Nudge: Improving Decisions About Health, Wealth and Happiness (R. Thaler and C. Sunstein)

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

I discuss this influential 2008 book in my course "Upgrade Your Mindware".

The first chapter reviews material familiar to us by now, on cognitive biases and the science that has documented our tendencies toward faulty judgments and bad decisions.

One approach to "debiasing" is to modify the decision-maker, through teaching them new thinking skills. See Richard Nisbett's Mindware: Tools for Smart Thinking, for a good example of this approach.

Another approach to debiasing is to modify the environment in which decisions are made, in a way that exploits our natural psychological tendencies, by unconsciously directing us to make good decisions rather than bad decisions. This is the subject of Nudge.

It turns out that how much we eat, for example, depends on what’s served on our plate. What foods we pick from the cafeteria line depends on whether the salads or the desserts are placed at eye level. What magazines we buy depends on which ones are on display at the supermarket checkout line.

This same tendency also affects decisions with more significant consequences: how much families save and how they invest; what kind of mortgage they take out; which medical insurance they choose; what cars they drive.

Behavioral economics has repeatedly documented how our apparently free choices are affected by the way options are presented to us.

Whether it’s a restaurant laying out food or a business offering its employees a list of mutual funds in its 401(k) plan or the government presenting different Medicare options, whoever presents choices must frame them in some way. And the framing will affect the decisions. No decision setting is “neutral” with respect to influencing people's choices.

The authors show a number of ways in which small changes to a choice environment can lead people to make better choices for themselves. But they're also very concerned about the ethical and political ramifications of this form of unconscious persuasion, and these discussions occupy parts of the book.

Nudge is a compelling effort to harness psychology and methods of persuasion in the service of the public good. For this alone it's worth a read.

It's also worth following the political impact of the book, especially in the governments of David Cameron and Barack Obama.