Nudge: Improving Decisions About Health, Wealth, and Happiness
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Questions for Richard Thaler and Cass Sunstein
Amazon.com: What do you mean by "nudge" and why do people sometimes need to be nudged?
Thaler and Sunstein: By a nudge we mean anything that influences our choices. A school cafeteria might try to nudge kids toward good diets by putting the healthiest foods at front. We think that it's time for institutions, including government, to become much more user-friendly by enlisting the science of choice to make life easier for people and by gentling nudging them in directions that will make their lives better.
Amazon.com: What are some of the situations where nudges can make a difference?
Thaler and Sunstein: Well, to name just a few: better investments for everyone, more savings for retirement, less obesity, more charitable giving, a cleaner planet, and an improved educational system. We could easily make people both wealthier and healthier by devising friendlier choice environments, or architectures.
Amazon.com: Can you describe a nudge that is now being used successfully?
Thaler and Sunstein: One example is the Save More Tomorrow program. Firms offer employees who are not saving very much the option of joining a program in which their saving rates are automatically increased whenever the employee gets a raise. This plan has more than tripled saving rates in some firms, and is now offered by thousands of employers.
Amazon.com: What is "choice architecture" and how does it affect the average person's daily life?
Thaler and Sunstein: Choice architecture is the context in which you make your choice. Suppose you go into a cafeteria. What do you see first, the salad bar or the burger and fries stand? Where's the chocolate cake? Where's the fruit? These features influence what you will choose to eat, so the person who decides how to display the food is the choice architect of the cafeteria. All of our choices are similarly influenced by choice architects. The architecture includes rules deciding what happens if you do nothing; what's said and what isn't said; what you see and what you don't. Doctors, employers, credit card companies, banks, and even parents are choice architects.
We show that by carefully designing the choice architecture, we can make dramatic improvements in the decisions people make, without forcing anyone to do anything. For example, we can help people save more and invest better in their retirement plans, make better choices when picking a mortgage, save on their utility bills, and improve the environment simultaneously. Good choice architecture can even improve the process of getting a divorce--or (a happier thought) getting married in the first place!
Amazon.com: You are very adamant about allowing people to have choice, even though they may make bad ones. But if we know what's best for people, why just nudge? Why not push and shove?
Thaler and Sunstein: Those who are in position to shape our decisions can overreach or make mistakes, and freedom of choice is a safeguard to that. One of our goals in writing this book is to show that it is possible to help people make better choices and retain or even expand freedom. If people have their own ideas about what to eat and drink, and how to invest their money, they should be allowed to do so.
Amazon.com: You point out that most people spend more time picking out a new TV or audio device than they do choosing their health plan or retirement investment strategy? Why do most people go into what you describe as "auto-pilot mode" even when it comes to making important long-term decisions?
Thaler and Sunstein: There are three factors at work. First, people procrastinate, especially when a decision is hard. And having too many choices can create an information overload. Research shows that in many situations people will just delay making a choice altogether if they can (say by not joining their 401(k) plan), or will just take the easy way out by selecting the default option, or the one that is being suggested by a pushy salesman.
Second, our world has gotten a lot more complicated. Thirty years ago most mortgages were of the 30-year fixed-rate variety making them easy to compare. Now mortgages come in dozens of varieties, and even finance professors can have trouble figuring out which one is best. Since the cost of figuring out which one is best is so hard, an unscrupulous mortgage broker can easily push unsophisticated borrowers into taking a bad deal.
Third, although one might think that high stakes would make people pay more attention, instead it can just make people tense. In such situations some people react by curling into a ball and thinking, well, err, I'll do something else instead, like stare at the television or think about baseball. So, much of our lives is lived on auto-pilot, just because weighing complicated decisions is not so easy, and sometimes not so fun. Nudges can help ensure that even when we're on auto-pilot, or unwilling to make a hard choice, the deck is stacked in our favor.
Amazon.com: Are we humans just poorly adapted for making sound judgments in an increasingly fast-paced and complex world? What can we do to position ourselves better?
Thaler and Sunstein: The human brain is amazing, but it evolved for specific purposes, such as avoiding predators and finding food. Those purposes do not include choosing good credit card plans, reducing harmful pollution, avoiding fatty foods, and planning for a decade or so from now. Fortunately, a few nudges can help a lot. A few small hints: Sign up for automatic payment plans so you don?t pay late fees. Stop using your credit cards until you can pay them off on time every month. Make sure you're enrolled in a 401(k) plan. A final hint: Read Nudge.
Review "How often do you read a book that is both important and amusing, both practical and deep? This gem of a book presents the best idea that has come out of behavioral economics. It is a must-read for anyone who wants to see both our minds and our society working better. It will improve your decisions and it will make the world a better place."-Daniel Kahneman, Princeton University, Nobel Laureate in Economics (Daniel Kahneman )
"In this utterly brilliant book, Thaler and Sunstein teach us how to steer people toward better health, sounder investments, and cleaner environments without depriving them of their inalienable right to make a mess of things if they want to. The inventor of behavioral economics and one of the nation''s best legal minds have produced the manifesto for a revolution in practice and policy. Nudge won''t nudge you-it will knock you off your feet."-Daniel Gilbert, professor of psychology, Harvard University, Author of Stumbling on Happiness (Daniel Gilbert )
"This is an engaging, informative, and thoroughly delightful book. Thaler and Sunstein provide important lessons for structuring social policies so that people still have complete choice over their own actions, but are gently nudged to do what is in their own best interests. Well done."-Don Norman, Northwestern University, Author of The Design of Everyday Things and The Design of Future Things (Don Norman )
"This book is terrific. It will change the way you think, not only about the world around you and some of its bigger problems, but also about yourself."-Michael Lewis, author of The Blind Side: Evolution of a Game and Liar''s Poker (Michael Lewis )
"Two University of Chicago professors sketch a new approach to public policy that takes into account the odd realities of human behavior, like the deep and unthinking tendency to conform. Even in areas-like energy consumption-where conformity is irrelevant. Thaler has documented the ways people act illogically."-Barbara Kiviat, Time (Barbara Kiviat Time )
"Richard Thaler and Cass Sunstein''s Nudge is a wonderful book: more fun than any important book has a right to be-and yet it is truly both."-Roger Lowenstein, author of When Genius Failed (Roger Lowenstein )
"A manifesto for using the recent behavioral research to help people, as well as government agencies, companies and charities, make better decisions."-David Leonhardt, The New York Times Magazine (David Leonhardt The New York Times Magazine )
"I love this book. It is one of the few books I''ve read recently that fundamentally changes the way I think about the world. Just as surprising, it is fun to read, drawing on examples as far afield as urinals, 401(k) plans, organ donations, and marriage. Academics aren''t supposed to be able to write this well."-Steven Levitt, Alvin Baum Professor of Economics, University of Chicago Graduate School of Business and co-author of Freakonomics: A Rogue Economist Explores the Hidden Side of Everything (Steven Levitt )
Every day, we make decisions on topics ranging from personal investments to schools for our children to the meals we eat to the causes we champion. Unfortunately, we often choose poorly. The reason, the authors explain, is that, being human, we all are susceptible to various biases that can lead us to blunder. Our mistakes make us poorer and less healthy; we often make bad decisions involving education, personal finance, health care, mortgages and credit cards, the family, and even the planet itself.
