Building better, healthier habits with behavioral economics

Every January a few things are true. Gyms see an influx of new memberships, financial goals are set, and resolutions for an overall healthier and wealthier year ahead are made. But by the end of the month, much of that momentum for many has started to fade. There’s psychology behind this – both our desire to set these goals and our inability to see them through – which is why Richard Thaler, a behavioral economist and co-author of a New York Times bestselling book on the topic, is just the person to speak to about this.

Behavioral economics, or applied behavioral science, studies the psychological, emotional, and social impacts of our decisions and builds theories around human decision making. The economists who work in this field combine economics and psychology to better understand why people behave the way they do.

Thaler popularized the term “nudge”, with the underlying idea that we never make choices in isolation.

“If we went downstairs to our cafeteria, there are several stations where you can get food,” Thaler says. “But as you walk in, the first thing you run into is a salad bar, which is of course the healthiest place, and you have to walk around the salad bar to get to the burgers and fries. Now, somebody had to figure out how to organize this. I'm not sure they had this in mind but this is an example of how something that seemingly isn't very important may influence what people eat, nudge people to eat something healthy. And that's true in every domain.”

Thaler also points to fast food restaurants, where it’s now the law in the United States to add the number of calories on menus.

“If you discover that that cinnamon roll you were about to buy has 1,000 calories, you might say, ‘Oh well maybe that banana looks good,’” he says.

Thaler and his co-author Cass Sunstein claim that you can’t avoid nudging just like you can’t avoid choice architecture, which is how different options are presented.

“One of the things we stress is the importance of default options,” he says. “Since choice architecture is inevitable, there has to be a menu. There has to be a design of that cafeteria. Why not make it a good one?”

He’s sensitive to the critique that nudges can feel like manipulation, but he’s adamant that’s not the case.

“People say we're bossing people around which we're not,” says Thaler. “First of all, there's always an opt out in the policies we design. But the analogy we like is a GPS system. Now I have the world's worst sense of direction. I’m doomed without a map. Now think about GPS. The user chooses the destination and the map helps you get there and even allows you to take a detour. If you're driving and you see a nice view, you can pull over. The GPS never yells at you, it’s not a backseat driver. Imagine that we could have a GPS for life that just made getting where you want to go easier without ever commanding that you must do something. That would be great.”

According to Thaler, technology that you likely already own can be a great place to start. Smart phones and watches now have built-in features that track the number of steps you take per day and provide the option to limit screen time.

“That’s a source of feedback,” he says. “And if you look at the end of the day and it looks like you’ve barely gotten out of your chair then that’s feedback. Every now and then it will say it’s time to stand up. Now you can turn that feature off, but you shouldn’t. And that’s just the beginning. It can measure your heartbeat and do a primitive EKG. Imagine what this technology will be 10 years from now, even five years from now. The technology already exists to monitor blood sugar for people with diabetes and to administer the blood sugar. So that’s going beyond nudging right? That’s just taking over. But in many cases, that’s what we want, just like self-driving cars.”

Having something in place that monitors and nudges us towards taking better care of our health isn’t just beneficial for the individual, it’s better for the system at large, too. Prevention is not only easier than treatment, but also more cost effective for the person and it frees up resources in medical facilities, too.

“The easiest way that we could save money on healthcare would be if we could get people to just take their medicine,” he says.

Just like behavioral economics and nudges can encourage you to take a walk or choose the salad, it can help the micro decisions we make in our homes too and ultimately help us live more sustainable lives.

“There are technologies and behavioral enhancements that can work well around the edges,” he says. “Take modern thermostats. They know when you're there and when you're not and they reduce utilization. You could imagine a thermostat that on a hot day, when you turn the thermostat down a degree or two, it says ‘This is going to cost you 10 dollars.’ It’s up to you, go for it, but it will cost you. So there are things like labeling that help us better understand how much energy something will use. These are all little things but the only way we're going to deal with climate change is doing a lot of little things.”

And that’s how most habits are made, too. Small changes done consistently that become second nature, rather than a grand promise we make to ourselves arbitrarily at the beginning of every year. Happy nudging!