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Sunday, December 4, 2016

This weekend, The Weekend Reader brings you Simpler: The Future Of Government by Cass Sunstein. Sunstein, a former administrator of the White House Office of Information and Regulatory Affairs  and current law professor at Harvard Law School and director of the Program on Behavioral Economics and Public Policy, explains how the government can benefit from emulating tactics from other industries. Sunstein says that the Obama administration caught on to this idea of becoming a Simpler government, and during his tenure in the White House had assisted in putting into effect policies that will shape our future and benefit Americans for years to come. 

You can purchase the book here.

Suppose that you are watching your favorite television show on channel 52, and after it ends, a show comes on that you don’t much like. Will you change the channel? If you are like a lot of other viewers, the answer is no. As shows get more popular, the shows that follow them get more popular too. Why? Because the channel that you are watching is the default—it is what you will continue to see if you do nothing at all. In Italy, a 10 percent increase in the popularity of a program has been found to lead to a 2 to 4 percent increase in the audience for the program that follows it. Unsurprisingly, television stations exploit this behavior; if they did not, they could lose up to 40 percent of their profits!

I propose the following aspiration for governments and the private sector alike, suitable for many domains: Make it automatic. For governments, the goal should be to ensure that if people do nothing at all, things will go well for them. And if people are required to take action, government should make the process is as simple and automatic as possible. Put differently, government should try to ensure, when it can, that what has to be done can be handled quickly and easily by System 1.

Many companies prosper because they excel at making things automatic. Part of the genius of Apple products is that their amazingly complex technologies build on simple patterns that people find intuitive and familiar. iPad and iPhone users never encounter complex instruction manuals filled with technical jargon and impenetrable diagrams. Why shouldn’t interactions with government be as simple as interactions with the iPad?

Both public and private institutions often require people to fill out complex forms before they can receive benefits, license, permits, grants, employment, entry, or security clearance. Are all of these really necessary? The Obama administration eliminated tens of millions of hours in paperwork requirements, and there is much more to get rid of. The federal government could eliminate many millions more—probably hundreds of millions. Time is money, and at a reasonable hourly rate, we are talking about billions of dollars in savings.

As one of my final acts in government, I directed all agencies to test their new forms to get a sense of the burdens they would impose in the real world, and then to figure out how to make them simpler. I also directed agencies to test their existing forms before renewing them, and to refine or simplify them on the basis of what they learn. (I confess that when requiring these steps, I had not forgotten my own frustration in filling out innumerable forms to qualify for federal employment.) If filling out forms cannot be automatic, at least it can be easy rather than hard and at least we can reduce the burden on those who must comply. If System 1 is unable to fill out a form, we should take steps to make sure that System 2 does not have to struggle.

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Deciding by Default

We have seen that stating points, or default rules, greatly affect outcomes. Here is a little example. Credit card machines have been installed in taxis in New York City. But what’s the tip? The machine gives you three options: 30 percent, 25 percent, or 20 percent. If you want to give less you can, but it takes a little work. Customers are effectively defaulted into one of the three options. There is every reason to think that tips are increasing as a result. Calculations are highly speculative, but according to one admittedly very rough assessment, the result has been to increase the average tip from 10 percent to 22 percent, which would mean that cabdrivers are taking in an addition $144 million each year.

In 2011, several of us organized a conference at the White House on information disclosure. Along with others, Dick Thaler, a friend and coauthor, sent out materials in advance to the 300 registrants, who came from more than sixty federal agencies. In those materials, people were told that unless they specifically requested otherwise, they would get the healthy lunch option. The materials explained: “Healthy options for lunch may include, but are not limited to, a bean sprout and soy-cheese sandwich on gluten-free soda bread.” The materials also offered a “special reward” to anyone who sent in an e-mail with the subject line: Full Disclosure.

The bean sprout and soy-cheese sandwich sounds pretty awful, and I doubt that many people actually wanted it. How many people do you think would opt out? As it happens, 80 percent of attendees failed to do so, and just 1 percent got that reward. On the morning of the event, the participants groaned when told that most of them had “selected” the soy-cheese sandwich for lunch. Now, Thaler is a nice guy, and he was joking, and people ended up with pretty good sandwiches. Still, it is noteworthy that the well-educated participants ended up signing on for a really unappealing sandwich (and missing out on a promised reward).

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