Thaler and Sunstein invite us to enter an alternative world, one that takes our humanness as a given. They show that by knowing how people think, we can design choice environments that make it easier for people to choose what is best for themselves, their families, and their society. Using colorful examples from the most important aspects of life, Thaler and Sunstein demonstrate how thoughtful “choice architecture” can be established to nudge us in beneficial directions without restricting freedom of choice. Nudge offers a unique new take—from neither the left nor the right—on many hot-button issues, for individuals and governments alike. This is one of the most engaging and provocative books to come along in many years.
Actually, our economic system thrives on poor choices by consumers According to the authors, man is not the hard, cold rationalist, or economic man, who is often described in free market postulations, but is instead quite fallible, even the highly-educated. The thinking and perceptions of man are constantly being waylaid by subtle influences which result in bad choices. The authors propose "libertarian paternalism," a catchall term for the subtle persuasion of people to make decisions that are helpful to them. However, if one examines our economic system, the authors' fears that their paternalism is freedom stifling pale next to the realities of consumer manipulation by large economic entities.
The first section of the book describing the various influences on erroneous thinking are fairly basic, much of it demonstrated in psychological experimentation. Unfortunately, life is a good bit more complicated than merely making so-called correct decisions about trivial or contrived matters. There are many areas in our lives where powerful institutions have created a situation where there are no good choices for most of us.
Take retirement savings, 401k plans, and investment decisions. Workers did not choose for corporations to abandon defined benefit plans and put the onus on workers to save for retirement. Many workers don't contribute to 401k plans because they have insufficient income - not that they cannot make a decision, a fundamental fact not mentioned by the authors. It is simply disingenuous to criticize workers for the performance of mutual funds in today's stock markets, for their investment "choices." Stock markets have been captured by financial elites who use others' investments as money to play with. The ordinary 401k contributor absolutely does not have the tools or the means to manage their investments on a minute-by-minute basis aided by sophisticated computer software.
The idea that parents don't correctly choose a good school for their children is absurd. Let's say in a school district of 100,000 students that there are five good schools with total enrollment of 10,000. Of course, all parents want their children to go to those five schools, or could easily be so persuaded - an obvious impossibility. This is a problem of poor schools, not a failure of parents to choose. Or take the new Part D of Medicare, the Prescription Drug Plan - this plan was designed by insurance companies to be completely incomprehensible with all kinds of loopholes where benefits do not have to be paid. Do the authors really want to use this as an example of choice failure? This is a scam that has been perpetrated on the American public.
On the surface, there can hardly be anything wrong with the idea of improving choices; who advocates making poor choices. However, let's consider our environment. We live in a capitalistic economy - profits are virtually all that matter. Giving good information to people is not a priority; in fact, it could be argued that giving disinformation is, especially if it positively affects the bottom line. What is advertising? It is disingenuous to write a book about poor choices without situating those choices. There are many powerful players who are successful because they count on poor choices and ensure that those choices continue. That is the book that needs to be written.
If and when we ever empower the citizens of this nation to control the nature of our institutions, then criticize the result and the choices. Now the choices we have are not really choices.
Reads too much like Behavioral Psychology textbook This book is about influencing people to take actions towards a desireable objective. If you have ever taken a Behavioral Psychology class in college, the topic, structure, and even the research studies contained in this book will look familiar.
The two authors are University of Chicago professors. Indeed, their familiarity with the subject matter and their deep analysis of human beahvior and how they are influenced by the environment are very impressive.
The book is full of empirical studies on Psychology. It is very long on research reference and analysis, but somewhat short on suggestions. Although it contains a lot of good information, I can't say it is an entertaining read....more info
Couple of socialists in favor of capital & labor allocation with decisions by the "elite who know best." The title of this review says it all. One does not get the bias and philosophy of the authors until about half way through the book. An unworthy read; I am glad I got it on loan from the library....more info
Empowerment!! The book was very intrigueing from the initial pick up; felt like blink and tipping point with a bit more behavioral science to back up the findings. But then midway through this book I started getting concerned about the self help direction of this book and how the message was going to get lost because it catered to individual's who couldn't manage their credit or weight. I trudged along and was pleasantly surprised. The book does an excellent job encouraging all of us to drive change without being too overt. I reflect on my best managers and they were master's at this art. These managers collaborated with me and all my ideas and never pushed me to implement their ideas. I always believed that my ideas (and those of my team) and application of those ideas were my own (or my team's). It is tremendously empowering to be able to say that your results are your own and never to feel that I was overruled. Nudging others lends itself exactly to that objective. ...more info
Puts together behavior and economic While this is not totally satisfying to my economist husband, I like that it draws on psychological research, to look at things in a new way. People talk about inter-disciplinary work, but it seems to be relatively rare. ...more info
Misleading and manipulative fig.1.1; the book also? The authors work readers by asking us to estimate the width to length ratios of two tables shown counterposed in their figure 1.1. (This is a variation of a perception puzzle common to pop psychology books.) As expected, they declare the reader wrong if one table is thought to appear longer than the other. One, in fact, does look longer.
We are then told that the two tables are the same shape/size (chagrin). The authors then pounce: "Not only were you wrong; you were probably confident that you were right." (Boy, did we get you on that one!) All of which is an exercise to demonstrate just how much we really need their expertise and how important their tome is to us. Unfortunately, there is a problem with the way the tables are drawn, one that that punctures their presumed authority.
In measuring the table legs of the table on the left in figure 1.1, I find that the more-or-less vertical separation of the legs (as measured from the outer edges of the 'buns' at leg end) is 1 13/16". In contrast, the same measurement taken on the legs of the table on the right (more or less horizontal) is 1 9/16". That difference, 4/16" or 1/4", is clearly noticeable and can only mislead. Inadvertently or not, the fact that the authors have made such a big point of the exercise and yet failed to check their facts suggests unreliable material. Fool me once, shame on you; .... I booted Nudge with a disdainful grudge....more info
A timely book "Nudge", a behavioral economics book, is very good at giving a reader perhaps a peak into President Obama's mind as he attempts to tackle some pretty big issues like healthcare, the environment, education and the financial urgencies of Medicare and Social Security. In his first few months in office, he does seem to be trying to win the support of political moderates just as this book presents such a case with its concept of "libertarian paternalism". The concept presents a case for giving people many choices while at the same time trying to have them lean toward directions which would likely be in their best interests. Some points from the book which caught my attention are:
1. Small details can have major impacts on people's behavior.
2. A "nudge" is an aspect of choice architecture which alters human behavior in a predictable way without forbidding any options or changing their economic incentives.
3. Never underestimate the power of inertia. The power can be harnessed by default options, for example. 'Econs' are people who respond to economic incentives. 'Humans' are people who respond to incentives AND nudges. Therefore, incentives and nudges help everyone.
4. It is false to assume almost everyone all the time makes choices in their best interest.
5. There are two kinds of thinking: intuitive/automatic (the oldest, like with voters and teenage drivers) and reflective/rational.
6. The book goes into rules of thumb like 'anchoring', 'availabilty' and 'representativeness' which affect how people make decisions.
7. Optimism/overconfidence and loss aversion affect decisions.
8. Temptation/dynamic-inconsistency can be handled.
9. 'Following the herd' must be managed.
10. 'The spotlight effect' - people unnecessarily tend to think others are watching them. So, investment clubs with conformists tend to do poorly, for instance.
11. The golden rule of 'nudges' is when they are most likely to help and least likely to cause harm.
12. Expect errors - humans are prone to making errors.
13. If Social Security is changed to allow investment choices, well thought-out defaults would be good. Medicare Part D is too cumbersome the way it is now, with about 2/3 making the wrong choices.
