Nudge or Shove?

by JT McGee

rotary telephoneI love Nudges, man.

They’re totally awesome – little balls of structural advantage with a cute little name.

My credit union uses a nudge on its members. Every time I call I get the automated operator. The friendly voice instructs me follow the touchpad operations.

“For lending, press 1.”

“For member service, press 2.”

Aha! You already see the marketing genius right there. Credit unions make killer money on lending, but not so much member service. The credit union knows this and makes “lending” the first option when you call in. Surely lending doesn’t get more calls than any other product combined.

Certainly a few hot leads click into the lending department when they would probably be better to speak to member service about their particular problem. Suckers are born every minute!

Oh – and let’s think about the kind of people who are going to press 1 before they hear about option #2. I guarantee you they’re significantly more impulsive spenders than the people who wait for all the options.

My credit union is a nudge machine.

Nudges are Awesome

I’ve spent a lot of time writing posts about nudges, which I call boring old structural advantage. I’ve written about why Discover is the best credit card marketer, why Buffett is a liar when it comes to railroads, and how to use structural advantage to win at Monopoly.

And we can’t forget about how to pick a seat in class, either – structural advantage is at play here, too.

But most importantly, I’ve blown a lot of time over at the Nudge blog.

Nudge Your Way into School

Needless to say, I was pretty stoked last night when I heard that the District of Columbia would enact its own nudge.

What’s that nudge, you ask? Oh – you know, it’s no big deal. Some mayor just wants to require that every student apply to college in order to get their high school diploma. (Insanity source.)

I’m not making this up. Now, obviously, D.C. isn’t going to require you actually go to college. Nope – just apply for one.

Anyone can figure out this proposed law:

  • If you apply to go to college you get your diploma.
  • If you don’t, then you won’t graduate high school.

Obviously this is a very strong nudge to get people to apply for school who otherwise wouldn’t. Cheap money, guaranteed approval, and endless financial aid are apparently not enough to lure a worthy crop of college students. Naturally, you have to make them do it.

This nudge comes with costs. Someone has to read the application of disinterested students while someone at the high school has to make sure disinterested students send their applications.

Now I’m not one to hide how I feel – I think this nudge is probably one of the dumbest things I’ve ever heard of – but I wanted to get your opinion.

Readers,

Is this a nudge or a shove?

Photo by: Plenty

{ 9 comments… read them below or add one }

Financial Samurai January 4, 2012 at 00:58

But good for colleges who get to collect $100 per application!

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JT McGee January 4, 2012 at 01:00

Darn those application fees! I was going to apply to Harvard just for the trophy rejection letter until I realized Harvard wanted a $200 application fee.

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PKamp3 January 4, 2012 at 11:30

Yeah, this one is more of a push… although it might be nice for a few students at the margin who, for whatever reason, wouldn’t even want to try to apply to college. I think that the enrollment numbers will be very interesting to look at after a few years of this policy…

Reply

JT McGee January 4, 2012 at 23:35

Yeah, I bet it causes a minor but not so major bump. If it were a college application + FASFA then I’d change my mind and say huge bump.

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Corey @ Passive Income to Retire January 4, 2012 at 14:05

Darn those fees indeed! It seems like the intention of this law is helping out universities. Considering that I work for one, I would think that this is a good thing. If only I worked for a university in DC. Definitely a push. I think it has good intentions, but radically naive. While a 4 year degree is becoming the average, it isn’t everything and we need to realize this.

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JT McGee January 4, 2012 at 23:38

Ahh – so you’re part of the 39%, the 39% growth in administrative workers per 100 students?

Honestly, I don’t think you could ever reduce the amount of faculty at colleges. Education spending is way too politically popular and administrative staff is directly related to the increasingly complex tax and financial aid laws and procedures. No sweat – there’s plenty of paper to move!

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Pelle G. Hansen January 5, 2012 at 03:34

Hi JT MCGEE,

I think it definitely counts as a shove, since it follows by definition that eliminating choice is not a nudge. See:

http://inudgeyou.blogspot.com/2011/12/nudge-by-definition.html

Of course, it depends on how one defines an individual option in any given choice set. In this case I would argue that the introduction of “a diploma conditional on x” is adding a NEW option, althought this is hidden by the substitution – and thus elimination – of the original option of “a dimploma (unconditional on x)”.

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101 Centavos January 5, 2012 at 06:48

Seems that nudges are effective when used by companies to make money, and mostly not when used by state or state-subsidized agencies for social engineering.

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Miss T @ Prairie Eco-Thrifter January 6, 2012 at 09:50

I would agree. Anytime you start taking away choice from the public, you end up with issues. People either try to get around the new obstacle or they stop trying. There is something to be said for self motivation these days. We already live in a world where everything else is done for us. If this goes through, your decision to go to college is also made for you. When you don’t make decisions yourself you inevitable end up unhappy and dissatisfied.

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