By now there’s pretty much consensus that smartphones have made us depressed, unproductive drones who simply cannot look away. The good news is there may be an upside to all this. Our crippling phone addiction is now being used by behavioural economists as a tool to “nudge” us toward making better choices.
According to the AFR, the boffins over at Treasury and the Department of Prime Minister and Cabinet are investigating a way to use text message reminders to stop people being swept up in a credit card debt spiral. The idea is another application of “nudge theory” — a concept out of behavioural economics popularised by the University of Chicago’s Richard Thaler and Cass Sunstein in 2008. A nudge is essentially something which gently alters people’s decision-making in a non-coercive way.
The theory has been a hit with businesses and governments ever since. Last year, for example, the Australian Taxation Office found that sending a simple email to tax agents could save millions in expense claims. This summer Queensland lifesavers are hoping that wi-fi zones between the flags on beaches will nudge people toward safer swimming. It’s easy to remain sceptical of the effectiveness of this one given Australia has internet speeds slower than Kazakhstan.
The bigger challenge is whether simply nudging individual consumers can fix problems which seem to be systemic. Last year, an Australian Securities and Investments Commission report found that, although one in six consumers struggled with credit card debt, banks often avoided telling people about deadlines, and in some cases, encouraged them to incur more.
Still, the latest text message trial showed positive signs. Customers who had been struggling with credit card debt improved their repayments 28% when sent reminders of impending deadlines. Maybe nudges can save us from ourselves (and predatory financial institutions) one text message at a time. Fittingly, the next challenge for behavioural economics is using nudges to get us off our smartphones.