14. Asymmetric paternalism - help the least sophisicated while imposing the least on the most sophisticated.
The book also goes into over thirty nudges on various issues. Overall, the book is timely in giving a reader a clue into how some major issues facing the government might be handled, in order to have the best chance of progressing and working....more info
Surpassed My Expectations When I invest in a book, I expect to get one rock solid idea that I can apply to improve some aspect of my life. "Nudge" handed me that one idea, then another, and yet another. Truth be known, I can't begin to place an idea "value" on this book; new thoughts are springing forth each day. Great book....more info
Mostly Rehash With the widely recognized academic reputation of Thaler, I would have expected a far more creative book that covers new territory. I only made it half way through and put it down because it wasn't telling me anything new. This book largely reframes what has been written by several other authors....more info
Choice Architect - great concept but downhill from there I like the way the book started especially the concept of design as never neutral and being choice architects but the book is quite a bore. Not a pleasure to read past 1/3 of the book.
A lot of its other concepts are also in other books. It would have been better if examples were organized in better format. There were parts of the book that read like a university textbook.
contexts are required.... Firstly I need to state that I see a corporo-fasctic, dystopian country (if not world) we live in today. We have a veneer of "capitalism" over a Statist structure. Concepts such as those in this book do nothing to change this viewpoint. And the concepts expressed in this book aren't merely theoretical, they are currently being implemented at the Federal level.
To conceive that there is anything libertarian with the oxymoron of "paternal libertarianism" is nonsense. To state that people are at liberty by having to TAKE ACTION to NOT have something happen that is man made is inherently false. The real idea here is that "GIVEN THE DEGREE THAT CHOICES ARE ALREADY MUDDLED UP BY STATIST INVERVENTION, ISN'T PREFERABLE TO TILT THE TABLE THIS WAY"?
Basically the vast confusion that laborers face as to how to dispose of their "gains", whether to consume or save/invest is State made. It is the State that seeks to tax above and beyond providing collective defense from aggressors, and even well beyond simple co-operative services (garbage collection, signage etc etc). It is the State that says "save in this way, or we will take it". It is the State which lies and says that IT provides a "safety net" which makes for an environment wherein moral hazard EXPANDS. If people were confronted by the reality that their lives are bounded by what they create, which has to be allocated between consumption and investing (if allowed at all), then they will act very much differently than they do today - where they are led to believe someone will always be there to bail them out.
So to have and "end game" rigged wherein people are allowed a small decision in a complex leviathan and call THAT freedom or liberty is nonsense. And it doesn't take a clairvoyant to see that whatever "choice" is left will soon be legislated out as a rider to a bill recognizing the state reptile of Mississippi. The inexorable expansion of the State works just this way - it trumpets the the small chinks left in the Statist wall that will be bricked up later when you're paying even less attention since you don't have any control over your life anyway.
More practically I recently met with the rather parasitical gentleman who "consults" my company on our 401k plan. It has reached a point where it feels a lot less like he is providing an intellectual service to us (which is what he is paid for) than as a mouthpiece for the Corporo-Fascistic Apparatus. He cautions us that even though the market lost 45% over the last year and our profit sharing portion (that which he doesn't consult over) lost only 16% we are still exposed since we don't have his nifty "analyses" nicely bound up. If ERISA doesn't have one of those we are prima facie exposed for sanctions. And of course this fellow is all guns for the "automatically in unless actively opt out" conceptions, the fact that if there's going to be unthinking people in the world then the ruts might as well work in the direction that increases the base assets that he takes his skim out of. The result is an obstensibly capitalistic service which exists in the Statist/Beaurucratic vacuum forged by the State.
It needs to be understood that people need to invest a portion of what they create. Eating all your "seed corn" isn't the mode by which civilization advances. But the economy and markets and human behaviors are mind bogglingly complex. But that never stops macro-economists and Statists from believe that they somehow have tapped into the Ether, somehow managed a more insightful understanding of All and Everything with their 24 hour days and 7 day weeks than the rest of humanity. And they trot out their "findings" in books such as this. And the State gets more fuel for the fire of its Good Works.
No, we need to reject such thinking. We need to educate children on how to be productive and how to balance consumption and savings/investing. Let's make rational thinkers out of our children instead of unthinking lemmings. "Nah! We'll keep putting out financial idiots and tax them into oblivion and beat back all this nasty complexity that we've created for our engrandizement by doing even more thinking for them. That'll work."
More philosophically put - life is an absurdity. Life is thrust upon us unasked for. We advance out of the primordial haze of infancy and eventually become self-possessed. We navigate through the complexities of limited resources and a bevy of other self-possessed, self-interested people all with the purpose of staving off pain and death, knowing full well we will sometimes painfully stumble and eventually die. We can either progress through this absurdity free and at liberty or let people who have convinced themselves of their superiority put us in chains. Just because they give you a small choice as to how those chains are applied isn't Liberty....more info
Dangerous elitist rubbish The fashionable ideas of behaviourial economists like this are elitist rubbish. Who decides what "positive social norms" people need to be nudged toward? Those same would-be decision makers are just as fallible, lazy, stupid, greedy, weak, loss-averse, stubborn, and prone to inertia and conformism (and poor decision-makers) as the people to be nudged.
Excellent intro how to manage group decision making This is an excellent user friendly introduction to behavioral economics and the art of decision making in a group context. Richard Thaler is a renowned economist and is a leader in this discipline. He is the main author of this book as he has contributed all the concepts and underlying research.
Behavioral economics deals with all the actions human take within the investment field and others that defy traditional economics. Within "Nudge" Thaler comes up with many examples of such irrational behaviors. Those are also well covered by Dan Ariely in Predictably Irrational: The Hidden Forces That Shape Our Decisions and Scott Plous in The Psychology of Judgment and Decision Making. Those behavioral anomalies, include: anchoring, availability, representativeness, framing, loss aversion, and overconfidence among many others.
Thaler describe our cognitive systems duality. One is the Automatic System that is lightning quick, intuitive, instinctive. It includes the immediate "fight or flight" mechanism. It does not leverage much cognitive resources. Thus, it errs the minute a situation calls for critical thinking. That's when the second cognitive system comes in: the Reflective System. But, as Keith Stanovich states in "What Intelligence Tests Miss" we are all cognitive resource misers. We make mistakes because we rely too often on the Automatic System.
The authors invent a new language to describe the influencing of choice (nudging). They call this activity Choice Architecture (presenting options in a certain manner so as to influence others selection). And, the person doing it is a Choice Architect. Thaler states we are all at times Choice Architects whether we are lawyers, doctors, managers, parents, or spouses. We present facts and options,so as to influence the choice of others. As an example of framing, your doctor will sell you an expensive treatment as having a 90% success rate rather than a 10% failure rate. A computer would not differentiate between the two identical probabilities. But, a human will be very sensitive to this framing.
Choice architecture often is based on the default option being the optimal choice selection. Such default options can cause people to be organ donors in case of death when they would not otherwise. Thaler goes into much detail regarding 401K choice architecture. And, I found it really relevant. I wish many benefit managers would read that specific chapter.
Choice architecture can become complex. Amazon and NetFlix are masters of choice architecture as their entire websites are geared to facilitate you making desirable choices and continue transacting with them.
Thaler goes on reviewing many different existing choice architectures in the marketplace and find them really wanting. Cell phone plans, mortgages, credit cards, and all other financial products have pretty terrible choice architecture. The customer has no idea what he ultimately will be charged. Thaler suggests all such services should be required to have transparent pricing readily captured in a simple table so the customer understand what he pays. That's a wonderful suggestion, but Thaler may be missing the point that the lack of pricing transparency is intentional to hide the true price to the customer.
