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How Government's Using Behavioral Economics to Get People to Make Better Decisions

Federally funded projects in several states and localities are testing ways to use convenience and peer pressure to get prison inmates and people who owe child support to make better decisions.

In Texas, most parents who go to prison still owe child support even though they might not have a job. That’s a problem for inmates because the typical inmate responsible for chlld support payments in the United States leaves state prison about $20,000 in debt, making it harder to pay for housing, transportation and food. It can also be a problem for state child welfare agencies because if states record too many cases of late and unpaid child support payments, they are at risk of losing some federal funding. 

Technically, Texas already has a solution: The state offers a process where inmates can lower the amount that inmates owe due to their lower income level while in prison. It’s called modifying their child support order status. But fewer than a third of eligible inmates take advantage of it.

The policy in Texas, which considers imprisonment to be a form of voluntary unemployment, is how most states deal with noncustodial parents owing child support when they become incarcerated. In fact, more than a dozen states are less accomodating than Texas: They don't even consider imprisonment as a factor in modifying the amoung of child support owed. None lower the amount owed automatically.

But about a year ago, the federal Administration of Children and Families (ACF) agreed to help Texas increase the percentage of inmates taking advantage of the modification option. In a demonstration project where federal contractors introduced a few low-cost tweaks (about $2 extra per inmate), the participation rate for the treatment group was 39 percent; for the control group, it was 28 percent. The results, otherwise unpublished so far, were reported in a presentation at the Welfare Research and Evaluation Conference in Washington, D.C., in late May.

While federal officials were excited about making an impact, they were even more enthused about how they did it: by "nudging" to induce a change in the inmates' behavior. The Texas experiment is part of a larger movement within the federal government to field test the nudge theory -- a concept rooted in behavioral science and economics.

Popularized by former White House regulatory czar Cass Sunstein and economist Richard Thaler, nudge theory is based on the premise that people sometimes make choices that negatively impact their health and well-being because it's the easiest option. Government can influence better decision-making by working to make the most convenient choice the one that is also the most beneficial to the target population.

In their 2008 book, Nudge: Improving Decisions About Health, Wealth and Happiness, Thaler and Sunstein use the example of how a cafeteria presents food options to its customers: If a buffet line begins at the salad bar, customers are more likely to choose a nutritious meal than if they're first directed to the burgers and fries. As Governing’s Jonathan Walters reported in May, the United Kingdom has used the nudge theory to modify its messaging to potential organ donors, ultimately improving its donor recruitment rates.

The idea of using the nudge approach in human services in the United States is picking up momentum, as is the adoption of that approach in a state or local context. About two years ago, ACF held a conference in Washington, D.C., with state and local partners to discuss the potential uses of behavioral economics in human services, according to Schmitt. From those and other discussions, the agency identified a handful of places that could serve as pilot projects to see if the nudge approach could improve social outcomes.

ACF contracted with a third-party evaluation firm, MDRC, to design scientific studies with treatment and control groups for a handful of pilot projects. (In a preliminary report released in April, MDRC details three nudge experiments that were designed with the help of ideas42, a nonprofit partner that specializes in the application of behavioral economics.)*

In Texas, the treatment group benefited from a series of interventions that targeted potential “drop-off points” where inmates were likely to abandon the process of applying for a modified child support payment status.

The federal contractors posited that when inmates receive the initial letter informing them about the option to reduce their child support payment obligation, many don’t open it. They noted that the envelopes bear the logo of the Attorney General’s office, a law enforcement arm that could plausibly be imparting unpleasant information, and inmates were avoiding whatever was inside.

To get around that problem, the intervention included a teaser postcard, so inmates would learn about the option to lower their child support payments without having to take the extra step of opening an envelope.

Based on similar hypothesis about bottlenecks and drop-off points, the intervention included a few other changes, such as:

  • Lowering the reading level of the letter
  • Printing the notification materials on blue paper, so that they would be visually distinct from other mail and might stand out in the reader’s mind
  • Mentioning in the letter that other parents had successfully reduced their child support obligations to zero
  • Sending a reminder postcard to inmates who did not return an application within one month of receiving the notification letter
While the experiment's results indicate that nudge concepts did make a difference, the magnitude of that success is open to interpretation. “There are a few ways you could look at it,” said Emily Schmitt, a social science researcher within ACF. “Fewer than 50 percent of people eligible are not taking it up, so there’s still room to move. On the other hand, we had a big impact at a small cost.”

Schmitt pointed out that the 11 percentage-point difference between the treatment and control groups also means that the actual number of people who participated was 38.7 percent higher in the treatment group.

She added that the difference was statistically significant, meaning that it’s highly unlikely that the treatment group participated at a higher rate due to chance. Also, improved participation wasn't the only difference: Among inmates who decided to apply for the lower payments, those from the treatment group replied faster than ones from the control group.

While the Texas experiment is the first to yield complete results, MDRC is also testing the nudge theory in a handful of other states and localities. Though the pilots are generally connected to human services in some way, their objectives range from getting more eligible people to apply for tax credits to encouraging parents to renew their financial assistance vouchers for child care.

In Franklin County, Ohio, the local Child Support Enforcement Agency is trying to increase the participation rate among non-custodial parents who owe child support payments. In that case, MDRC is experimenting with the timing of reminder phone calls and mailings about owed payments.

Though the results aren’t finalized yet, the basic idea of modifying public assistance programs -- which are often laden with multi-step processes and paperwork -- has great promise, says Lori Torriero, assistant director at the Franklin County Child Support Enforcement Agency. Now that her agency understands how MDRC identified potential drop-off points, she and her co-workers are noticing other areas where cumbersome processes are undermining the core policy. “Once you get that mindset,” she said, “you can look at every one of your processes and make it more accessible to your client.”

*This story has been updated to reflect that ideas42, a nonprofit that specializes in the application of behavioral economics, designed the intervention that MDRC is evaluating for the U.S. Administration of Children and Families.

J.B. Wogan is a Governing staff writer.
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