
take shape, drawing on social and behavioral
scientists, economists, and legal scholars. We
explore questions central to the performance
of targeted transparency policies.
Targeted transparency differs from
broader “right-to-know” and “open-government” policies that span from the 1966
Freedom of Information Act to the Obama
Administration’s “open-government” initiative encouraging officials to make existing
data sets readily available and easy to parse as
an end in itself (1, 2). Targeted transparency
offers a more focused approach often used to
introduce new scientific evidence of public
risks into market choices. Government compels companies or agencies to disclose information in standardized formats to reduce specific risks, to ameliorate externalities arising
from a failure of consumers or producers to
fully consider social costs associated with a
product, or to improve provision of public
goods and services. Such policies are more
light-handed than conventional regulation,
relying on the power of information rather
than on enforcement of rules and standards or
financial inducements.
Transparency has been used as a policy
tool at least since the 1906 Pure Food and
Drug Act, to improve food safety, and the
1933 and 1934 Security and Exchange Acts,
to reduce financial malfeasance. Study of
targeted transparency as a distinct form of
social policy is relatively new (3). We found
that effective targeted transparency policies
follow a demanding “action cycle” of information provision, use, and response (4). Con1
School of Management, Boston University, Boston, MA
02215, USA. 2Harvard Kennedy School, Harvard University,
Cambridge, MA 02138, USA.
*Corresponding author: [email protected]
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sumers must see and comprehend new information and integrate it into choices of products and services; target companies must
perceive and act on consumers’ responses
in ways that reduce risks, improve services,
minimize corruption, or otherwise further a
policy goal (4). Third parties may play critical roles, translating complex information
into a form more readily used by individuals
in market settings or acting through political
or other nonmarket channels in response to
disclosed information.
Many policies fail to satisfy these conditions. Consumers may not understand or be
interested in new information, may not have
the capacity to choose when given information, or may not act in accord with policymakers’ aims. In cases where disclosure
relies upon more collective responses, such
as pollution emissions, third parties may have
agendas not well aligned with the individuals they purport to represent. Target companies may not understand consumers’ changed
choices, or, if they do, many not act in accord
with policy-makers’ aims. The disclosure
mandate itself may be flawed. As in other regulatory regimes, politics plays a role in framing targeted transparency; thus, information
completeness, format, or timeliness may be
compromised.
Disclosure systems erode over time if
not designed to evolve as markets and scientific findings change. Ineffective disclosure
requirements can be costly. Forcing companies to collect and disclose information can
require substantial resources. Mandated disclosure of incomplete or out-of-date information can mislead consumers and create
new risks.
Three Emerging Questions
When should government require disclosure? Some argue that government has only
a small role to play in mandating transparency because market pressures create sufficient incentives for businesses to provide
accurate information to consumers (5). But
multiple consumer priorities—for example,
new car prices, fuel economy, and safety—
can make revelation of any single dimension
skew consumer choices in ways that do not
advance public goals (see the chart). Firms
may underdisclose because disclosure is
costly relative to private benefits. Consum-
ers may lack adequate baseline information
about quality characteristics and variation to
compare products and practices. The case for
public intervention arises when such barriers to voluntary disclosure deprive the public of critical information about products or
services (5, 6). This information asymmetry
pushes markets away from socially optimal
outcomes (7).
Even then, government-mandated transparency may not be appropriate or feasible.
When no consensus metrics exist, when risks
cannot be clearly communicated, or when
agencies lack capacity to frame or oversee
a targeted transparency system, policy-makers must search for other approaches. Standards- or market-based approaches may be
more useful when policy-makers seek specific outcomes like adoption of certain safety
practices. Banning substances may be a more
appropriate approach when transparency
would produce variable responses that perpetuate unacceptable hazards to the public,
such as allowing mercury in food.
When and how do consumers respond to
new information? Research suggests that people use cognitive “short-cuts”—streamlined
paths of decision-making that can be useful
but, at times, misleading. Individual failures
to use or incorporate new information reflect
cognitive errors because they lead to suboptimal decisions (8). For example, people may
overreact to risks when they feel little control
(e.g., flying in an airplane) but underestimate
risks when they perceive control (e.g., riding
a bicycle). The extent of such problems, and
the influence of transparency formats in overcoming them, remains contentious. However,
most acknowledge that some choices will be
more affected by new information than others, such as decisions that are infrequent and
involve unfamiliar alternatives and multiple
priorities (e.g., a major medical procedure).
Research suggests that transparency systems can be designed to mitigate such problems. Some policies require user-friendly formats to make complex information comprehensible, e.g., five-star ratings for auto safety
or restaurant hygiene grades. Some of these
rating systems have proven highly effective
(9). In some instances, nonprofit or for-profit
third parties may be better equipped and more
facile than government in translating complex information into usable formats. Private
21 JUNE 2013 VOL 340 SCIENCE www.sciencemag.org
Published by AAAS
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David Weil,1* Mary Graham, 2 Archon Fung2
POLICYFORUM
CREDIT: HANDOUT/MCT/NEWSCOM
organizations rank schools;
environmental groups rank
polluters; consumer groups
rank airline performance.
What factors influence whether target
companies respond to disclosure by reducing
risks or improving their practices? Recent
research has investigated cases in which targeted transparency creates inappropriate
incentives for businesses by focusing on one
set of quality or risk dimensions versus others. When hospitals are compelled to disclose
some, but not all, aspects of patient safety, for
example, their actions may increase risks that
are not reported or may discourage admission of high-risk patients (10). Companies
or agencies may also try to avoid detection,
appear as if they have complied or improved
their performance, or raise some measures
without altering underlying outcomes (e.g.,
“green washing,” which appears to promote
better environmental practice but actually
changes very little). As with any high-stakes
policies, transparency may lead to attempts to
undermine the system politically or to bribe
officials (11). Research also suggests the
importance of preemptive responses by managers. When required to disclose toxic pollution, some chemical companies took steps to
reduce such pollution before the public and
press responded (12). Studies of the required
disclosure of drinking water contaminants
reveal preemptive responses by water-quality
agencies (13).