Next, Thaler moves on to the government sector. There he reviews the choice architecture of the U.S. Medicare Part D plan and Sweden's privatized social security investment choices. In both cases, the choice architecture is really poor. That is simply because the policymakers (choice architects) fell for the counterproductive mantra of maximizing the number of choices (many different drug insurance option for Part D; many investment fund options for the Swedish system). This seemed like a laudable goal; But, the result was chaos, frustration, and confusion on the part of the relevant constituency. Barry Schwartz in his excellent The Paradox of Choice: Why More Is Less expands on this theme by stating that the more choice we have the more confused we get and the worst selection we ultimately make. Good choice architecture suggests nudging people towards a single and optimal default option and offering a limited amount of alternatives. Medicare Part D does not even have a default option. Instead, it assigns beneficiaries to various plans randomly with as expected really bad results.
In one of the last chapters, the authors review 12 potential nudges. I found a couple of them really attractive. One of them consists in the IRS automatically generating your tax return if you have a straightforward situation. Studies indicate this process would save 225 million hours! Another interesting nudge is to give the right to motorcyclists not to wear a helmet if they have:
a) completed additional driving training;
b) submitted proof of insurance; and
c) signed an organ donor form.
The authors even invent a political philosophy to reflect their behavioral framework: Libertarian Paternalism. They pleasure in the fact that the phrase is an oxymoron. It stands for little government intervention, much freedom, and enlightened nudges so people make better decision for their health, safety, and welfare of society. They claim this represents the optimal third way to breakdown the logjam in today's polarized politics. Democrats want social mandates to protect the needy. Republicans want "laissez faire" capitalism to maximize choices and opportunity for the competent. The authors instead recommend "nudges" for the needy that still protect choices for the competent.
Not enough for a book I agree with other reviewers that the topic, though interesting, does not warrant book-length treatment.
I also think the authors fudge the definition of "nudge." For instance, in the last section of "12 nudges," they mention Automatic Tax Returns for those who don't itemize deductions. Purportedly, such automatic filing will save tax filers millions of hours of time a year. Probably a good idea, but how is making something automatic, in effect reducing choice, a libertarian nudge? And really, how is it different now from the current choice architecture, in which filing is mandated anyway? Similarly, while I enjoyed the idea of separating "marriage" and "civil union" and I think it might make good public policy, I don't really see how it fits into the idea of "nudging." This complaint goes hand in hand with my first one, which is that, in order to come up with enough material to make a book, they had to really stretch on some of the nudges.
Finally, and maybe I'm being nit-picky, but I was driven crazy by the amount of parenthetical phrases. It seems, especially in the first half, that every other sentence had something or other in parentheses, most of which in my opinion either could be removed or didn't belong in parentheses in the first place. It really made parts hard to read. ...more info
BEHAVIORAL behavioral economics
Nudge: Improving Decisions About Health, Wealth, and Happiness (Hardcover)
by Richard H. Thaler and Cass R. Sunstein (2008)
A note: this is not a general review of the book, but rather an analysis of the ways in which the system presented in the book is congruent with that of another system: behavior analysis. Were it a general review I would take issue with many of the suggestions made by the authors.
`Nudge' appears to be mainstream behavioral economics; economists attempting to make their analysis more realistic by replacing the completely rational `Economic Man' of classical economic analysis with a more realistic version derived from the decision theoretical work of Tversky and Kahneman. Nothing theoretically radical here. In fact, its roots can be traced back to John B. Watson (yes, that Watson), the founder of advertising psychology.
The authors' point is that classical economics is in fact a poor guide to action if we want to be effect in changing what people do. Instead they propose some empirically supported strategies for behavior change which they derive from some recent work in the area of decision theory, although (as I will point out) many of the strategies they propose can be more parsimoniously derived from other conceptual systems.
In fact, this is a good example of parallel evolution.
Thaler and Sunstein are responding to the same environmental situations as behaviorists do, and it is not surprising that the common set of contingencies (observed patterns of human behavior) occasion similar verbal behavior. What has surprised me as I read the book is that my typical response is not `how dumb', but `of course.' They suggest generally the same courses of action that I would as a behaviorist; I (and more so behavioral behavioral economists) might suggest some detail differences, but by and large what they suggest makes good behavioral sense.
Of course, I differ with some of their recommendations, and would argue that they have cherry-picked the data that these recommendations in areas like education are based on.
As I've indicated, there is another field of behavioral economics.
This is a group of behavior analysts (Skinnerian or Radical Behaviorism) who have incorporated some of the concepts of economics such as value delay discounting and demand elasticity into the terms of behavior analysis, and can be looked at as an application of proven behavioral principles. Specifically, they avoid coercion by emphasizing existing stimulus control rather than programmed reinforcement or punishment. Thaler and Sunstein's distinction between Automatic and Reflective Systems maps easily onto the behavioral distinction between contingency and rule governed behavior: behavior governed by direct contact with outcomes versus behavior controlled by learned verbal rules.
A 'nudge' itself sounds very much like what a behaviorist would call a prompt -- the minimal stimulus necessary to produce a behavior that is already likely to occur. Much of their discussion seems to concern how to prompt behavior rather than compelling it with obvious rewards and punishments -- good behavioral practice.
One might say that it is a plea to identify and use existing stimulus control (the way we learn to behavior in a given way in a given situation) as well as some descriptions of common patterns of this sort of influence on our behavior. For example, their RECAP procedure (a simple and readable breakdown of costs) makes the costs and benefits of things like mortgages and credit cards more discriminable.
Much of their analysis can be put into a structure of concurrent chains.
They identify two (occasionally more) alternative behavioral sequences involved in some choice situations (such as whether or not to pollute), and then discuss ways in which the contingencies of the competing chains might be altered. This could be as simple as changing the controlling stimuli to make the desired behavior more likely, or if necessary to decrease its response cost, or as a last resort, to more directly modify the consequences in terms of reinforcing or punishing outcomes.
The fact that a chain is always involved; people always have a choice in the sense of available alternative behaviors, allows them to maintain their `paternalistic libertarian' stance. Thus, they support the use of cap-and-trade systems as an approach to pollution control since it would embed some positive reinforcement contingencies which would result in a decrease in the choice of polluting industrial practices, rather than simply mandating a target (they use the phrase "command-and-control") for pollution reduction.
This sort of distinction is sometimes more apparent than real; a choice between two possible behaviors is present in both cap-and-trade and direct regulation.
In the one case, the choice is between paying a tax for polluting on the one hand, and not polluting on the other.
In the case of direct regulation, the choice is between polluting and suffering some penalty for violating the regulation, versus not polluting.
Thus, the difference between the two situations is the nature of the contingencies, not the presence or absence of choice.
As a related point, they talk about the problems involved with too many choices (Barry Schwartz has written on this, although they don't cite him). Medicare D plans are a good example: it's almost impossible to make a good choice given the number and complexity of alternatives.
In general, the book's analysis is very consistent with the predictions and recommendations that a behavior analyst would make, to the point where I wonder if the ghost of Israel Goldiamond is still roaming the halls of the University of Chicago where the authors work.
For example, they've discovered the old behavioral tactic of having a person surrender control of a sum of money to someone else. If some goal is met the money is returned; if not it goes to someplace aversive to the client.
One of the strengths of the book's approach to human behavior is the acknowledgment that we make choices for a reason -- and that these reasons can often be identified. There is no such thing as purely autonomous choice independent of outside influences. Therefore, our choice is not between influence and lack of influence, but whether we will study and use these influences to better our lives. Ignorance is not bliss, nor is it healthy.
