Nudge

Nudge by Richard Thaler and Cass Sunstein covers the behavioral science behind how the structure of choices influences a person’s actions. The book looks at past examples of good/bad ‘choice architecture’ and how proper implementation of choice architecture can help solve global problems like retirement savings, global warming, and organ donation.

Choice architecture is how the context around which people make a decision is provided. Choice architects are the people that organize that context. Choice architects are everywhere, and their impact can range from getting more people to eat salads, solve climate change, cause an elderly homeless crisis, or potentially end the world. Nudges are design implementations that push people toward an option desired by the choice architect, and they can be either for or against the decider’s best interests.

Thaler and Sunstein believe in their self-created ideology of Libertarian Paternalism. Their interpretation of this term means to preserve freedoms to choose while pointing people to the decision that is most likely to leave the chooser better off. Their stance is that choice architects should adopt this principle so that they “nudge for good.”

In economics, it is assumed that people make reasonable decisions and are able to do this because they understand all their options. This definition does not hold true in the real world where people are humans who occasionally, or frequently, make decisions that make themselves worse off. Thaler and Sunstein take into account this behavior and use it to justify the need for good nudging.

Some of the ways that people show bias with decisions include:

• Availability- Salience of recent experiences and overall knowledge of options

• Optimism & Overconfidence- People will assume that things will go according to plan

• Gains & Losses- People are loss adverse and will try to keep as much of their resources as they can in the present

• Status Quo Bias- Generally people want to maintain the status quo

• Framing- Wording of decisions can affect interpretation of options

• Others- People can go with the mob or go with what they believe the mob wants

The authors also identify the two thinking systems, the automatic and the reflective. The automatic thinking system is used for decisions made in the moment when temptation is hot. This system is the doer or the Homer because they act towards what option seems best in that moment. The other system is the planner or Mr. Spock that thinks through decisions before they are made when temptation is cold. Mr. Spock might not have planned to buy donuts when visiting the grocery store, but Homer might put them in the grocery cart when walking past the baked goods and temptation becomes hot. Temptations can be quelled with commitment strategies that anticipate and submit temptation when it arrives. Paying with a debit card that only has enough money for the planned grocery items would be an example to the donut problem.

A good nudge will “make it easy” for users to take their desired action. This means that choices will have good mapping or stimulus response compatibility which means options are presented in an honest way that explain what will happen when you take them. Relevant information should be present, and the outcome of each decision should be explained without obfuscating any unsavory details. Defaults are defaults because they are the expected best option for the person making the decision. If someone wishes to go against a default, they should not be prevented but might be warned about their decision if it’s possible that choice could have a negative outcome for them.

A bad nudge will make it hard for users to take their desired action. This is called sludge. Government sludge doesn’t seem impossible to change but when it comes to removing sludge that encourages user to make companies less revenue… I remember I had to go through a hole rigmarole when I chose to delete my social media accounts. Snapchat said I had to try again in X amount of time for seemingly no reason, and I think Instagram made me do it through a web browser on my desktop. Not only did they hide the options, but I specifically remember that the Instagram support article on how to delete your account was for an old Instagram UI that didn’t exist anymore. Removing sludge like that is probably going to need government mandates.

Thaler and Sunstein look at nudging in the real world with money, global warming, and organ donation.

When it came to money, the retirement saving portions were the most interesting to me. It made me check my 401K to see how much I was getting when I retired. I don’t think the percentage contributed is set to be higher over time which is unfortunate because I don’t know if I trust myself to remember to update it. With my current monthly expenses, I could probably contribute a lot more, but I want a good amount of liquidity in case of an emergency. How did I get so distracted so quickly. Needless to say, the percentage scaling option mentioned in the book resonated with me greatly. The Sweden pension fund portion was also very informative where the advertising of verified funds in a short period affected 2/3rds of people’s decisions select the non-default fund. Shortly after the introduction of the program, when advertising died down, the default became the more selected options with those entering the program. After the decision was made, it was hardly ever altered.

The global warming section developed strategies using, but not limiting themselves to, nudging that can combat global warming. Nudges in the form of taxes/subsidies encourage good behavior. Broad commitment from all countries and penalties to enforce incompliance is necessary to avoid the free rider problem. There is no one solution to fix things but a series of recommendations that could make things better than they are.  

The organ donation section clarified a misunderstanding with people’s interpretation of the previous books thoughts on opt-out/presumed consent organ donation policies. Changing organ donation to opted-in or presumed consent does not necessarily mean more donations. Prompted choice, where people can opt-in but also choose to not necessarily opt-out takes into consideration all stakeholders in the matter (Donors, Patients, and Families).I registered to be an organ donor in Texas but couldn’t find the symbol on my Ohio license, so I registered online.

I enjoyed reading nudge. It was dense at times but overall, the authors did a great job of putting big ideas into understandable words. Their playful writing style makes economics not a chore to read about. These may be the only people that can write about choosing pension funds and make it interesting.

I understand their reasoning on titling this second edition that I read, “The Final Edition,” but it makes me wonder why they mentioned COVID-19 so often. They did do rewrites during the Pandemic so it was definitely top of mind, but did they think that would last forever. I kind of did. I just felt like it dated the material. Not that the information isn’t still relevant.

I don’t know how many times I’ve looked at the cover of The Design of Everyday Things, but I feel like it wasn’t until reading this book when the authors described the cover picture that I saw what was wrong with the teapot. How I missed this when I’ve seen its spine almost everyday for over half a year is beyond me. Speaking of the Don, this book helped me get a better understanding of mapping. I used to interpret it just as controls but now my definition includes the outcome. Mapping isn’t something restricted to buttons on an interface and direct results rather results over time as well.

When discussing the reflective thinking system, the referred to the science officer on the original series as Mr. Spock instead of Spock which leads me to believe that Thaler and/or Sunstein enjoy the show which I found amusing. End of report. :)