Future Transparency Research and Policy
As research continues on these questions,
scholars and policy-makers must also focus
on issues that have been neglected.
When to employ transparency versus
other policy tools. Some recent policies
aimed at discouraging consumption of food
and drinks that contribute to obesity have, for
example, introduced transparency measures,
whereas others have favored taxes and product bans. But little is known about the relative
effectiveness of these actions. Socially beneficial defaults—“nudges”—may be useful
when individuals invest little time in understanding risks associated with their choices,
but researchers understand little about when
those circumstances occur and the marginal
efficacy of additional information (14, 15).
How to design policies that improve
over time. Our research suggests that some
transparency policies become more robust
and effective over time, whereas others are
reduced to costly and irrelevant disclosure
exercises. Policies lose value when dynamics like gaming and regulatory capture undermine their purposes. They gain value when
constituencies develop to fortify them or
when companies gain competitive advantages from disclosures. Policies must evolve
to account for advances in scientific knowledge and economic innovation. Recent transparency provisions designed to stabilize the
financial system, for example, will become
obsolete unless they are updated to address
innovations in securitization, insurance, and
derivative financial products.
How to harness information and communications technology. Traditional transparency policies have relied on limited and often
outdated information, with data about autosafety defects, drug side effects, or food contaminants making their way to government
offices only slowly. Many incidents escape
current reporting channels.
Entrepreneurial efforts have begun to
emerge. Cheap sensors enabled citizens to
quickly create accurate maps of radiation levels near the Fukushima nuclear accident site
in Japan to counter less-nuanced government
models. Web sites where
patients share medication
experiences provide clues
about drug safety and effectiveness as a supplement
to clinical trials. Research
should examine ways in
which technologically
enabled networks can complement or replace traditional transparency policies.
Targeted transparency
policies seek to mobilize
private decisions and market forces to reduce critical risks, to improve public
services, and to minimize
corruption. Research from
a variety of disciplines, as
well as experimentation by
federal and state agencies,
remains essential to achieve the promise while
avoiding the pitfalls of targeted transparency.
References and Notes
1. Office of the President, Fed. Regist. 74, 4685 (2009).
2. Office of the President, Fed. Regist. 76, 3825 (2011).
3. Zeckhauser and Marks (16) and Sunstein (17) separately developed the idea that government-mandated
disclosure of standardized information could influence
corporate decisions concerning public health and safety.
Tietenberg (18) and Graham (19) focused on disclosure
strategies for pollution control. Gormley and Weimer
examined the design and effectiveness of organizational
report cards (20).
4. A. Fung, M. Graham, D. Weil, Full Disclosure: The Perils
and Promise of Transparency (Cambridge Univ. Press,
New York, 2007).
5. D. Dranove, G. Z. Jin, J. Econ. Lit. 48, 935 (2010).
6. O. Board, J. Industr. Econ. 57, 197 (2009).
7. J. Stiglitz, Q. J. Econ. 115, 1441 (2000).
8. A. Tversky, D. Kahneman, Science 185, 1124 (1974).
9. G. Jin, P. Leslie, Q. J. Econ. 118, 409 (2003).
10. D. Dranove, D. P. Kessler, M. McClellan, M. Satterthwaite,
J. Polit. Econ. 111, 555 (2003).
11. D. E. Ho, Yale Law J. 122, 574 (2012).
12. J. Hamilton, Regulation Through Revelation (Cambridge
Univ. Press, New York, 2005).
13. L. Bennear, S. Olmstead, J. Environ. Econ. Manage. 56,
117 (2008).
14. R. Thaler, C. Sunstein, Nudge: Improving Decisions About
Health, Wealth, and Happiness (Yale Univ. Press, New
Haven, CT, 2008).
15. Office of the President, Memorandum for the Heads of
Executive Departments and Agencies: Informing Consumers through Smart Disclosure, 8 September 2011; www.
whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/informing-consumers-through-smart-disclosure.pdf
16. R. Zeckhauser, D. Marks, in Wise Choices: Games, Decisions, and Negotiations, R. Zeckhauser, R. Keeney, J.
Sebenius, Eds. (Harvard Business School Press, Boston,
MA, 1996)
17. C. Sunstein, Univ. Penn. Law Review. 147, 613 (1999).
18. T. Tietenberg, Environ. Resour. Econ. 11, 587 (1998).
19. M. Graham, Democracy by Disclosure: The Rise of Technopopulism (Governance Institute/Brookings Institution
Press, Washington, DC, 2002).
20. W. Gormely, D. Weimer, Organizational Report Cards
(Harvard Univ. Press, Cambridge, MA, 1999).
www.sciencemag.org SCIENCE VOL 340 21 JUNE 2013
Published by AAAS
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Updated labels for vehicle fuel
efficiency and environmental
impact. Adopted in 2011 by the
U.S. Environmental Protection
Agency and Department of Transportation, these illustrate key
components of effective transparency: provide information
on the policy objective in multiple forms, based on an understanding of how consumers think
about fuel efficiency; provide a
sense of how a car performs compared with other vehicles; and
incorporate scientific information
regarding environmental impacts
not included in older labels.
10.1126/science.1233480
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