Thaler and Sunstein sugar coat this by using the label `libertarian paternalism', but underlying their argument is the assumption that behavior is not ultimately autonomous, and that the job of `choice architects' (those who manage behavior in any sense) is to identify the aspects of the environment that control actions of interest, and to change behavior by changing the relevant aspects of the environment.
The book follows a basic pattern:
The authors first describe how a rational and knowledgeable Economic Person (an Econ) would approach some decision situation, then document how real people (Humans) actually behave, and finally describe some way of restructuring the situation (a Nudge) that would cause Humans to behave in a way more to their long term benefit.
Some examples of the behavioral processes involved:
One behavioral concept that they appear to be developing is that of the contingency trap.
This is the observation that immediate consequences (reinforcers) are more effective than delayed ones. Many human problems are due to the fact that a given action usually has more than one consequence. If the immediate consequence is reinforcing, but the long term outcome is harmful, we have a contingency trap. Health risks like overeating and smoking fit into this category. Again, the problem is how to rearrange the environment (particularly the social environment) to provide prompts for behaviors with delayed positive outcomes rather than immediate ones.
Rule governed behavior
On of the ways out of a contingency trap is to bring behavior under the control of verbal rules.
Often this works by making contingencies more obvious.
In the Nudge context, this is described by terms such as consumer education, getting people to forgo immediate reinforcers that have more delayed and diffuse long-term effects. They apply this to a free market (cap-and-trade) approach to pollution, to overcome the political difficulties involved in getting legislation enacted.
Not surprisingly, the authors devote a chapter to this topic; again it's pretty straightforward.
In behavioral terms (not theirs) social influence can be divided into two categories: modeling (doing what one sees others doing, and getting reinforced for doing) and social reinforcement (direct peer pressure; approval or disapproval of one's actions). An additional process is referred to as `priming': prompting an initial step in the sequence of actions necessary to achieve a goal.
Despite their `libertarian' stance, they don't seem to find peer pressure unacceptable as a way to change behavior, although their preference is for various forms of prompting.
T & S have discovered that the cost of doing something affects the likelihood of taking action.
In particular, people tend to follow the Law of Least Effort (this concept goes back to Thorndike). Among other things, this results in behavioral `inertia' since doing nothing (no change) requires less effort than doing something (such as changing one's asset allocations)
Thus, in discussing `opt-in' vs `opt-out' methods of having people enroll in programs such as retirement savings, they recommend structuring the programs so that the default action is enrolling in a program, with a positive action required to opt out of it. The same analysis is applied to the task of increasing organ donations.
Another point: the default payment options on credit cards are a minimum payment that maximizes the company's interest income. Their alternative: make it an equal effort forced choice between minimum payment and complete balance payment.
A good example of the way in which they apply these principles is the Save More Tomorrow program developed by Thaler and Schlomo Benartzi.
This program is based on the principle of making a verbal commitment now (a behavior with a low response cost) to do something in the future which has a high response cost. This is very similar to Hayes' ACT (Acceptance and Commitment Therapy).
In this case, they start with a standard savings plan where people sign up for an automatic periodic transfer of funds to a savings account.
The added detail is a commitment to a gradual increase in the size of the deduction (some echos of progressive ratio reinforcement schedules here), thus reducing the aversiveness of a large initial payment.
They also talk about `inertia' as a factor both in maintaining behavior and resisting change; reminiscent of Nevin's Behavioral Momentum Theory, which might provide some additional suggestions for developing this program.
Some of their predictions seem a bit self contradictory.
While making a big deal of the difference between "Humans" and "Econs", they seem to assume that simply providing information about costs and benefits of behavior will be enough to change people's choices.
A good example of this is their analysis of medical malpractice lawsuits. They seem to feel that people might trade off their right to sue in exchange for lower medical fees. This seems to assume that Humans are Econs and make rational choices based on economic considerations.
An alternative might be the well known psychological principle of minimizing the maximum loss (a mini-max strategy). People will trade off the lowest long-term cost in exchange for minimizing that maximum possible loss. That is why few people will choose to self insure, even if that results in the lowest predicted long term cost.
Finally, the whole idea of `libertarianism' (paternalistic, maternalistic, or otherwise) seems to contradict the deterministic assumptions of behaviorism.
From the point of view of the behaviorist, freedom is just another word (see Baum's text for a good analysis of the uses of the term). People do not behave freely in the sense of being autonomous actors, but rather their behavior is determined by the interaction between genetics, experience, and consequences. Our goal is not to maximize freedom (except in the limited sense of absence of aversive control), but rather to promote the use of contingencies which will maximize human welfare.
My final question is, therefore, do we as Behavior Analysts have a unique contribution to make in the sense of suggesting solutions that are basically and profoundly different from those suggested by non-behaviorists, are do we (at least in the case of social engineering) tend to converge on the same basic solutions?
In the latter case, our contribution would not be in the uniqueness of our analysis but in the efficiency of its implementation. As I have tried to demonstrate, a non-behavioral analysis based on some nonsystematic decision principles and some canny observations can be more parsimoniously analyzed in behavioral terms. In addition, we might avoid the consequences of pursuing some of the false distinctions implicit in the concept of libertarianism.
This, in turn, should lead to a more effective implementation.
Maximizing versus satisficing: Happiness is a matter of choice.
Schwartz, Barry; Ward, Andrew; Monterosso, John; Lyubomirsky, Sonja; White, Katherine; Lehman, Darrin R.
Journal of Personality and Social Psychology. Vol 83(5), Nov 2002, 1178-1197.
A Good Read Really interesting book on tweaking public policy to make a big difference in people's lives. Should have been done years ago!...more info
Nudge: Improving Decisions About Health, Wealth, and Happiness The subject matter is good but like so many books of this type, it would have been a much better read at 1/3 its length....more info
Comparison to Predictably Irrational I've written a review of both "Nudge" and "Predictably Irrational" so my energy to reproduce anything of the sort on here is less than inspired. In case you're interested though....
Please enter a title for your review so yeah i did what they said on pg 17-18 and measured the dimensions of the tabletop diagrams. the two tabletops on pg 17 measure 5.25mm by 2.5mm and 5.5mm by 2.2mm respectively. A smaller difference that the naked eye suggests, but a difference nonetheless. Then on pg 18 we're presented with a different diagram of two identical tabletops, 2.4mm by 5.4mm (or thereabouts, the sides aren't all even in any of the diagrams) and told these tabletops have the same dimensions as those on pg 17, thus proving they were identical all along. wtf?...more info
Liberal Dogma Posing as Erudition The authors don't think you're very smart, which is undoubtedly why they published this thinly veiled dogma posing as erudite economics for the general public.
A good read if you want to begin understand how the current administration will take advantage of what they believe is your ignorance, and a good replacement for caffeine if having your intelligence insulted gets your blood going in the morning....more info
Playing fair? I have to open with a BIG disclaimer: I have read only the beginning of the introduction available online. That said, I see that the authors have begun by not playing fairly with the reader. In the very first example, the two tables that are "equal" are not. Look at the right-hand table; the two side edges diverge. This is a perspective cue. If the perspective is true, then the right-hand table is far more foreshortened than the left-hand table. That the two are "equal" in area in the plane of the paper is the trick; if these were actual three-dimensional objects, they would not be equal at all.
