Behavioral Economics in Action: Using Theory to Drive Social Change
As social entrepreneurs we see the world for what it can be, not what it is. We are looking to inspire action and change the world. Mass social change starts with individuals, so driving behavior change at an individual level is an important task for social entrepreneurs. An academic discipline called behavioral economics offers some insights on how to achieve this change.
Behavioral economics sits somewhere between psychology and traditional economics and seeks to understand how we make economic decisions. Crucially there is an emphasis on uncovering how we make errors in our decision-making processes, errors which often stem from mental shortcuts called cognitive biases.
Our cognitive biases tend to serve us well and help us make quick decisions. However we often rely on a shortcut when a longer, more deliberative thought process is required. This can set us up for failure.
Anticipating how people fall short in their decision-making gives social entrepreneurs an opportunity to frame their messages in the right way to drive positive social change. Research from behavioral economics can therefore provide some much-needed inspiration when designing solutions to tackle the big social issues we face.
While this research helps us understand how we go wrong, it’s often hard to find concrete examples of how these lessons are applied in the real world, outside of the lab.
Let’s look at three examples of socially-aware organizations using well-known cognitive biases to drive behavior change in the real world.
Opower
Behavioral economics research has found that competition is a good way to motivate groups. Two particular cognitive biases are at work here:
Social comparison bias: People experience feelings of competitiveness when someone is perceived to be better than them. We are seeing this becoming ever more pervasive in the age of social media.
Social proof: People tend assume the actions of others in an attempt to reflect correct behaviour for a given situation.
Opower is a software company that has used the power of competition by leveraging social comparisons to inspire neighbors to compete for energy savings. They have taken this a step further through a social energy app on Facebook that encourages friendly competition among Facebook friends by providing social proof of energy use amongst friends.
It’s hard to raise awareness about important social issues like climate change. The leap to leveraging social networks like Facebook with this intervention is an incredibly powerful way to steer the conversation towards energy efficiency.
This is a great example of research applied at scale to drive behavior change that will help people live in a more energy efficient and sustainable manner. Opower are now working with more than 95 utilities and serving more than 50 million homes in nine countries.
Behavioural Design Lab
The Behavioural Design Lab in London leveraged two aspects of behavioral economics to help homeowners retrofit drafty, energy-inefficient homes with insulation.
The framing effect: People will react differently to a decision depending on how it is presented. The behavioral design lab framed the decision as a choice between a warm home and a cold home, and avoided using the alienating term “retrofitting”.
The default effect: In the question above, the team set the default option to “yes”, meaning people were compelled to choose a warmer home, thus taking action to retrofit their drafty home.
The project was a success; participants were recruited four times faster than for similar projects in the same region.
Which LED Light
The anchoring effect describes the common human tendency to rely on the first piece of information offered (the “anchor”) when making a decision. After an anchor is set, people make judgements in relation to the anchor, biasing the interpretation of subsequent information.
At Which LED Light we have used the anchoring effect on our page loading screen to show people how long LED lights can last and how much money they can save by switching to LED light bulbs. LED lights are more expensive than traditional incandescent alternatives, so we are testing if using the lifetime and cost savings as an anchor helps get over the higher upfront cost.
We have also made use of framing by showing the initial savings per year per light plus the lifetime of the light in our product results section to show the value of the light rather than the simple up-front cost.
There is a wealth of information out there illuminating how and why behavioral economics works. We hope these examples inspire you to put your own spin on the best-practice lessons emerging from academia, to drive your own social change objectives.
