Nudge: Improving Decisions About Health, Wealth, and HappinessProduct Description
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.
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Product Details
Amazon Sales Rank: #128 in Books
Published on: 2008-04-08
Number of items: 1
Binding: Hardcover
304 pages
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Editorial Review
Amazon.com
Amazon Best of the Month, April 2008: Debit or credit? Paper or plastic? Lease or buy? Public or private school? Have you made the right choices? Probably not, according to the important new research on the science of choice. In clear and entertaining style, Nudge: Improving Decisions About Health, Wealth, and Happiness provides a crash course on how and why humans are prone to make bad choices, and what we can do about it. Through dozens of eye-opening examples, authors Richard Thaler and Cass Sunstein demonstrate how "choice architecture"--a fancy term for the particular scenario or context in which we are asked to make a decision--can actually nudge us toward making better decisions. More importantly, the authors show that by putting the right "nudges" in place, choice architects (who range from cafeteria managers to divorce lawyers) can substantially improve just about everything important to us, from our retirement savings to the health of our planet, without removing our range of options. Recommended for fans and foes of Freakonomics and Predictably Irrational. --Lauren Nemroff
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Bonus Excerpts from Nudge
Who Needs to Nudge?
Just what are "nudges"? And who needs to know about them? Learn more in this special excerpt.
Ready for More?
Read a sample chapter to see which dozen nudges the authors would most recommend for improving everyday life.
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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.
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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 )
About the Author
Richard H. Thaler is the Ralph and Dorothy Keller Distinguished Service Professor of Behavioral Science and Economics and the director of the Center for Decision Research at the University of Chicago’s Graduate School of Business. Cass R. Sunstein is Karl N. Llewellyn Distinguished Service Professor of Jurisprudence, Univesity of Chicago Law School and Departent of Political Science.
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Customer Reviews
A Triumph for Behavioral Economics
Richard Thaler, an economist at the University of Chicago School of Business, is one of the founders of modern behavioral economics, along with economists Amos Tversky and Daniel Kahneman. Cass Sunstein is a legal scholar and political science professor at the University of Chicago, and has been at the forefront of applying the results of experimental economics to social problems, especially in the field of law.
This book has one Big Idea, and it is a very important one. The idea is called "status quo bias," meaning that in many choice situations, people value the status quo (what they currently have), and will forgo the opportunity to switch to an alternative unless the alternative is significantly more attractive than the status quo. In situations where it is difficult to evaluate the exact benefits and costs of what one has over what one could only obtain with some conscious effort, people will tend to stick with what they have.
For example, in the United States, the default condition with respect to organ donation is "no donation," so if people want to donate their organs upon death, they must explicitly state this preference. In France, the default condition is "donation," and an individual who does not like this default condition must expressly indicate a desire not to donate. Consequently, the rate of organ donation is France is several times higher than it is in the United states.
The idea behind Nudge is that the choice of a default condition can both allow individuals to choose as they please in a democratic, market society, while at the same time improving social outcomes by providing default conditions that lead to socially useful choices. Thaler and Sunstein call this "libertarian paternalism." While one might think that this minimal sort of market intervention can have only a limited impact on social outcomes, the organ donation example suggests otherwise. Perhaps the most important policy of this type would be a mandate that employers make contributions to retirement savings, in the form of 401(k) and other plans be the default, so that individuals who do not wish to save would have to register the desire to opt out of the plans. A related ideas developed in the book is that employees commit to saving a certain fraction of future raises they are awarded by employers, the idea being that it people do not want to reduce their "status quo" income in order to save, but they may be willing to accept a lower new "status quo" when the status quo changes. This is a very sensible idea.
A second sort of libertarian paternalism takes the form of having the government require firms reveal with clarity and salience the full terms of contractual agreement with consumers. For instance, the nutritional content of restaurant food might be required on the menu, or the precise interest rate on a mortgage might be required to be posted, or all the charges of a broker might be required to be itemized on a monthly statement. These measures are "paternalistic," because if consumers were fully aware of the situation, they might demand this information from firms, and market competition would then lead to compliance. The role of the government in this situation would then be the more traditional one of enforcing "truth in advertizing"---firms are not allowed to misrepresent their offerings.
Libertarian paternalism, of course, is not a panacea, and will not replace the price system as the central mechanism for allocating goods and services, and will not obviate the need for legislation that corrects market failures, such as the tendency for excessive energy use to undermine the natural environment, and perhaps even partially offsets such "human frailties" as the tendency towards undersaving and abusing illegal substances. However, libertarian paternalism is attractive as a first line of attack on even these problems, and should be part of the policy-maker's toolkit.
Something new under the sun...
Thaler and Sunstein pulled off something fairly rare and valuable in this book; they offered up a social/political idea that isn't currently being offered up by either the Republicans or the Democrats, but is still politically viable for either party. That's a good thing, because it can be easy to forget that the Democrats and Republicans aren't the only sources of political, social and economic ideas out there.
The authors label themselves as Libertarian Paternalists, two terms that would not normally go together. Libertarians tend to want very small government with a high degree of freedom for citizens, while paternalists tend to think the government should show citizens the right way to do things even at the expense of their freedoms.
Thaler and Sunstein marry the two ideas, saying that governments should not limit peoples' options, but should offer guidance in certain decision-making scenarios. Those decisions would be the ones that are complex for lay-people to make (like prescription drug plan options) or have many options (like choosing a manager for your retirement investments). While the authors do not want to reduce the number of options available or make the decision for anyone (libertarian), they do want to provide well-researched default options and/or forms of encouragement they call nudges to get people headed in a sensible direction (paternalism).
They give a small-stakes example of arranging the food choices in a school cafeteria so that the healthiest options are positioned at eye level at the beginning of the line so they are chosen more frequently (this apparently does really work). They don't want to take away the less healthy options, but neither do they heed the call to stay completely uninvolved. It's a hard philosophy to fault from either side of the political aisle and seems promising for implementation on a number of troubling political fronts we face right now.
Highly recommended for people who like new ideas and are curious to hear about something that isn't being talked up by either of our two major political parties right now.
Refreshing insights about economics in real life
Fascinating examples illuminate a fascinating concept: that we can be "choice architects" structuring our environments so that our natural biases and heuristics lead to better choices and outcomes. Some of the examples are mundane and familiar--such as putting healthy food in a more convenient location than junk food--but the authors quickly move into exploring more novel, unexpected, and compelling possibilities. My only complaint is that the second half of the book couldn't compete with the first half.