I mistrust authors who play tricks to make a point, and who don't later make those tricks right. Your mileage may vary....more info
A must read Behavioural economics has rapidly become popularised and a couple of titles have made the best seller list, but if you read only one or two this should be on your list. What makes this different is that the authors come up with policy options which could significantly improve public policy choices and save our taxes....more info
Not what I was expecting Perhaps I should have looked more into what I was getting. I was expecting a book which helped the individual make good decisions as well as influence others to make the good decisions they want to make but sometimes don't. There were some really good concepts in this book which covered these areas, but primarily it was a book for the politically minded. It goes very into detail on finances as well as medicare and various government programs which could be improved. While I love the idea of "Libertarian Paternalism", be aware this book is very political (the concepts can easily be applied to any party though) and contains little advice for the individual who is looking to better themselves. As another reviewer stated:
"It is a book that people interested in any aspect of public policy should read. It is a book that people interested in politics should read."...more info
A great study in human psychology I think that anyone in a leadership position should consider reading this book. The book is all about human psychology and how to nudge, or encourage, people to make decisions or enact certain behaviors. The concept of the nudge is that the coercion is subtle rather than forced, which is why I find this beneficial to people in leadership positions.
Overall, it's a great study in human psychology. The book delves a bit into choice architecture, which seems to scratch a small itch someone might have if they have an interest in usability or user-centered design. The only flaw of the book is that it sometimes finds awkward examples, or that it goes on and on about some topics longer than necessary. The real highlights come in the first half of the book and are mostly just reinforced as the book progresses. Otherwise, it would have been a 5-star book.
Some of my favorite case examples in the book talk about how lines were painted on a curvy part of Lake Shore Drive in Chicago to "nudge" people to slow down. Signs didn't work, but lines painted on the road whose spacing quickly diminished gave drivers the illusion that they were going fast and as such, they slowed down. The book is full of similarly great examples of how nudges work. In fact, I found so much of them useful that after reading the book, I felt that it was worthwhile to take a few notes and post a synopsis to my site at http://yanoff.org/books/synopsis-nudge.shtml.
The fallacy of free will ... An excellent treatment and analysis of human predisposition to making choices - and how one can influence them. This book clearly establishes the fact many of us suspect - that there is no such thing as pure rational decision-making (realistically), free will, and most importantly, independent thinking. Understanding this critical aspect let's us engineer our own decisions and choice presentations in a more persuasive way. Highly recommended!...more info
No man's land The subtitle of the book ("Improving Decisions about Health, Wealth and Happiness") is what caught my eye at the bookstore, but dare I say, the authors fail to deliver. The introduction starts with a prolonged justification of what authors call "libertarian paternalism" or "choice architecture" - a process of carefully nudging people into making a specific decision - but the reader is left wondering why the authors are so compelled to defend their own ideas before even explaining them. They've made me a skeptic before they even began.
Studies from behavioral economics, psychology and sociology fields are introduced in the context of choice architecture, but once again, the authors often veer off into giving public policy prescriptions, or simply citing the study results. It is as if they got stuck in the middle: there are no new and interesting academic insights, nor are the public policy suggestions grounded in what the authors know best.
If you're interested in the subject, I would recommend "Predictably Irrational" by Dan Ariely instead....more info
Nudge, not noodgie I found the general ideas of nudges useful in my field of medicine. Though I had a vague idea before of these principles, the book sharpened the way I thought and planned many of my activities.
The book is a bit repetitious but the repetition sort of consolidates the ideas....more info
not a book-worthy subject while the ideas behind this book are interesting, they do not warrant a book-length examination. good for the authors for being libertarian--it is mentioned relentlessly throughout the manuscript--and good for them for figuring out the whole choice architecture thing and coining such a pop term. but everyone participates in choice architecture when they make decisions, whether they realize it or not. does it matter if people know that they are doing it and that it has a name? i doubt it.
i did like the idea of separating "marriage" and "civil union"--all 6-8 pages of it-- and that was interesting. overall this would have made for a great nation or new criterion article, but not a book. skip it the book, read the reviews here (some of which are more enlightening than the book itself) and re-read freakonomics instead....more info
Not enough How The book is very well written, has some excellent points and is in generel very informative. The one thing dragging this book down is the distribution of subjects it covers.
More than 60% of the book, concerns itself with current political topics in the US, and how they could be handled better by using "nudges" and decision architecture. This has 2 major side-effects, 1. It's mostly irrelevant for non-US citizens, 2. In 5 years time, it will also be irrelevant for US citizens, since they problems mentioned are very specific and will most likely no longer be relevant.
The remains of the book is split something like this:
10% What is a nudge (as well as the Econs Vs. Humans)
5% What is liberal paternalism
20% Defense of liberal paternalism against critics
>5% How do you nudge people.
I highly recommend reading the first 100 pages or so, sadly the remaining 200 pages are mostly filler.
Love the Concept of "Choice Architecture" The authors' concept of "choice architect" is great. They define a choice architect as having "...the responsibility for organizing the context in which people make decisions."
They provide a range of choice architectures in action. Everything from offering healthy snacks earlier in school cafeteria traffic flows to encouraging 401K deposits at a future date rather than immediately, to helping seniors understand Medicare Part D.
In business, whether we know it or not, we are acting as a "choice architects" every time we plan a presentation. Simply by deciding what to leave in and what to leave out, we are designing the context for making decisions.
Thaler and Sunstein offer a range of ways to provide structure to the choices you offer to your business associates, customers, and contributors to your favorite charities
What causes the perception that credit cards are necessary financial device Introduction: In 2004, there were 1.4 billion credit cards. By 2007, the average American family had an average credit card debt of $12,000 and paid the typical 18 percent per year. Credit card payments are decreasing causes increased losses by banks.
Citigroup, in 2008, credit card losses eclipsed losses in the 1990s and is expected to rise in 2009. The weak economy has pushed more borrowers over the edge and affecting a wider range of borrower types.
1. Credit cards provide a convenience allowing to user to be cashless and still have buying power.
2. Businesses, such as, hotels and restaurants cater to credit card usage.
3. Credit cards provide a ready source of liquidity
4. Debit cards often offer a line of credit
5. Credit card usage is compulsive and addictive and has a huge nudge factor and tension. The constraints to usage don't exist and the temptative tension to use the credit card is compulsive and pressure oriented.
6. Excessive Credit cards usage and accumulative debt demonstrates lack of self-control
7. Credit cards provide instant gratification bypassing the discipline of saving for a duration, accumulating, and purchasing with cash.
8. People don't like to be told not to use their credit cards. They rebel at the censorship of their excessive usage and feel credit card usage is a right.
9. Credit card companies should be required to a electronic copy to the consumer showing all the precise usage and fee payments, so customers get a better sense of what they are paying for.
10. Credit card companies establish rules that help them raise fees. One way credit card companies capitalize on fee is by shortening the day you ahve between the time you get your bill and the day your payment is due. One day late means 30 days late, you pay the penalty and the interest; one day can result in a 100 dollar fee.
11. Credit card debt is unsecure debt. Default rates are expected to increase during receding economies.
12. Credit cards have hidden fees.
13. Interest paid on credit cards is not tax deductible.
14. Credit card companies require the consumer to pay the minimal payment and extend payment for decades without moral remorse.
15. People are more afraid to abandon their credit cards than to use cash.
16. Credit card companies should allow the automatic payment of the full bill.
Why Every Doctor Should Change Their Last Name to Aardvark This is one of those rare books that can actually make you change the way you look at things. Specifically, Thaler and Sunstein discuss what they refer to as choice architecture or the conscious ways in which choices can be presented to people in various situations, particularly in areas where people can be helped (nudged) in making better decisions. They rely heavily on the existing psychological knowledge base related to decision making, but they take this knowledge and reconfigure it in a way that can make for powerfully beneficial choice architecture.
