Interview with Dr David Halpern

Elaine Ung: Hello and welcome to BETA's podcast series. BETA, more formally known as the Behavioural Economics Team of the Australian government, sits in the Federal Department of the Prime Minister and Cabinet, and its mission is to advance the wellbeing of Australians by applying behavioural insights to public policy and administration. My name's Elaine, and I'm part of BETA, and in this podcast series we're interviewing a whole range of academics and practitioners in the behavioural economics and insights field.

Today I have with me Dr. David Halpern. We're really fortunate to hear more about Dr. Halpern's experience, as he has had extensive experience in behavioural economics and insights from both an academic angle, as well as a practitioner's angle. You might know of Dr. Halpern as head of the UK's Behavioural Insights Team, or BIT, which was initially part of the UK cabinet office, and since 2013 has become a partially privatised organisation. Welcome, Dr. Halpern.

Could you give us a bit of background, who you are and where you've come from?

David Halpern: I've been involved at the request of David Cameron, the Prime Minister in 2010, when we had a new coalition government, setting up the Behavioural Insights Team in London, which I continue to look after. Before that, I used to be a respectable academic years ago, before I ended up in government in the then strategy unit of Tony Blair. And in between, I set up and run for periods a think tank called the Institute for Government in London.

Elaine Ung: How did you get into behavioural economics?

David Halpern: When I did used to be a respectable academic, actually at Cambridge, I had lifetime tenure, and psychology was really my source discipline, so I was always interested in it. And even in the years of the strategy unit, the Tony Blair years, we did look at this a bit; we'd looked to whether you could use behavioural changes. For various reasons it didn't fly politically, so it was very much at the margin. But in 2010, the coalition government came in, particular conditions were—it was centre-right, and therefore it didn’t really want to use—it was interested in alternatives to regulation, put it that way. The government also, frankly, was broke, we had a huge structural deficit. So you’ve kind of taken away the two principle tools of a government: spend more money or legislate. And in that moment there was a lot of interest in alternatives including introduce more realistic models of human behaviour into policy making, and will we get better outcomes?

Elaine Ung: Could you share with us why the transition from academia to public policy in government?

David Halpern: Yes, sure. It's never been a complete transfer. I'm relatively unusual probably for the British scene in moving backwards and forwards through the years between the academic and policy world. I sort of feel like the best of it is a combination.

I realise the evidence doesn't support that as far as a lot of people decide not to mix it, but at best what you see in something like the Behavioural Insights Team according to the What Works Centres, which I also look after in the UK, or indeed in BETA here, the New South Wales teams et cetera. At its best it's the best of academia, right? It's really rigorous in the methods being used, really careful about what is the background evidence as opposed to what's our prior prejudices on these issues, but it's being applied to real policy issues. So it's intellectually stimulating and edgy, and difficult sometimes, but also really impactful.

So I've always sort of believed in a kind of scholarship, which is what could we do to use this knowledge to make the world a better place? Slightly cheesy. But I think we can use knowledge and expertise and better methods to make the world a better place, and so I don't see why we have to choose. Why can't we bring those worlds together in these kinds of institutions and it has better impact for policy. As it happens, it's also theoretically incredibly interesting. We are learning new things about human beings and society as we go along, which stands up to the best in academia too. So hopefully that is also what you're experiencing in BETA and indeed in many sister and brother units across the world.

Elaine Ung: Could you give an example of a trial you've worked on that demonstrates the potential impact of behavioural economics?

David Halpern: It's hard to choose a single trial because there are so many now. The easy ones are tax, where you make what seems like a very small change in a letter and you can quantify the effects and I think we're now up to hundreds of millions, in fact probably into billions and stopped counting, across the world. So this is very impactful in terms of money.

One of my favourite areas is also around getting people back to work. Relatively modest-seeming changes to the script, the way in which advisors interact with people who are unemployed or seeking work, getting people back to work faster. Why I particularly love that is it's not only the financial impact, which you can quantify, but it's also reduced scarring, the positive impacts it has on the advisors in turn and so on.

One of my favourite recent trials which we've done, which I think is really fascinating, is interventions which mobilise support around the individual not just directly at them. So we published recently updates and we've got more actually coming through on the so called study supporter trials. This is aimed at young people who have been struggling in school, have to retake, would they like to nominate a couple of people who will receive texts from the college. And we are seeing 6-10 percentage point increases, 25-35% increases in pass rates from this thing, and it costs a few dollars per person. I mean how fantastic is that, to be able to put a young person on a different trajectory in life by what looks like some simple nudges. So it's a wonderful area to work in for a public servant and indeed, those just link to the work.

Elaine Ung: Do you have a favourite behavioural economics concept or behavioural bias?

David Halpern: It's interesting isn't it? There's so many effects. If I had to choose one, partly because I used to do a lot of work with the likes of Bob Putnam on social capital and so on. And, if you like my origins in some ways was, if I had a source discipline, it was social psychology. So I find the social influences very interesting, I think they are kind of a bit neglected, if I’m honest. Danny Kahneman’s work, obviously completely world class, but there’s something sometimes which the economists, of course Danny is a cognitive psychologist, is lacking is on the emotional and the social. The voice in our head, the influences, get a bit more neglected.

