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Behavioral Economics and Asset Building - Neighborhood Partnerships' RE:Conference 2014
- 1. RE:Align Behavioral Economics And Assets #ReConf2014 | NeighborhoodPartnerships.org
- 3. 1) Our environment has a large, yet unrecognized effect on our behavior 2) Our intuitions about what drives our behavior are flawed 3) Emotions play a large role in our decision making - Dan Ariely
- 4. A healthy community begins at home. REACH provides quality, affordable housing and opportunities for individuals, families and communities to thrive.
- 5. Financial education classes Individual financial coaching Matched-savings accounts
- 6. nudge verb ˈnəj : to touch or push gently : to push gently with your elbow in order to get someone’s attention : to encourage someone to do something Merriam-webster.com
- 7. Boost self-control or activate behavior Self-imposed or externally-imposed Mindful or mindless Encourage or discourage Nudging options
- 10. Activate helpful mental accounting Mvelopes.com, Smartypig.com
- 12. Map program process “I want to buy a house” Finds out about program Enrolls in financial ed Fills out IDA application Coaching, credit-building, planning Completes financial ed Opens IDA account Saves money, earns match Buys a home
- 13. Identify bottlenecks “I want to buy a house” Finds out about program Signs up for info session Fills out IDA application Financial ed, coaching, planning Attends info session, enrolls in financial ed Opens IDA account Saves money, earns match Buys a home
- 14. Simplify and/or nudge “I want to buy a house” Finds out about program Signs up for info session Fills out IDA application Financial ed, coaching, planning Attends info session, enrolls in financial ed Opens IDA account Saves money, earns match Buys a home
- 15. Encourage through social proof
- 17. What’s next? From opt-in … … to active choice?
- 19. • Founded in 1975 as the first domestic violence shelter in the West • Bradley Angle serves survivors of all genders, offering emergency shelter and community based services • The Economic Empowerment Program started in 2009 to respond to demand for services that addressed safety and finances simultaneously
- 20. Choice Overload • When faced with so many options, we often chose wrong • Chocolate or vanilla versus • Chocolate, vanilla, strawberry, mint chip, peanut butter, cheesecake, blueberry, • Practice example: Days for making deposits • Matched savings account offerings
- 21. Limited Attention • Limited attention can interact with choice overload. Attention is finite and we all love to “multitask.” • With limited attention a cost-benefits analysis becomes too hard and we “just pick one.” • Practice example: Car shopping
- 22. Procrastination • No explanation need! • Practice example: Making activities “one-sitting” • Setting artificial due dates
- 23. Loss Aversion • The joy of winning $20 is less than the pain of losing $20. Loss hurt us more than we feel the joys of wins. • Practice example: Missed deposit letters
- 24. Let’s Practice! • Get into groups and discuss one way you can address a behavior change tenant at work or at home.
- 25. Want to learn more? https://bitly.com/bundles/o_4 nk16lr8rj/1 #ReConf2014 | NeighborhoodPartnerships.org
Editor's Notes
- Desk pic
- Most important BE lessons Why – inexpensive, more effective was to change behavior Improtance of cog sci in future of global work
- REACH owns and manages over 1800 units of affordable housing in the Portland/Vancouver metro region. We provide on-site Resident Services and a variety of educational and asset-building programs to help our residents achieve their goals.
- A resource that’s been really helpful for us is the Practitioner’s Guide To Nudging- I’m going to walk through their framework and how we have applied it to our financial education and matched-savings programs.
- With certain behaviors, like saving money or exercising, there’s a discrepancy between what people would like to do and what people end up doing. Nudges that help boost self-control correct this discrepancy. In other domains such as littering, people might not always actively consider what the right behavior should be. In this case, nudges are designed to activate a desired behavior or norm and influence a decision that an individual is indifferent or inattentive to. Self-imposed nudges are voluntarily adopted by people who wish to adopt a behavior that they feel is important. Externally-imposed nudges passively shape behavior because of the way they present available options without constraining them. Mindful nudges help people intentionally make better choices so that their behavior in the present better reflects their wishes for the future. Mindless nudges include the use of emotion, framing, or anchoring to sway the decisions that people make. Encouraging nudges facilitate the implementation or continuation of a particular behavior. Discouraging nudges hinder or prevent behavior that is undesirable.