Thaler and Sunstein provide ample examples and areas of public policy where their choice architecture process can be applied - health insurance, savings, and investments, for example - areas where, generally speaking, choices are plentiful, complex and feedback (results) take a long time to be seen. They give good examples of where good choice architecture has met the desired goals, or at least helped move people in the right direction. They also describe the human tendencies that choice architecture overcomes or counteracts- the status quo bias - for example.
The one area where I think their proposal for choice architecure is naive is in same sex marriages. Creating a dichotomy between the two by having civil authorities approve civil unions (for anyone) and only private institutions, religious ones primarily, conducting marriages, as they see fit, does not address the larger cultural and religious issues which are super-charged with emotion. This is not the same as trying to nudge someone to save more or to reduce their smoking.
Anyone who influences others, particularly government policy makers, needs to read this book to determine whether how they structure choices is helping or impeding their goals, and if the latter, adjust according to Thaler's and Sunstein's suggestions.
Oh, and this is why every doctor should change their last name to Aardvark. When I pick a doctor, after I find the specialty (usually a mental health practitioner), I start looking at the directory alphabetically, and I usually pick my doctor from the first few letters of the alphabet. So, if you are a doctor and want to apply better choice architecture, change your name to Aardvark....more info
Why I bought this book This was a Christmas present for my economist son. He was pleasantly surprised and said he had heard so much about it since he has been an Obama fan for a long time and knew that Barack Obama had read it and recommended it.
I chose the book for that reason but also it looked like a novel approach to the overworked subject of self-improvement. But I have not read the book yet. Will borrow it after my son reads it and will report back at that time. ...more info
Disappointing and political As an economist, Nudge was a book that I desperately wanted to like. Unfortunately, I was disappointed. Perhaps my low rating of the book stems from my high expectations of a book co-authored by the well-regarded behavioral economist Richard Thaler. Without such expectations, my rating might have been higher. But at the same time, without such expectations, I might not have bothered to read the book at all.
The only interesting part of the book is the first part, which consists of the first five chapters. Here, the authors lay out the main premise of the book. The decisions humans make are affected by "nudges." Since nudges are not easy to define, they are best explained through examples. The clearest example of a nudge is a default. When you register online at a site, you are often asked, "Would you like to receive future emails?" By default this box could be either checked or not checked. The default matters; that is, different results emerge under different defaults. The main point of the book is that nudges matter and thus should be carefully designed.
The rest of the book presents a laundry list of policies to which we should apply this principle. For me, this got boring fast. For some reason, the authors seem to be obsessed with identifying every possible nudge and offering their nudge design suggestions. The end of the paperback version of the book became really ridiculous - a bonus chapter of twenty more nudges. I think that the hardcover version is saved from this madness, because the bonus chapter was added after the publication of the hardcover version.
Many may find Nudge overly political. The authors weigh in on what they believe to be good nudges on a large number of hot political issues such as Medicare and same-sex marriage. I personally didn't mind their political stances as much as I minded the lack of economics.
The book is also poorly written. I felt that the publishers gave the authors complete free reign since the authors were well-regarded academics, and obviously academics don't need editors. One problem with the writing was the lack of a targeted audience. The book is supposed to be targeted towards a mass audience; or at least, that is the target of the book's marketing efforts. It is not a textbook or standard teaching material targeted towards undergraduate economics majors. It is also not a serious academic discourse targeted towards other economists. And yet, although it's supposed to be targeted towards the layman, the writing is oftentimes confused about its audience. Additionally, I didn't care for the writing style. While I do enjoy a casual and conversational tone, this book suffered from unnecessary tangential remarks that detracted from the main point. All of the writing issues in this book could have been easily rectified with a good editor. I don't fault the authors as much as I do the publishers for that oversight.
I weakly recommend Part I of Nudge to the intellectually curious layman. The rest of the book I recommend only to those want to read a laundry list of political suggestions....more info
good psychology Great insights to human behavior and how to incorporate appropriate options for progress on complex issues. Very well written and easy to read. Reveals good sense of humor of authors. Extensive documentation, but not at all off-putting. Highly recommend for students of human behavior....more info
Beware of nudging If you have ever been to a theme park or one of those large stores where you can buy things in bulk, you will need this book to understand how they nudged you around so you can spend more money, gain more weight and feel happier.
This book is simultaneously good and very creepy because it suggests (or implies) that Masses are automatons who have to be guided through life to make better decisions. Isn't that what Hitler tried to do, for the "Volk"? I think that's the same and it also shows that it can blow up (pun intended) in faces of millions of people. It did give us one good thing though: the Beetle (Hitler's pet project to nudge people towards motorization) and Porsche (Hitler's chief engineer for racy sports cars and tanks).
Choice architecture sounds good when I am shopping for ketchup but it doesn't sound so good in other areas of life.
Important book in times of crisis. Beware of nudging....more info
The nub of Nudge Paternalism of any kind is dangerous, except for children. There are no "Econs" among the human race, so the "planners" themselves are only us, and not "rational" either, and have their own motivations, benign or malign. Any assumption planners, whether political ones or commercial ones, are always benign is naive. So, we cannot move the decision making to the "planners" and conclude they will inevitably make the best choices for us to be nudged towards.
All we can hope for in fact is that books like Nudge show us how it all works. Then we can at least know what's going on, especially what the "planners" are unwittingly, or more importantly wittingly, trying to get us to "choose", and we can have a say in their activities....more info
Defaults I read half of Richard Thaler and Cass Sunstein's collaboration, Nudge, a few months ago. Then I set it aside, and finished it up recently. It's possible that the pause made me like the book even more. Just when I thought I had read enough, and got their point, I stopped reading. After I returned, I learned more that I thought I knew, and found them even more clever as a result of reading Nudge to the end. The authors observed that humans make decisions in ways different from that expected by economists, or the way econs think they would be made to optimize outcomes. The path of least resistance makes a world of difference, so default choices matter a lot. An expectation of error can also lead to improved decision making because it turns out that humans aren't great decision makers. A nudge is anything that influences our choices, so well constructed nudges can produce better outcomes. These University of Chicago professors have written a cogent, thoughtful and entertaining book about an important subject, and chances are any reader will come away from the book with an increased thoughtfulness about decision making.
A new and original way of looking at the world This is an important book to read given that the authors are Obama's advisors. The authors are from University of Chicago, the school famous for libertarian Milton Friedman who was a favorite of Ronald Reagan. The authors introduce the concept of libertarian paternalism. They do not embrace a pure libertarian nor a left leaning pro-government solution to common problems we face today. My guess is that libertarian idealogues will find some of the ideas offensive.
There is considerable overlap with other books on behavioral economics and psychology such as:
Predicably Irrational by Ariely
Influence by Cialdini
Yes! by Goldstein et al
Whereas the above books were fun to read, Nudge gets dry after the first part.
The book takes a practical but boring turn when it starts tackling specific issues such as social security and healthcare. I found reading these parts boring and not written well. Nevertheless if you trudge through the book you may be rewarded with gaining insight into what an Obama Presidency may look in the future.
a book written by Libertarians nudging the reader to be a libertarian To be fair, I think only first five chapters are worth reading. After that...it's really a long yawn unless you are sympathetic to Libertarian ideas. There is nothing new in this book. I'm little tired of picking up books with rehashed examples already mentioned in other books like "Blink", "Freakonomics" or "Influence"....more info
Behavioural Psychology/Economics best for government officials and policy makers Despite the many behavioural economic top sellers in recent years, this book easily stands out as a practical guide for all (dubbed by the authors as choice architects) responsible for organizing the context in which people make decisions, particularly government officials and policy makers to which the authors try to pitch with plenty of suggestions on public health, safety, money .....issues. Well organised and written with vivid real life examples. In short, recommended!
p.s. Below please find some of my favorite passages for your reference.
