[MUSIC] Welcome to Week 7 of our course on Unethical Decision Making. In the last six weeks we have discussed unethical behavior in organizations. We have tried to understand why such behavior may occur. Thereby, we focused on one possible explanation, ethical blindness. People do not see that what they are doing is unethical. After so many videos on unethical behavior, on ethical blindness, and on the dark side, we now finally the last week want to turn to ethical behavior. More precisely, we want to address question, how can we promote ethical behavior, and how can we fight against ethical blindness? A good therapy requires an accurate diagnosis. So to summarize, what were the main risk factors for ethical blindness that we discussed? One was located first and foremost within ourselves. We discussed framing, the way we see the world, and decision making, the way we process information. In both cases, we have discussed people's tendency to simplify and to reduce complexity. Another family of risk factors are external pressures. And we can clearly locate their sources outside of us. We discussed external pressures in a given, proximal, situation. We looked at pressures at a meso-level, the organization in which people are embedded. And finally we considered the distal context, institutions and ideologies. All three layers, the immediate situation, the organization, and institutions and ideologies constitute our external environment, and are hence, closely related to each other. This is, by the way, why I refer to them as a family of risk factors, where they could blind us. It seems to be straightforward to adopt this distinction between mind, framing, decision making, and environment, external pressures. We're now addressing the question, how to promote ethical behavior and how to reduce the risk of ethical blindness? We will start by focusing on the environment with the present video entitled, Nudging. In the next video entitled Mindfulness, we will focus on the mind. And subsequently in the last video of this week, we will address this question from an organizational point of view. In this session you will learn what nudges are. You will learn how nudges can be used to promote ethical behavior and finally, understand some limitations of nudges and problem of this approach. So what are nudges? A nudge is any aspect of the choice architecture that alters people's behavior in a predictable way, without forbidding any options or significantly changing the economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting fruit at eye level counts as a nudge. Banning junk food does not. Increasing prices does not. In short, nudges are interventions that change the decision-making environment to affect behavior in systematic ways without changing the economic incentives and without constraining choices. The concept has been made popular by Dick Thaler, a professor of behavioral science and economics, and by Cass Sunstein, who is a law school professor. These two see nudges as tools that can be used in what they refer to as libertarian paternalism. Paternalism builds on the distinction between parents and child. A child is someone who should and possible also needs to be educated and protected so that it cannot harm itself or others. A parent is usually and ideally already educated, knows better, has more power, good intentions and uses this power and knowledge for the best of the child. So this is clearly a hierarchical relationship. Liberalism, in contrast, emphasizes freedom, for instance, freedom of choice. And it is not very fond of hierarchy, power, control, and influence. Liberal thinking is against strong governments and authorities. The term libertarian paternalism combines the two isms, and hence, appears to be at first glance a contradiction in itself, but only at first glance. An example makes it obvious that the combination is in fact not so contradictory. Imagine you are an owner of a little grocery store or a manager in a big supermarket, that doesn't matter. Research, and your own experience tell you that putting items at certain places will influence people's decisions, and increases these items' chances of being picked. For instance, by placing them at eye level, or at the cashier, where people are forced to wait and often purchase items spontaneously and impulsively. This example shows customers can freely choose. They can ignore those items at the cashier, and they are entirely free to pick up the items somewhere in the corner, down in the shelf. This is the libertarian aspect. But at the same time, the choices will be made in an environment that you, the shop owner, control and design. And you know that placement has an effect, and you can hence use your knowledge to steer customers' purchase behavior. This is the paternalistic aspect. You cannot not decide where to place which product. You have to place the stuff somewhere. Whatever you do, you nudge. You create your customers' choice environment. And this is why you find this term choice architect quite often in the corresponding literature. How is this related to ethics? Imagine you, the shop owner, know, or at least believe, that some products are more ethical than others. They are maybe produced in a more sustainable way by companies that have higher social standards, are members of the Fair Labor Association, signed on to obey fair trade agreements, whatever. Your customers may not have this background information about the companies and their products, or they may not care. And some may not even see the ethical dimension involved in purchase decisions. They are ethically blind in this regard. But you have the information. You do care. And you are convinced that producing, selling, buying and using product A compared to B makes the world a better place. In this situation, you as the shop owner and choice architect can use this nudge, where to place these products to increase the rate of ethical choices in your customers. Let's now look at some other nudges. They all follow the same scheme. Some people may not see the ethical dimension of a decision. But someone else, who has control over the choice environment of this person, does. This choice architect then uses his or her power to control the choice environment, and also his or her knowledge on how this best should be done to make those people behave more ethically. An example for a nudge that is often given in the literature is the use of defaults. And here a prime example is organ donation. Every year, many people Who needs an organ donation, die, because there are not enough organs. There are various reasons for this bottleneck. Logistics, transportation, timing, functioning of matching procedures, but before all those issues become relevant, there's an important legal obstacle that is related to the question, who owns the organs of a dead person? Are the physicians allowed to take the organs after death for this purpose? The answer's definitely yes if the person before death gave his order of consent to be a donor. This figure displays for various countries the proportion of people who gave their consent. One may have different views here. But assume for the moment that someone asked you for your consent and argues as follows. After death, you don't need your organs anyway, but for someone else they could make the difference between life and death. Hence giving consent to organ donation is ethical, and not giving is unethical. To the extent that we are willing to adapt this argumentation, how can it be that a vast majority of people in countries like Austria, France, or Portugal, are ethical, whereas, most people in Denmark, the UK, or Germany, are unethical? The difference between these countries is the legal default. In France, for instance, you are an organ donator by default, and you would have to opt out if you disagree. In contrast, the default in Denmark is that physicians may not use