Nudge: Improving Decisions About Health, Wealth, and Happiness
Attached are the best excerpts (and summarized texts from yours truly) from the book “Nudge: Improving Decisions About Health, Wealth, and Happiness” by Richard H. Thaler and Cass R. Sunstein
Most of us are affected by the eating habits of our eating companions, whatever their intentions. Obesity is contagious; you’re more likely to be overweight if you have a lot of overweight friends. An especially good way to gain weight is to have dinner with other people. On average, those who eat with one other person eat about 35 percent more than they do when they are alone; members of a group of four eat about 75 percent more; those in groups of seven or more eat 96 percent more.
We are also greatly influenced by consumption norms within the relevant group. A light eater eats much more in a group of heavy eaters. A heavy eater will show more restraint in a light-eating group. The group average thus exerts a significant influence. But there are gender differences as well. Women often eat less on dates; men tend to eat a lot more, apparently with the belief that women are impressed by a lot of manly eating. (Note to men: they aren’t.) So if you want to lose some weight, look for a thin colleague to go to lunch with (and don’t finish the food on her plate).
If you find yourself nudged by your friends’ eating choices, it is unlikely to be because one or another friend decided to nudge you. At the same time, social influences are often used strategically. In particular, advertisers are entirely aware of the power of social influences. Frequently they emphasize that “most people prefer” their own product, or that “growing numbers of people” are switching from another brand.
A colleague who raises chickens tells us that they behave the same way. A chicken who has already eaten enough to feel sated will start eating again if a hungry chicken is brought into the next cage.
A choice architect has the responsibility for organizing the context in which people make decisions. […] many real people turn out to be choice architects, most without realizing it. If you design the ballot voters use to choose candidates, you are a choice architect.
If you are a doctor and must describe the alternative treatments available to a patient, you are a choice architect. If you design the form that new employees fill out to enroll in the company health care plan, you are a choice architect. If you are a parent, describing possible educational options to your son or daughter, you are a choice architect. If you are a salesperson, you are a choice architect (but you already knew that).
There are many parallels between choice architecture and more traditional forms of architecture. A crucial parallel is that there is no such thing as a “neutral” design. Consider the job of designing a new academic building. The architect is given some requirements. There must be room for 120 offices, 8 classrooms, 12 student meeting rooms, and so forth. The building must sit on a specified site. Hundreds of other constraints will be imposed — some legal, some aesthetic, some practical. In the end, the architect must come up with an actual building with doors, stairs, windows, and hallways. As good architects know, seemingly arbitrary decisions, such as where to locate the bathrooms, will have subtle influences on how the people who use the building interact. Every trip to the bathroom creates an opportunity to run into colleagues (for better or for worse). A good building is not merely attractive; it also “works.”
…we welcome you to our new movement: libertarian paternalism. We are keenly aware that this term is not one that readers will find immediately endearing. Both words are somewhat off-putting, weighted down by stereotypes from popular culture and politics that make them unappealing to many. Even worse, the concepts seem to be contradictory. Why combine two reviled and contradictory concepts? We argue that if the terms are properly understood, both concepts reflect common sense — and they are far more attractive together than alone. The problem with the terms is that they have been captured by dogmatists.
The libertarian aspect of our strategies lies in the straightforward insistence that, in general, people should be free to do what they like — and to opt-out of undesirable arrangements if they want to do so. To borrow a phrase from the late Milton Friedman, libertarian paternalists urge that people should be “free to choose.” We strive to design policies that maintain or increase freedom of choice. When we use the term libertarian to modify the word paternalism, we simply mean liberty-preserving. And when we say liberty-preserving, we really mean it. Libertarian paternalists want to make it easy for people to go their own way; they do not want to burden those who want to exercise their freedom.
Libertarian paternalism is a relatively weak, soft, and nonintrusive type of paternalism because choices are not blocked, fenced off, or significantly burdened. If people want to smoke cigarettes, to eat a lot of candy, to choose an unsuitable health care plan, or to fail to save for retirement, libertarian paternalists will not force them to do otherwise — or even make things hard for them.
Loss aversion helps produce inertia, meaning a strong desire to stick with your current holdings. If you are reluctant to give up what you have because you do not want to incur losses, then you will turn down trades you might have otherwise made. In another experiment, half the students in a class received coffee mugs and half got large chocolate bars. The mugs and the chocolate cost about the same, and in pretests students were as likely to choose one as the other. Yet when offered the opportunity to switch from a mug to a candy bar or vice versa, only one in ten switched. As we will see, loss aversion operates as a kind of cognitive nudge, pressing us not to make changes, even when changes are very much in our interests.
Status Quo Bias: Loss aversion is not the only reason for inertia. For lots of reasons, people have a more general tendency to stick with their current situation. This phenomenon, which William Samuelson and Richard Zeckhauser (1988) have dubbed the “status quo bias, “ has been demonstrated in numerous situations. Most teachers know that students tend to sit in the same seats in class, even without a seating chart.
Conformity and Tax Compliance: In the context of tax compliance, a real-world experiment conducted by officials in Minnesota produced big changes in behavior 12 Groups of taxpayers were given four kinds of information. Some were told that their taxes went to various good works, including education, police protection, and fire protection. Others were threatened with information about the risks of punishment for noncompliance. Others were given information about how they might get help if they were confused or uncertain about how to fill out their tax forms. Still, others were just told that more than 80 percent of Minnesotans already complied, in full, with their obligations under the tax law.
Only one of these interventions had a significant effect on tax compliance, and it was the last. Apparently, some taxpayers are more likely to violate the law because of a misperception — plausibly based on the availability of media or other accounts of cheaters — that the level of compliance is pretty low. When informed that the actual compliance level is high, they become less likely to cheat. It follows that either desirable or undesirable behavior can be increased, at least to some extent, by drawing public attention to what others are doing. (Note to political parties: If you would like to increase turnout, please do not lament the large numbers of people who fail to vote.)
