Making Behavioral Economics a Routine Tool of Federal Agencies

Making Behavioral Economics a Routine Tool of Federal Agencies

New White House Policy Requires Testing, Evaluation and Use of 'Nudge' Insights

One year after it launched a Social and Behavioral Sciences Team (SBST) to test behavioral economics as a tool for streamlining government operations and policy, the White House has made that effort an official mandate for all federal agencies. 

In a White House ceremony earlier this month, President Obama signed an executive order requiring federal executive departments and agencies to "identify policies, programs, and operations where applying behavioral science insights may yield substantial improvements in public welfare, program outcomes and program cost (and) develop strategies for applying behavioral science insights to programs and...rigorously test and evaluate the impact of those insights."  The order also requires agencies to "recruit behavioral science experts to join the Federal Government."


At the White House for the release of new Executive Order was Kevin Volpp, MD, PhD, Director of Penn's Leonard Davis Institute of Health Economics' Center for Health Incentives and Behavioral Economics (CHIBE) and LDI Senior Fellow.

Opportunities for Researchers
LDI Senior Fellow Kevin Volpp, who was present at the White House event and whose behavioral economics research work is cited in the SBST 2015 Annual Report released there, said the SBST "has worked hard to get some interesting initiatives going. They have gotten buy-in from Agency leads at a number of federal agencies on the value of using behavioral insights in designing programs. It will be interesting to see how the new executive order from the President affects further uptake of these initiatives across the federal government. There should be some interesting opportunities for researchers to collaborate with them in the future."

Volpp, MD, PhD, is the founding Director of Penn's Leonard Davis Institute of Health Economics' Center for Health Incentives and Behavioral Economics (CHIBE). He is also a Professor of Medicine and Vice Chairman for Health Policy of the Department of Medical Ethics and Policy at Penn's Perelman School of Medicine and a Professor of Health Care Management at Penn's Wharton School. Earlier this year, he received a top NIH award for his role as a national leader in the discipline of "translating behavioral economics into health."

Third nation to launch 'nudge unit'
The new White House executive order makes the U.S. the third country -- after the UK and Australia -- to create a high-level "nudge" unit charged with incorporating behavioral economics principles into daily government operations.

In its first year of operation, the White House SBST focused on conducting a handful of "quick-turnaround" innovation tests using methods that enabled researchers to implement a change in a federal agency practice and immediately begin monitoring and evaluating the viability of that concept.

The overall result, according to John Holden, Assistant to the President for Science and Technology, is that "A strong body of evidence demonstrates that research insights about behavior, when incorporated into the design of Federal programs and policies, have significantly improved Americans' lives, whether by boosting retirement savings nationwide or helping more low-income students get to college each year."

Five  'quick turnaround' studies
These SBST experiments were carried out through the communications systems used by federal agencies to conduct their daily business. Separate pilot projects tested various versions of the language, format or mechanics of mailed letters, emails or websites' choice architecture elements. The goal was to identify which communication "nudges" could measurably achieve:

  • higher levels of payroll savings among active military members, 
  •  an increase in the number of families applying for student loans, 
  •  improvement in veterans understanding of all the benefits they qualify for,
  •  an increase in federal workers' use of the "double-sided" print function of their computer printers, and 
  •  increased enrollment in's health insurance exchanges or "marketplaces."

ACA's insurance exchanges
In this last experiment involving the Affordable Care Act (ACA)'s exchanges, the SBST sent 8 different letter versions to 700,000 people who had begun an applications in the federal exchange website but hadn't completed the process. As a result of the most effective version of the letter, The SBST reported that more of the stalled applicants went on to complete their insurance enrollment.

That most successful of the eight message variations included a picture of the insurance official sending the letter as well as a small calendar showing the number of days left to enroll, along with boxes the recipient was invited to fill out as a reminder of the date and time they would complete their application. 

According to the SBST report, use of that message made it 13.2% more likely that recipients would complete the insurance exchange application process.