So if I had to choose I am very interested in what you might call social norms, particularly declarative social norm: how we are incredibly influenced by not what the rule is—the injunctive social norm, what government tells us to do—but actually what's everyone else actually doing? Very powerful influence on our behaviour, sometimes for bad as well as for good depending on what it is. So there is a particular special place in my heart for social norm influences I think. Very interesting, powerful.

Elaine Ung: And how do you B.E. yourself? That is, how do you apply behavioural economics in your everyday life?

David Halpern: Yes. By the way, Rory Gallagher, who of course leads the APAC [Asia Pacific] team has also written a book with Owain Service back in London exactly on that topic. "Think Small", which is we often get asked these questions: how do you apply it on yourself? So it’s kind of a nice summary of the literature if you want something to go to. For myself, a simple example is that my watch is fast. For those who are retro enough still to wear watches, it's a very interesting example of a sort of self-nudge, and why does it work? Why is it persistently effective? Mine is normally two or three minutes past, ideally stochastically. And I find it effective. Otherwise everyday things is, we learn that things we're supposed to do, you need to routinize it. So, I don't really have time to go to the gym or lots of stuff, but I do cycle into work, I've routinized it to the point where the idea of doing anything else, it wouldn't occur to me to get on the Underground in London. So, I do do some of that, I think.

Elaine Ung: What do you think is the next big thing for behavioural economics?

David Halpern: Well, next and I think is hopefully kind of ongoing, so I've written a bit about this, in fact in "Inside the Nudge Unit" I talk about three classes of areas which I think still remain pretty high on the list. So social mobility and trench disadvantage as an issue. Some of the most interesting recent work has been in this area, so Eldar Shafir’s work et cetera, these very subtle effects of poverty on cognition, but that also opens a whole range of new kinds of interventions.

We're very interested in group conflict, which is social norms can be good, but actually a lot of it is to do with: society has come apart, economies come apart when people fall out with each other. So that goes from the very micro, the empathy, but also, more than a joke, two new wars start every year in the world. Why can't we use behavioural science, half of which are re-ignitions of previous wars, to prevent that happening? We think it is possible, might seem crazy.

If I had to choose a third area, I would say an area where ironically behavioural economics in particular has had the least impact is in economics, so market design, market dynamics. And based on our presumption that all of these little kind of heuristics are affecting maybe what you do; whether you're late paying your tax or maybe you could get the kid to study a bit harder in school, but when it comes to proper grown up markets, they all work just fine, I think that's crazy, that's ridiculous.

You know we see massive volatility, we see bubbles, animal spirits aren't some marginal factor in economies, they are absolutely fundamental to it. And we do start to rehearse now in many countries so called behaviourally-based market failures around consumers. We think there are much much more severe in relation for example to B-to-B markets. So if you're in the business of trying to increase productivity, increase market performance, we should be taking behavioural economics, behavioural insights into those absolutely core areas.

For those now who are kind of engaging, it's a very exciting time to be engaging in the field. Yes, let's use it on the small nuts and bolts, but let's look around and say ‘what are the biggest challenges which we face in our economies and societies?’ Generally it involves human beings there too. Let's take those insights into those areas and see what we can do.

Elaine Ung: And one final question. What's next for you?

David Halpern: Well, we're working on lots of those areas including those ones I just mentioned. So mobility, group conflict, market functioning, and so on. There's one other kind of new area, or maybe two I want to just mention for us that are really promising, as much as new tools in the box.

So we're doing a lot more now using machine learning, bringing that into play. Partly that’s because a lot of the data, which turns out to be very powerful when used on a larger scale, is actually behavioural. These small kind of weak signals are coming through that can tell us which bits of service are not working or not, who can help better. It also has a follow through in relation to being able to offer much more tailored interventions. What would work for who? And that's definitely one of the kind of new frontiers.

The other one which is really fascinating, seeing actually here in Australia as well as back in London and elsewhere, is innovations where sometimes we think the solution is not a government policy per se, we kind of want to see a disrupter or disruption occurring in the market and it's not happening. So the idea of reaching out and saying look this is the problem, has someone got an actual solution here, and it isn't going to be fixed with a piece of legislation but a new product, a new service. So an example from us has been we developed a platform which is now out and available to help people do better recruitment called Applied. Hopefully it'll spread, we think it reduces bias, that means it takes less time, you get better appointments. It's like ‘well, fantastic!’ If that becomes prevalent or provokes other providers to do that better, then bring it on.

It'll be really interesting to see as to whether the Try Test, and Learn Fund for example here in Australia is genuinely used. Let's get some fantastic ideas flowing to see if we can develop products, services et cetera to go out and sort of change and disrupt the world and see if we can come up with solutions in that space. So I think that's a really cool new area to bring in new talent, new ideas and so on.

Elaine Ung: Thank you again for coming to BETA, and for sharing your journey through this interesting and growing field. If you'd like to know more about Dr. Halpern or the Behavioural Insights Team, head online to their website. Once again, I'm Elaine and you've been listening to a BETA podcast with Dr. David Halpern. Until next time.