Tag: opt-in schemes

On 15 March 2019, the ‘Organ Donation (Deemed Consent) Bill’ was passed into law. (See the blog, Organ donations – Changing the default option vs active choice.) The government has just announced that this will come into force on 20 May this year. Under the scheme, ‘adults in England will be considered potential donors unless they chose to opt out or are excluded. The act is known as Max and Keira’s law in honour of a boy who received a heart transplant and the girl who donated it.’

This change from an ‘opt-in’ to an ‘opt-out’ system follows a similar a move in Wales in 2015. Since then, Wales has seen a significant increase in potential donors, with the consent rate rising from 58% to 77%. A similar move in Scotland will come into force in the autumn of this year. The government expects there to be an additional 700 transplant operations per year available for transplant by 2023.

These moves from an opt-in to an opt-out system are consistent with ‘nudge theory’. This maintains that positive reinforcement or making a decision easy for people can persuade them to make a particular choice. They are ‘nudged’ into so doing.

Opting out and nudge theory

In the case of having to opt in to a scheme such as organ donation, people have to make the decision to take part. Many, as a result, do not, partly because they never seem to find the time to do so, even though they might quite like to. With the busy lives people lead, it’s too easy to think, ‘Yes, I’ll do that some time’, but never actually get round to doing it: i.e. they have present bias and hence behave in a time-inconsistent manner.

With an opt-out system, people are automatically signed up to the scheme, but can freely choose to opt out. In the case of the new organ donor schemes in the UK, it is/will be assumed that organs from people killed in an accident who had not opted out could be used for transplants. If you do not want your organs to be used, you have to notify that you are opting out.

It could be the same with charitable giving. Some firms add a small charitable contribution to the price of their products (e.g. airline tickets or utility bills), unless people opt out.

Similarly, under UK pension arrangements introduced from 2012, firms automatically deduct pension contributions from employees’ wages unless they opt out of the scheme. Opt-out pension schemes like this retain between 90 and 95 per cent of employees. Opt-in pension schemes, by contrast, have much lower participation rates of around 60 per cent, even though they are otherwise identical.

This type of ‘nudging’ can improve the welfare of those who make systematic mistakes (i.e. operate in a time-inconsistent manner), while imposing very limited harm on those who act in a time-consistent manner. If it is in the interests of someone to opt out of the scheme, they can easily do so. Policies such as these are an example of what behavioural economists call ‘soft paternalism’.

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Questions

  1. Why do opt-out schemes have a higher take up than opt-in ones? Would this apply if people behaved in a time-consistent manner?
  2. What is present bias? How does it differ from simple impatience? Explain how present bias might help to explain the impact of changing the default option.
  3. What are the arguments for and against nudging people to make decisions that benefit them or are in the social interest?
  4. Give some example of nudges that are used in public policy or would be a good idea to use. Consider how effective they are likely to be. (You might refer to the work of the Behavioural Insights Team.)
  5. What are the possible drawbacks of presumed consent in organ donation?
  6. What are the arguments for and against paying live people to donate organs, such as a kidney?
  7. How might people be encouraged to behave in the right way during an epidemic, such as corona virus?
  8. To what extent was nudge theory used during the Brexit referendum campaign and in the two subsequent general elections?