Influencing Behavior at the Margins

Not everyone is likely to change their behavior in response to pressures, such as social or economic changes, at the same intensity and rate. Some people need more convincing; others need more time.

A good customer retention strategy doesn’t lump all customers into one group. It might, for example, treat customers of ten years better than customers of six weeks. These are examples of margins. “Margins” can mean a lot of things in economics; in this case we mean “by increments,” or “small changes”—shades of gray instead of all or nothing. Farnsworth explains thinking at the margin as “looking at problems not in a total, all-or-nothing way…but in incremental terms: seeing behavior as a bunch of choices about when to do a little less along one dimension and a little more along another.”[[9]]

Let’s consider the consumption of sugary drinks. Influencing behavior at the margins means that you won’t see the problem as a binary of consumption or no consumption. Instead, ask how a change in price, access, or convenience might affect how much people consume. Different interventions preserve or restrict choice to different degrees.

Maybe you want people to consume fewer drinks. Maybe you want them to substitute sugar-free drinks as a healthier option. If we were thinking about putting in rules to reduce the consumption of sugary drinks, we could tax them, or limit where they could be consumed or sold, or limit the age of people who can buy them. Farnsworth writes, “The activities of individual people have margins…and then groups of people have marginal members,” and often a legal rule is created with “the hope, realistic or not…that it cuts down on the practice at the margin.”[[10]]

Using feedback loops as a lens, we can understand influencing behavior at the margins as instituting a series of incentives that create loops. These responses may develop into feedback loops if they change conditions that then influence later behavior. Small changes across many people can add up, but the outcome needs to be measured rather than assumed.

Another reason to pay attention to the margins is that they are often the place where reinforcing feedback loops start. A business might hypothesize that a customer of twenty years is less likely to leave after a price hike than a recent buyer. It would need evidence about its customers to know whether that is true. However, when they leave to go to a competitor or even just buy less, there is a danger of setting off a negative reaction that sees sales plummet, which makes reinvestment in the product harder, which leads to more customers leaving.

Criminal law has to work at the margins in terms of deterring unwanted behavior. Marginal deterrence concerns the additional punishment associated with an additional offense. For example, if a criminal “faces execution for the crime he already has committed, he pays no additional price for adding a murder to it.”[[11]] If theft and murder carry the same maximum penalty, that penalty adds no further deterrent against murder during the theft. Other motives for restraint may remain. Farnsworth explains, “The designers of criminal penalties have to worry about preserving marginal deterrence—scaling penalties so that there is always something more to fear by doing a little worse.”[[12]] In essence, this creates a balancing feedback loop that responds with appropriate consequences depending on the severity of the crime.

One of the issues as systems get larger is that there are more margins on which to adjust behavior. Adjusting a feedback loop in an attempt to balance it may create an undesirable reinforcing feedback loop somewhere else. For example, if you make it more difficult for people to consume sugary drinks in public, do you then force them into consuming in private indoor spaces? Consumption might shift to homes, where habits and social influences differ. That is a possible unintended response to investigate, not a demonstrated result of such a rule.

The concept of feedback opens up the idea that a system can cause its own behavior.

—Donella H. Meadows[[13]]