The nudge provided by asking people what they intend to do can be accentuated by asking them when and how they plan to do it. (illustrating Kurt Lewin's "channel factors" by experitment of Leventhal, Singer and Jones (1965) on the campus of Yale University) pg70
If certain objects are made visible and salient (priming), people's behaviour can be affected. Objects characteristics of business environments, such as briefcase and boardroom tables, make people more competitive, less cooperative, and less generous....People's judgements about strangers are affected by whether they are drinking iced coffee or hot coffee! Those given iced coffee are more likely to see other people as more selfish, less sociable, and, well, colder than those who are given hot coffee. pg 71
When asked about how he allocated his retirement account, Harry Markowitz confessed: "I should have computed the historic covariances of the asset classes and drawn an efficient frontier. Instead...I split my contributions fifty fifty between bonds and equities." pg 123 ...more info
A bit wordy, but that is its only fault As has been demonstrated numerous times, and reported in numerous books, humans are not rational decision makers. Therefore, why not take advantage of human tendencies to help people make better choices for themselves and for society? "Nudge" is a little wordy, but that is really its only fault. I certainly don't mind being reminded of the various controlled experiments on decision making conducted by psychologists, the humor is good, and I enjoyed the authors' personal experiences. Perhaps more important, the authors are careful in finding and assembling evidence for their recommendations.
Sometimes it is a matter of choosing the proper default to overcome inertia: so organ donation becomes the default rather than the opposite. If this bothers you, then there should be no default: to renew your license you would have to make a choice. Other times it is a matter of eliminating misconceptions: teens tend to overestimate the frequency of teen drinking and smoking, and conformity is a powerful influence. If you inform people about average energy use, and how they compare, they will tend to move toward the average, so the under users actually start using more; just using emoticons with the information (smiley face for the under users) eliminates the negative effects of providing the information and accentuates the positive. Routines are important reminders, so birth control pills for days 20-28 are placebos, but people remember they need to take a pill every day.
The government must take a better role in requiring useful information (such as nutrition labels); Thaler/Sunstein carry this idea farther in suggesting that more standardized/computer readable information be provided, for example on drug plans or mortgage terms: not because this will help the typical consumer directly, but because 3rd party providers could then develop software for the consumer.
No New Ideas, Even Wonks get bored... Book started well, but when these guys try to resolve issues they claim to be important, ah, nothing happens......more info
Good Book, but Not a Flowing Read This was an interesting book. It talked about how to structure choices to nudge people in the right direction concerning health, wealth, and happiness. The books lays a foundation for the discipline. The authors believe in freedom of choice, but also believe that organizations have the role of nudging people towards the best choices in life. The book highlights that people are typically lazy and not proactive. It made me think about ministry in the sense that few ministers actively plan for retirement. Congregations should automatically set up a retirement fund for them and put in a certain amount of money per month. The book is weighty and not the most enjoyable read. Some of the information was more common sense advice than radically changing ideas. To boil down the book, be proactive and put your savings and house payments on a automatic plan. Pretty much structure your life in an appropriate way and you will retire well. Use incentives because these are powerful pushes for companies and churches to guide people in the right direction.
Emphasizing the importance of defaults and choices Nudge provides a solid, easy-to-read background for the emerging space of behavioral economics. The upfront sections provide the context of fundamental human biases that provide power to those that help to form the decision choices each of us have. For me, the most critical insight of this book is the emphasis placed on how responsible any of us are for setting the default options in the choices we pose - whether to our children, our spouses, our colleagues, our team members or our organizations. Several examples provide further fodder, but if you just read the first few chapters, it can help significantly to remind you, that if you lead any people or help shape any decisions, how critical your role is in the impact on those people's lives....more info
NUDGE, IMPROVING DECISIONS OVER LIFE AND HEALTH EXCELLENT PRIMER FOR FIRST TIMERS ON BEHAVIORAL ECONOMICS. IT EXPLAINS IN PLAIN PROSE HOW WE CAN BE INFLUENCED BY OUR ENVIRONMENT TO DO THINGS WITHOUT THOUGHT....more info
Are we human or are we econs? This book breaks down to three sections:
The first section explains the core thesis of 'Nudge' or Choice Architecture. This is, by far, the most interesting portion of the book. It explains why people do what they do, and why many major decisions (picking mortgages, for example) are so misguided. The information (economic or behavior related) isn't necessarily new, but this combination & analysis of the pieces is compelling. This section of the book is interesting enough on its own to make the whole book recommendable.
The second section is an in depth discussion of a number of issues, that tends to become slightly wonkish. The breakdowns are necessary to understand the problem, and then see how the 'Nudge' solution (or 'Choice Architecture') would work. Like anything wonkish, your interest level may vary based on what's being discussed. This section of the book isn't bad, but it can be a let down after such a strong start to the book.
The last section contains conclusions, a summary and if you have the paperback, a short commentary on how the book's apply to the economic/political events of 2008. Everything here is solid and mostly ties up the loose ends, offering final arguments, etc.
I like public policy, economics and any fresh solution to old problems, so I liked this book a lot. I also found various similarities in Choice Architecture to my work, in software development. The book gently alludes to software design, and how its choice architecture (typically defining the 'default' selection, etc) is better than what you find when picking a mortgage/insurance/anything in the real world. The authors also recommend things like all quotes/offers/etc for insurance or mortgages arrive in a standard digital format, so they can easily be compared with everything else out there....something that is very natural in all software design. In many ways, the solutions offered in the book borrow a great deal from software design....more info
Useful analysis of factors affecting decision making In this lovely, useful book, Richard Thaler and Cass Sunstein examine choices, biases and the limits of human reasoning from a variety of perspectives. They often amuse by disclosing how they have fallen victim to the limitations of thought that they are describing. The fact that these educated, articulate professionals can fool themselves so often demonstrates how tough it is to think clearly, a point the authors emphasize and even repeat. Humans fall prey to systematic errors of judgment, but you can harness this problematic tendency productively, including by helping others make better decisions. Some of the authors' suggestions may not be practical, but many are and all are interesting. getAbstract recommends this book to anyone who wants to know how to shape responsible decisions. ...more info
engaging and thought-provoking Everyone seems to be talking about this book, and the Tories like it a lot (which may not necessarily be a good sign). The book shows how people often behave in irrational ways and offers some gentle 'nudging' techniques for making them behave more responsibly and sensibly. There are some very entertaining illustrations and examples - I love the story about the urinals at the airport (but I won't go into any more detail here or else I'll spoil it for you.) Sometimes, however, the strategies seem to be a little less subtle than the authors suggest - for example, the idea that there should be a waiting period before people get married. Surely that's a little too much interference? Nevertheless, the book is an excellent and stimulating - and optimistic - read. I recommend it along with Stop the Age Clock: Look 20 Years Younger, 20 Pounds Lighter and 200% Prettier in Only 20 Days...more info
Insightful, surprising, rich... an intellectual "nudge!" A well-written, insightful, and intellectually-engaging work that gives a real "nudge" to one's thinking and way of looking at the world....more info