- Our financial education classes include a lot of time and activities to help people reflect on and gain awareness for their relationship with money and their current financial habits. One activity that’s really easy to use and people really appreciate is the Money Habitudes solitaire game.
- We invest a lot of class time in goal-setting activities, and are always looking out for ways that participants can create their own nudges that will change their environment and last for a long time after class ends. So these would be self-imposed nudges. One example of this, for people who are really visually oriented, is a vision map. We do a vision mapping activity in the class and encourage folks who really like the vision map concept to stick their map up on a wall in their house, so they are consistently reminded of where they want to go. We also use magic wands for this same purpose- in class our magic wand activity helps people think creatively about the future they want- and then we encourage folks to take their wand home and stick it somewhere they’ll see it regularly- like in their car or in that jar on the counter full of old pens and pencils (everyone has one!)
- Mental accounting is a key principle of behavioral economics- it’s the idea that our brains are constantly separating and categorizing information, often in irrational and not helpful ways. For instance, saving money in a no-interest account or piggy bank while carrying debt with a high-interest rate. It doesn’t make sense to make a distinction between your savings and debt in this case- the rational choice is to use all funds available to pay off your debt so you avoid paying interest. That’s not what people do, though! So, we can talk about this bias so that people are more aware of their tendencies, BUT, we can also help people take advantage of mental accounting. I bet a lot of you remember the old envelope system- where you divide up your income into different envelopes based on your weekly or monthly budget. This is a classic example of using mental accounting to your benefit- once you “Assign” cash to the groceries envelope, you’re unlikely to “Steal it” to buy more movie tickets. There are several websites out there offering more modern, electronic ways to use this concept- like Mvelopes.com and smartypig.com
- We also share lots of ideas for ways that participants can create their own nudges to keep their goals and core values in alignment with their actions.
- So far I’ve been talking about nudging in the context of our financial education, but we have also been using this framework to think about our program structure and process. First, you map out your current process- this example is what our IDA process looks like.
- Then you want to identify the places in the process where you lose people or where people get stuck- these are your bottlenecks. We noticed two major bottlenecks: we lost people in the space in between when they signed up for an info session, and actually attended an info session and enrolled in our financial ed class. We were doing info sessions every couple months and so depending on when a resident contacted us, it could be a month or more until the next info session. The second bottleneck we identified was in between successfully completing financial education and actually applying for an IDA account. Often people have some work to do before they can open an IDA- they need to deal with old collection accounts, or maybe work on increasing their income or decreasing their expenses so their budget is more stable.
- One you’ve figured our your bottlenecks, you can try out some different ways of relieving them and getting more people through the process more easily. For example, we decided to make our enrollment process simpler. Now, when people contact us with interest in the program we strive to meet with them individually within one week to get them started with the process in a way that makes sense for them. We have been experimenting with various nudges to help people move from the financial education and coaching into actually applying for an IDA. So far we’ve tried a few different nudges related to social proof…
- For the past year we’ve been trying out various ways to encourage people through social proof. One thing that’s been very successful, and that I know a lot of you are doing already, is to make it a point to include success stories in the communications we share with residents. This is an example from our regular newsletter called the Homefront.
- We’ve also started to get active in social media as a way of helping our folks stay connected with their peers.
- And as we continue to think about how to use this stuff to create better processes, we are looking at the very beginning of our process- way before we usually connect with residents about our programs- right when they move into our housing. The idea with this is that if we could embed an active choice option in our lease up process, we could potentially capture residents attention right away, and help them seamlessly take advantage of these programs right when they move in. Of course, making changes like this involves working across departments within the organization and really gathering support for this way of engaging residents- and we have yet to really get started with that work. But I really think that’s the direction we need to head, and that we could scale up our financial empowerment work in a big way by incorporating ideas like this.
- Hand out EAST framwork