Last month, the Nobel Prize for Economics was awarded to behavioral economist, Richard Thaler. Commonly referred to as the Father of Nudge Theory, Thaler was recognized for his groundbreaking work in debunking outdated economic market assumptions that individuals operate rationally. Instead, Thaler asserted that not only do individuals behave irrationally, but economists can actually predict the irrationality of individual behavior. This has huge implications not only in economics, but also in public policy more broadly—and in spots where that policy impacts industry, as with utilities.
The ability to predict and address human behavior is critical in designing effective policies and programs—something we at Oracle Utilities fully embrace.
Oracle Utilities’ Opower products are based on a foundation of behavioral economics. Our ability to motivate customer action and drive energy savings is steeped in behavioral science principles. Intuitively, we think people will conserve energy for economic or environmental purposes—of course people will reduce to save money or save the planet. But what behavioral science has taught us—what Richard Thaler pioneered—is that people’s values and beliefs don’t necessarily compel people to act. Instead, it’s their sense of how they are doing relative to their peer group and the social norm that drives people to act.
Leveraging this knowledge, Oracle partners with over 100 utilities across the globe to nudge their customers to conserve energy by sharing personalized insights and using behavioral science techniques to motivate them to be more energy efficient.
These nudges result in small individual changes that add up to massive savings. Over the past 10 years, we’ve helped customers reduce energy by over 16 TWh. That’s equivalent to taking more than 1.2 million homes off the grid for an entire year and nearly $2 billion in bill savings for millions of people all over the world.
So congratulations to Richard Thaler, and thank you to the Royal Swedish Academy of Sciences for recognizing the critical importance of accounting for human behavior to ensure the effectiveness and success of public policies and programs.
Read more on the consumer, behaviorial science and human behavior: