Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard Thaler and Cass Sunstein

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Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard Thaler and Cass Sunstein

by Rebecca Sanborn Stone

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If you’re like most Americans, chances are you made a New Year’s resolution to hit the gym, lay off the smokes or eat more green vegetables. And again, if you’re anything like most Americans, chances are you and your resolution parted ways sometime around Valentine’s Day. Take heart: you’re not alone, and it’s not that you actually want to spend more hours watching sitcom reruns—you just need a nudge.

Most humans are remarkably bad at making choices in their own best interest. We make predictable and systematic mistakes in reasoning, and we let them guide our choices. We rely too much on gut reactions and not enough on conscious thought. We use rules of thumb to make guesses when we don’t have much to base them on. We are overly influenced by events that are recent or close to us. We are reluctant to make choices that others can make for us. And we are unfailingly, unrealistically optimistic about outcomes.

It’s no big deal if we pick the wrong tie or breakfast cereal, but there are major consequences when thinking errors influence how much energy we use, how we interact with our neighbors, whether we vote, how we take care of our health, and what we want for our communities. Richard Thaler and Cass Sunstein, two University of Chicago economists, believe that we can vastly improve the quality of decision-making by understanding where people typically go wrong and by using “nudges” to help people make choices that are truly in their best interest.

In Nudge: Improving Decisions About Health, Wealth, and Happiness (Yale University Press, 2008), Thaler and Sunstein suggest that “people make good choices in contexts where they have experience, good information, and prompt feedback—say, choosing among ice cream flavors.” Conversely, people make bad choices when they don’t have much experience and when feedback and consequences are delayed or indiscernible. Unfortunately, decisions in our personal lives and in our communities often fall into the latter category. Most people can’t picture how a big box store zoning decision will change the way their neighborhood looks or feels, or how expanding a 2-lane road into a 4-lane one might impact their lives in 20 years. When faced with complex decisions like those, most citizens accept the default option: vote with their guts or don’t vote at all.

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Thaler and Sunstein’s solution to our shortcomings in logic is to help people to make smarter decisions without forcing their choices. Nudge is directed toward “choice architects”—those people who have “the responsibility for organizing the context in which people make decisions.” Choice architecture is at play in everything from the design of election ballots to placement of stop signs, structuring of payroll and benefits options to setting up chairs for a community meeting. By consciously designing how information and options are presented, we can encourage people to make the decisions they would rationally make if they had complete information and perfect reasoning abilities.

According to Thaler and Sunstein, a nudge “alters people’s behavior in a predictable way without forbidding any options” or drastically changing their incentives (i.e. through payments or fees). Putting fruit at eye level in a cafeteria counts as a nudge; banning junk food does not. Telling people what they’d save through energy conservation is a nudge; paying them to conserve is not.

The book is full of nudges from various fields—economics, healthcare, education, environment—nearly all of which have lessons for improving citizen engagement and community decisions. A few key nudges can be easily applied to communities and planning:

 

  • Priming. Small reminders and features of our surroundings can have massive effects. One study found that it’s possible to increase the probability of voting by 25% simply by asking registered voters the day before an election whether or not they plan to vote. Perceptions and decisions can be influenced by things as simple as refreshments: people served hot coffee at a meeting have been shown to cooperate better than those served iced coffee.

  • Norms. Most people are influenced by peers, but are more likely to change if they are reminded of an accepted norm than a problem behavior. Colleges have found that it’s easier to reduce binge-drinking by highlighting that a majority of students does not drink excessively than by focusing on the problematic minority that does. A town could more effectively increase voter turnout by publicizing the fact that 60% of residents do vote, but we more often hear about the 40% that do not.

  • Feedback. It’s hard to make a decision when you don’t know how you measure up to your neighbors. A California utility company gave customers feedback by printing neighborhood comparisons on energy bills, along with a “smiley face” for bills with relatively low energy usage and a frown for those with high usage. The simple nudge was enough to ensure that high usage went down, without driving low usage up.

  • Risk-aversion and framing. People are naturally risk-averse, so they are more responsive to the possibility of losing money than gaining the same amount. People are more likely to take action if they are told it will cost $350 if they don’t conserve energy, than if they are told they will save $350 if they do conserve. A community could expect a similar response when framing a ballot measure about municipal cost-cutting.

  • Self-control. Most of us struggle with motivation and self-control, but there are ways to help people with commitments and consequences. Several new websites help individuals set a goal (losing 10 pounds, attending three public meetings, saving $1,000) and back it by putting up money or agreeing to another consequence. If the individual succeeds, he gets his money back. If he fails, it goes to charity or—even better—to an opposing political party or archrival baseball team.


Nudges aren’t foolproof, and detractors have plenty to say as well. Some see a fine line between nudging and an Orwellian world of pressing, cajoling, shoving and intimidating. Others argue that evil nudgers can co-opt nudges for their own sinister purposes. Still others claim that people should have the right to make their own decisions—even when they’re flat out wrong. Thaler and Sunstein address most of those objections through “libertarian paternalism,” a paradigm that emphasizes using nudges to make people’s lives better while still ensuring that people are not forced into choices. Regardless of one’s philosophy, Thaler and Sunstein point out that intentional and unintentional nudges are pervasive and inevitable. You’ve been nudged before and you’ll be nudged again, so you might as well keep on nudging, and try to do so in a positive direction.

There are plenty of ways for citizens and communities to do just that. Challenge yourself and your neighbors to commit to public participation, and put up some money to prove it. Publicly reward people who participate and contribute to the community. And next time you’re organizing a contentious meeting, be sure the coffee is hot.


Read more about nudges at
nudges.org or the Nudge blog.

Cass R. Sunstein recently became administrator of the White House Office of Information and Regulatory Affairs. He was previously a professor at the Harvard Law School he taught at the University of Chicago for 27 years, worked at the Department of Justice, and clerked for former Supreme Court Justice Thurgood Marshall. Sunstein has also written regularly for leading newspapers and magazines, and been interviewed on all the major television networks.


Richard Thaler is the Ralph and Dorothy Keller Distinguished Service Professor of Economics and Behavioral Science at the Graduate School of Business, University of Chicago, and Director of the GSB's Center for Decision Research. He is also Research Associate at the National Bureau of Economic Research where he co-directs the Behavioral Economics Project.