The premise for our decisions is often influenced by imperfect information. This leads us to make poor decisions. Yet even when we have access to perfect information, we tend to make poor decisions due to our reliance on mental shortcuts, false believes, and the influence of social interactions. Nudge, written by Richard Thaler and Cass Sunstein in 2008, attempts to improve our decisions about health, wealth, and happiness. [Note: a newer, final edition was published in 2021.]
This book centers around the concept of nudges, behavioral psychology and economics. Nudges are small, simple changes to the environment or choices presented to people to influence their decision without undermining their freedom of choice. In the words of Thaler and Sunstein:
“A nudge is any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting fruit at eye level counts as a nudge. Banning junk food does not.”
Effective “nudges” are the result of what Thaler calls “choice architectures”: Instances in which people actively design menus, store layouts and other environments in which other people make decisions, such that design attributes “nudge” users’ decisions in certain directions. Free choice doesn’t necessarily lead to good decisions, according to Thaler, especially in cases with too many options. For example, in one large company’s health insurance package, employees were offered 48 possible plans, which led many to choose plans which were financially worse for them than the default plan. The book continues with a wealth of examples applicable to a plethora of social transactions.
Thaler’s premise for choice architecture is the concept of liberal paternalism. In other words, private and public institutions are allowed and encouraged to affect citizen’s behavior while also respecting freedom of choice and the outcome of choice. There are obvious drawbacks to this concept namely lack of clear boundaries, distributive injustice, and to an extreme extend it poses an insult to (human) autonomy.
In conclusion, I could have had the same learning experience by limiting my time to the first five chapters of part one and the last four chapters of part five of this book. Part two to four aren’t really new information but examples and justifications for their theory of libertarian paternalism and choice architecture. I recommend these parts for quick access to a specific situation for they can be consumed standalone out of context. For a casual drive or background listen, I found the Freakonomics episode on Nudging to be entertaining.