#63: Nudge

Nudge: Improving Decisions 

About Health, Wealth, and Happiness, 

by Richard H. Thaler and Cass R. Sunstein 

New York: Penguin Books, 2008

Summary:

"Nudge is about choices -- how we make them and how we're led to make better ones. Authors Richard H. Thaler and Cass R. Sunstein offer a new perspective on how to prevent the countless bad mistakes we make in our lives -- including ill-advised personal investments, consumption of unhealthy foods, neglect of our natural resources, and other numerous bad decisions regarding health care, our families, and education. Citing decades of cutting-edge behavioral science research, they demonstrate that sensible 'choice architecture' can successfully nudge people toward the best decision without restricting their freedom of choice. Terrifically straightforward, informative, and often very entertaining, this book is a must read for anyone with an interest in our individual and collective well-being."

Table of Contents:

Part I: Humans and Econs

• 1. Biases and Blunders
• 2. Resisting Temptation
• 3. Following the Herd
• 4. When Do We Need a Nudge?
• 5. Choice Architecture

Part II: Money

• 6. Save More Tomorrow
• 7. Naive Investing
• 8. Credit Markets
• 9. Privatizing Social Security: Smorgasbord Style

Part III: Health

• 10. Prescription Drugs: Part D for Daunting
• 11. How to Increase Organ Donations
• 12. Saving the Planet

Part IV: Freedom

• 13. Improving School Choices
• 14. Should Patients Be Forced to Buy Lottery Tickets?
• 15. Privatizing Marriage

Part V: Extensions and Objections

• 16. A Dozen Nudges
• 17. Objections
• 18. The Real Third Way
• 19. Bonus Chapter: Twenty More Nudges

My Take:
Surprise, surprise. For all the behavioral economics/ consumer decision-making stuff I've read, this one was different. It focuses less on the why we make the weird, illogical decisions we do and how policies in various areas might be designed to nudge us in a spirit of what the authors call libertarian paternalism:

"The libertarian aspect of our strategies lies in the straightforward insistence that, in general, people should be free to do what they like -- and to opt out of undesirable arrangements if they want to do so. To borrow a phrase from the late Milton Friedman, libertarian paternalists urge that people should be 'free to choose.' We strive to design policies that maintain or increase freedom of choice. ... Libertarian paternalists want to make it easy for people to go their own way; they do not want to burden those who want to exercise their freedom."


"The paternalistic aspect lies in the claim that it is legitimate for choice architects to try to influence people's behavior in order to make their lives longer, healthier, and better. In other words, we argue for self-conscious efforts, by institutions in the private sector and also by government, to steer people's choices in directions that will improve their lives. In our understanding, a policy is 'paternalistic' if it tries to influence choices in a way that will make choosers better off, as judged by themselves. ...


"Libertarian paternalism is a relatively weak, soft, and nonintrusive stype of paternalism because choices are not blocked, fenced off, or significantly burdened. If people want to smoke cigarettes, to eat a lot of candy, to choose an unsuitable health plan, or fail to save for retirement, libertarian paternalists will not force them to do otherwise -- or even make things hard for them. ... [Choice architects] are self-consciously attempting to move people in directions that will make their lives better. They nudge.


"A nudge, as we will use the term, is any aspect of the choice architecture that alters people's behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Putting the fruit at eye level counts as a nudge. Banning junk food does not."

The bulk of the book offers examples from a variety of public policy arenas, from retirement savings to health care to school choice to freedom to marry. Thaler and Sunstein's writing is accessible and funny, and they're never afraid to poke some gentle fun at themselves or at the mostly well-earned reputation of economists in general. If the topic sounds interesting, you'll probably enjoy the book.