Behavioral Economics Defaults

The Power of Defaults

Being still and doing nothing are two very different things.  The chart below shows the percent of drivers enrolled in their country’s organ donor program.  Notice the large difference between Denmark and Sweden.  What accounts for such a huge disparity?

Default Behavioral Economics

You might think culture or other national identity issues might be in play here.   Germany and Austria have a more similar culture than Portugal and Belgium, yet there is an 88 percentage point difference in their participation rates.  So, what is going on?

 

Turns out a very small difference is responsible for that huge disparity.  The countries with low participation rates have an opt-in policy; you have to check a box on your license application if you want to participate.  The countries with high participation rates have an opt-out policy; you have to check a box if you don’t want to participate.  Most people simply chose not to check the box. Their bias is to “do nothing”; the default option wins.  Defaults also play a role in establishing societal norms, but we will discuss that topic in a future blog.

Your organization is driving the behaviors of your employees and customers with the defaults you establish.  Are your employees not taking advantage of your 401K plans?  Are your customers/members failing to save for those inevitable financial emergencies?  Are your patients failing to schedule those follow-up appointments?  Opt-in to a relationship with us today so you can understand how to fix the “do-nothing” bias at your organization

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