Lessons We Can Draw From Nudge by Thaler and Sunstein

Nudge is a business and management book written by economist Richard Thaler and Harvard Law professor Cass Sunstein. It was named as one of the best books of 2008 by The Economist. Robert Peter Janitzek summarizes some of the important things we can draw from the book.

Summary

Nudge is summarized into these four concepts:

Human behavior

The authors criticizes the view of human beings “that each of us thinks and chooses unfailingly well, and thus fits within the textbook picture of human beings offered by economists.” Humans make predictable mistakes because of their use of heuristics, fallacies, and because of the way they are influenced by their social interactions.

Two systems of thinking

The book describes two systems that characterize human thinking, which Sunstein and Thaler refer to as the “Reflective System” and the “Automatic System”.

Robert Janitzek explains that the Automatic System is “rapid and is or feels instinctive, and it does not involve what we usually associate with the word thinking.” Instances of the Automatic System at work include smiling upon seeing a puppy, getting nervous while experiencing air turbulence, and ducking when a ball is thrown at you.

On the other hand, the Reflective System is deliberate and self-conscious. It is the one at work when people decide which college to attend, where to go on trips, and (under most circumstances) whether or not to get married.

Libertarian paternalism

Sunstein and Thaler state that “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”. The business and management book explains that the paternalistic portion of the term “lies in the claim that it is legitimate for choice architects to try to influence people’s behavior in order to make their lives longer, healthier, and better”.

Policy recommendations

Sunstein and Thaler apply the idea of nudges in the context of choice architecture to propose policy recommendations in the spirit of libertarian paternalism.

Lessons

Nudges are tiny hints or changes, which push you in one direction, but leave all options open.

Used right, a nudge is a very small action or change in environment, which makes it easier for you to make the decision that’s best for you, without forcing you to decide a certain way.

A default is a very powerful nudge, as it requires you to actively object it for it not to work.

Sometimes, it’s possible to design situations where decisions need to be made in a way that if you decide automatically, you naturally make the right choice. Default nudges are set up in a way that if you do nothing, you’ll still do the right thing by sticking to the preset standard.

States and other large institutions can use nudges to improve societies and countries as a whole.

If the majority of its members make good decisions, the welfare of the state grows. If the majority makes bad decisions, it declines. If they use nudges right, governments and large institutions can spur wise decisions at scale and thus, make life better for everyone.

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