Nudge

Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard H. Thaler and Cass R. Sunstein teaches you all there is to know about choice architecture. With the use of excellent, real world, examples the power of choice architecture is displayed. In the book, both authors also give compelling arguments for libertarian paternalism. A comprehensive read on how choice architecture defines our everyday choices.

The book starts with an introduction about the way choice architecture works. A common paradigm that is used consists of two concepts; opt-in and opt-out. They respectively mean that you actively have to check a box to 1) a box to enter 2) or exit a choice. Not too much trouble right? It turns out that it is. When people in different European countries were presented with an organ donor form with either an opt-in (no donor is standard) or opt-out (donor is standard) form, the first group only participated 10-40% percent of the time (after much campaigning), the latter had a 90% donor rate! Just as in Predictably Irrational, we see that our answers can be swayed by the way the question is asked.

The libertarian paternalism argument is defended in two ways. People should be free to choose for themselves, and not be forced into doing A or B. And at the same time, they should be defended from ‘bad choices’ and no effort should be withheld to offer the best choices. Thaler and Sunstein propose nudging as the perfect way to accomplish this. A nudge, they describe, alters peoples behaviour in predictable ways, without forbidding any options or significantly changing their financial incentives. The opt-out form for organ donation is a perfect example of a nudge.

Humans and Econs are two of the main characters, or groups, in the book. As opposed to Econs, Humans do not make perfect rational choices. We lack the control to inhibit making short-term gains against long-term losses. We cannot process all the information we are given. And we have personal opinions about almost every topic we can think of. Through choice architecture, we can nudge people into making better choices, without constraining them in any way.

Also see Thinking: Fast and Slow

Thaler and Sunstein have done a great job in describing and defending nudges and libertarian paternalism. In the latter chapters, they take down arguments against the policy. Reviews, however, question to which extent this has worked and whether an even more rigid (or looser) policy would be more effective. It is up to the reader to judge the application on a governmental level, on the individual level it cannot be denied that is has some very interesting implications.

The Book:

Nudge: Improving Decisions About Health, Wealth, and Happiness – Richard H. Thaler and Cass R. Sunstein – ISBN-10: 014311526X | ISBN-13: 978-0143115267