Innovation In Giving

Warwick Business School

Innovation in Giving

The Rise of Behavioural Insights

Jen Lexmond

For the last two years, the Behavioural Insights Team at the Cabinet Office has been working to apply insights from behavioural sciences and economics to a range of public and social policy challenges – thus taking many years’ worth of academic research and hauling it into the realm of practical application. Recently I’ve been to two events – one, the launch of the Behavioural Design Lab (a partnership between Warwick Business School and Design Council), and two, a recent Which? workshop exploring how to better ground regulatory policy in the behaviour of ‘real consumers’ – that suggest the approach is beginning to spread beyond government and into the territory of regulators, designers, and innovators. As part of the Innovation in Giving Fund, we are also interested in how to apply behavioural insights to better understand motivations and behaviour around giving and reciprocal exchange.

Taking the realm of economics as a way into this discussion, here our traditional understanding of human behaviour has been based on a theoretical model – people are conceived of as ‘utility maximisers’, where utility is understood as a function of consumption. In other words, decisions are based entirely on getting the most stuff for our money. This principle of human motivation is the underlying rationale for our entire economic system.

But when we look at real, human behaviour, it’s all the other stuff – time, mental exertion, social norms – that shape our decisions just as much. We function within ‘bounded rationality’ – limited by the amount of time available to us to make a decision, our patience to sort through complicated options and weigh up pros and cons, our ability to successfully defer instant gratification to make the best long-term decision, and the information that we have about the decision we’re making.

The problem is that our entire policy and regulatory system is based on the model, not the reality. It’s how the myriad of choices that the mass majority of us make have been dubbed ‘irrational’ and therefore ignored.

Two examples from the Behavioural Insights Team that I really like include:

Government subsidised insulation in attempts to incentivise more people to insulate their lofts. According to ‘rational choice theory’, people should have taken up the offer. But no one did. Why? It’s not that people didn’t want to save money (not to mention do their bit to protect the environment) but more than that, they didn’t want to go up to their lofts and spend hours clearing out old boxes in order to make room for the installation – it was just too much of a hassle. Under the current system, this would be considered ‘irrational’ behaviour, and hence not captured in the model. But in basing a policy in a genuine understanding of human behaviour and motivation, new solutions can be found. In this case, it was designing an installation service that included a complimentary clear out of your loft and delivery of unwanted goods to the charity shop. Suddenly, the take up rose significantly.

Another great example is the way that social norms and peer pressure shapes our decisions – another area entirely unaccounted for by rational choice theory. In pushing people to complete their tax returns, reminder letters are often sent out, and often ignored. But in a new approach letters were sent out that stated the percentage of people in your neighbourhood/county/city who had already completed theirs. In seeing that the majority of your neighbours and peers had fulfilled their responsibility, people were compelled to take action. The desire to stick with the herd, and not be the odd one out, is strong. Communicating this information to others had a significant and sharp impact on number of completions, saving huge amounts of money.

In the separate, but related, field of charitable giving, we see that human behaviour is governed not just by a desire to make the biggest impact with a donation or volunteered time, but also a desire to forge and develop meaningful relationships, build our sense of identity, share with others, win a reward, or just have fun. A couple examples of the behavioural insight approach being used in practice in this space include:

  • Brixton Pound, New Economics Foundation and Dr David Reinstein at the University of Essex are testing out how the use of a complementary currency and different incentives can increase donations and local giving. Called Payroll Local, it takes an experimental approach and draws on insights from behavioural economics.
  • Professor Peter John at University College London are using RCTs to test what mechanisms are effective in recruiting volunteers here in the UK to support a variety of different causes, from assisting older people in their homes to reducing bullying in schools.

And we’re always on the lookout for more opportunities to use behavioural approaches to test out and build our understanding of the most effective ways to increase giving – so keep watching this space.

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