Wading through sludge

In Saturday's book review post for Sendhil Mullainathan and Eldar Shafir's book Scarcity, I noted that the book fell a little bit short in terms of the linkages with behavioural economics. That was further highlighted to me when reading this new article by Cass Sunstein (co-author with Richard Thaler of the book Nudge), published in the journal Behavioural Public Policy. Sunstein highlights the role of 'sludge', which he defines as:

...‘a viscous mixture’, in the form of excessive or unjustified frictions that make it difficult for consumers, employees, employers, students, patients, clients, small businesses and many others to get what they want or to do as they wish...

When a student seeking financial aid has to fill out an elaborate application form with dozens of difficult questions, that is sludge. When a firm requires a consumer to call to cancel a subscription, and keeps them waiting on hold for a long time before they can deal with a customer service representative, that is sludge. When a potential immigrant has to jump through multiple hurdles, filling out endless paperwork and providing copious amounts of information, a lot of that is sludge. Dealing with sludge is frustrating, disheartening, and demotivating. It can easily lead the student to give up on applying for financial aid, the consumer to give up on cancelling their subscription, or the potential immigrant giving up on their dreams of immigration.

Sometimes the creation of sludge is inadvertent, but often it is intentional. You can imagine that the example of the difficulties in cancelling a subscription may well involve an intentional action on the part of the firm. At the very least, they won't be looking to make it easier to cancel a subscription.

Reducing sludge should be an important goal. As Sunstein notes:

Simplification and burden reduction do not merely reduce frustration; they can change people’s lives... An underlying reason for this is that our cognitive resources are limited...

It is at this point that the link to scarcity is apparent. Sunstein, to his credit, does reference Mullainathan and Shafir on this point. When people are dealing with limited cognitive resources - when they are facing extreme scarcity - burdening them with sludge is simply going to exacerbate their problems. Think about all the times where we burden the poor with excessive paperwork or require costly or time-consuming in-person appointments with case managers at Work and Income or StudyLink - applying for welfare benefits, food grants, student loans, etc. Is all of this necessary, or is the government simply putting obstacles in the way and preventing the people who need assistance from obtaining the assistance that they need? Sunstein argues for what he terms 'sludge audits'. It's an idea worth thinking about.

Sunstein's article makes some important points, and should be required reading for public policy students and for those working in the government sector.

[HT: Marginal Revolution, last year]