your organ unless you actively opted in before death. Another nudge related to the last one makes use of people's hurting behavior. People do not only tend to follow legal defaults but also social norms. In the first week, in week five, on the power of strong situations, we already introduced you to the experiments of Sullivan Asch on group conformity. If people are informed, what the majority of people does or chooses, this functions like a default. Many just imitate and stay within the herd, rather than opting out, so to speak, leave the herd, and become the black sheep. In the series of some simple but very clever designed experiments, Goldstein Giodanni, and Griskevicius, compared the effectiveness of various messages that aimed at getting hotel guests to reuse their towels rather than sending them to the laundry. Nudging the guests towards reuse is not only more ecologically better for the environment, and hence also more ethical, but also reduces costs for the hotel. What were these messages? One was an appeal. Please help us preserve natural resources by reusing your towel. Reuse rate with this appeal, 35%. Another message was a social norm. 75% of our guests use their towels more than once. Reuse rate, 44%. So interestingly, social norms appear to have a larger impact on behavior than appeals. In a related study members of a research team, led by preservation researcher Chiodini, went door to door and placed hangers on doorknobs of houses in San Diego, California, with messages about energy conservation. There were four different messages. Some urged the homeowners to save energy to protect the environment. A second message said to conserve to benefit future generations. A third pointed to the resulting cost savings. And the forth used, again, is social norm by saying that most of the neighbors were taking steps to save every everyday. So the first messages made an ethical argument. The third, a monetary, and the last, a social argument. At the end of the month the team came to read the meters, and they found that the only method that reduced consumption was the one with a social norm. Still another study, again on energy consumption in households, revealed a very interesting finding. Households have been accurately informed on their own consumption relative to their neighbors. Some were informed that their energy use was above average. Guess what happened? Energy use when down. Others were informed that their use was below average. What happened here, it went up. So there was a boomerang effect, the information backfired. This effect has been discussed, in terms of, licensing, if someone knows that he fulfills some norm, it has done some good. And this gives him the license to let's say, lower the standards. Interestingly, this pendulum changed in another experimental condition in which people not only received the numerical information, but, in addition, also some emoticons that were simply placed next to the numbers. For instance, sad emoticons for those whose consumption was above average, effect, consumption dropped even more compared to those who only saw the numbers. Even more interestingly, the boomerang effect disappeared for those whose consumption was below average. A simply smiley next to the number with the evaluation or call it social approval, you are doing great, and there was no licensing anymore. I found this very remarkable. Simply providing people with information that can be interpreted as you are better than average, with respect to something that has an ethical dimension can be detrimental, and can backfire. But once you approve it, once you tell them this is great, you can be proud of yourself, we certainly are, something like this, and it will not backfire. Consider still another example, also related to conformity. In an experiment, the effectiveness of four kinds of information to increase tax compliance was compared. One group of taxpayers was informed that their taxes were used for charity work. The second group has been threatened with some punishment for non compliance. Group number three received information about how to get help filling the forms. And the last group was informed that 90% of the population in this city has already paid their taxes. Guess which kind of information was most effective to increase compliance? Again, the last, the one that involved social norm. The implication of the study's obvious. If you want to promote ethical behavior, then talk about ethical behavior. Communicate how many are already on this track, though it only works if this is already the majority, of course. Create positive messages. Set role models. Do not talk so much about unethical behavior or in the present example about those who did not pay taxes. Some people who will hear and read this may think, ha,, there are such people, and obviously this is an option. Instead use the power of social norms of herding and conformity, and spread messages about behavior that you want to be imitated. Time only allowed us to present and discuss some nudges. But it is very easy to retrieve literature, examples, and studies, on nudging in the Internet and other data banks. Let us finally address two criticisms. One has been formulated by Elizabeth Corbet as follows. If people can't be trusted to make the right choice for themselves, how can they possibly be trusted to make the right decision for the rest of us? Let us add as a follow-up question. If choice architects control decision makers' environments, who is controlling these controllers? If we all agree what is ethical and what not, and if we all want to promote ethical behavior, then who is left to be nudged into ethical behavior? If however there's a profound disagreement about what is ethical in a given situation, then the issue gets thorny. Who is nudging whom? Nudges are interventions, they are tools. It all hinges on the question of, who is using these tools and for what purposes? So, here we run into problems of legitimacy, of control, and checks an balances. The second criticism or maybe better call it, limitation, that we want to mention here is, generalizability and stability of ethical behavior. Let us go back to the example with the shop owner who has a background about companies and products in who nudges his customers into what he believes to be ethical purchase behavior. Granted, these customers, in this shop, might have bought more ethical bead products after his intervention. But they did so because they were nudged. And not because they took ethical dimensions into account. Hence, they were remained ethically blind. And will most likely no longer buy these more ethical products in another shop without such purchase. Lesson, changing choice environments without changing the people may not be very sustainable. Once the people are in a new choice environment, the benefits of the purchase may be lost. And this is exactly the topic of our next video, how to promote ethical behavior and how to reduce the risk of ethical blindness, not via changing the environment, but via changing the people. To conclude. According to our model on ethical blindness, unethical behavior may result from factors both inside the decision maker (framing and information processing) and outside (various kinds of pressures in the environment). Ethical behavior can be promoted by focusing on factors inside as well as those outside the decision maker. Nudges are interventions that change the decision making environment to affect behavior in systematic ways (the paternalistic aspect) while leaving people free to still choose any of the options without any material costs (the liberal aspect). Examples of nudges are information displays, defaults, and social norms. But there are many more. Two major criticisms are legitimacy and control on the one hand, and limited generalizability and robustness due to lack of insight on the other hand. Thanks for watching. [MUSIC]
