Nudge | Thaler & Sunstein

Published: 2009

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What we choose to buy in the cafeteria depends on how the products are laid out and which magazine we buy in the store depends on where it is placed on the store shelf. The outside world and packaging affect the choices we make. Our choices are influenced by “nudges” – pushes that leads us to make certain decisions. What we consider to be our very own choices is often the result of how our choices are presented to us.

“A nudge is any small feature in the environment that attracts our attention and influences the behavior that we make”

THE DECISION-MAKING ENVIRONMENT IS NEVER NEUTRAL. No decision is made in a vacuum because the context is always distorted in some direction. It is extremely difficult to present choices completely neutral. Whether options are presented first or last or whether there is a default mode can determine the choices we make. Nudges can influence others to make decisions (for better or worse) without forcing it.

NUDGES ARE BASED ON BIASES. A successful nudge is based on one or more biases. It can be anything from social bias, default bias, home bias, anchoring bias or overconfidence bias – to name a few. The more biases a nudge system uses, the more efficient it becomes.

GUT FEELING VS. REFLECTION. We think with two systems; an automatic and a reflective. The automatic system is our gut feeling and the reflective system needs time to think to make a conscious decision. The automatic system makes many everyday decisions and is strongly influenced by nudges. By building our own nudge systems based on our own preferences, we can manipulate our automatic system. The reflective system has made the “investment” in a well-thought-out system and can then lean back. Examples can be to-do lists, shopping lists or the alarm clock.

PLANNING VS. ACTION. According to Thaler and Sunstein, a human has two personalities; the doer and the planner. The doer uses the automatic system and is the short-sighted who follows the gut feeling and does what feels right for the moment. The planner uses the reflective system and thinks long-term and carefully considers all options before making a decision. These two personalities are constantly fighting with each other. The planner works towards long-term goals but must take into account and accept the doer’s emotional and short-term choices.

NOTHING IS A COINCIDENCE. Thaler and Sunstein call those who design systems for nudges “choice architects”. These develop the layout of the menu at a restaurant to the default modes or designs the order of choices on government surveys. Small adjustments can have a dramatic effect on the choices we make.

“A choice architect has responsibility for organizing the context in which people make decisions”

WE PREFER THE DEFAULT. The easiest way to give people a nudge is to change the default option. We humans have a “status quo” bias that means that in the event of uncertainty, we stick to the default mode – where we get either what we are comfortable with or what someone else with knowledge in the subject considered a good choice. For example, the majority of Germans are organ donors, while very few Americans are. In Germany the standard mode is to be an organ donor, in the USA it is not to be.

“Defaults have some extra nudging power because consumers may feel, rightly or wrongly, that default options come with an implicit endorsement from the default setter, be it an employer, the government or television scheduler”

COMPLEX AND INFREQUENT DECISIONS NEED NUDGES. Thaler and Sunstein believe that we primarily need to be nudged in important decisions that we rarely make. For those decisions, we never have time to build systems to make the right decisions ourselves. Especially if the decisions do not give immediate feedback without us first seeing the results in a few years or later. Examples of these can be choices about pension savings. If there are no nudges, the least informed tend to be exploited by the most informed.

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