Monday, July 05, 2010

Book Review: Nudge, by Richard Thaler and Cass Sunstein

Sooo...let me start out by saying that picking out a book to read in the hot tub after you've finished your lap swimming is a fine practice. Unfortunately, you won't make a lot of speedy progress on said book if you only read 10 or so pages at a time...and then take up jogging in favor of lap swimming. This is precisely why it took me many months (5ish, if I had to guess?) to get through the 271 pages of Nudge. In truth, I spent most of that time getting through the first 120 pages, then decided I was sick of seeing it listed there on my sidebar - taunting me - and burned through the rest this weekend. Anyway, my point here is that it's been a goodly while now since I started the book, so the first couple of chapters are a tad fuzzy. Okay then. On to the review!

Nudge: Improving Decisions About Health, Wealth and Happiness presents to the reader the concept of libertarian paternalism. "But wait!" you say. "Libertarian. Paternalism. Are these two philosophies not completely at odds?" Yes, there are many who decry the concept as oxymoronic. But Thaler and Sunstein say that the idea is to "steer people's choices in welfare-promoting directions without eliminating freedom of choice," through the use of nudges. The very first example in the book is about organizing a school cafeteria. Some experimentation with different arrangements showed that, given the same set of options, it was possible to steer kids toward making healthier food selections simply by changing the layout. The argument is: the cafeteria has to be arranged somehow; why not set it up in a way that ultimately helps kids make better choices? "Choices" is, of course, the operative word. Kids still had the option of eating pizza and french fries and cookies with the altered setup, and many did. But on balance, more were choosing fruits and vegetables more often than they did before the change.

Now, pretty much everyone can get behind the use of nudges to help kids eat healthier diets. But they're, you know, kids. A paternalistic approach, even a mild one, is rather more palatable with regard to kids than to full-grown adults. And when nudges are used by commercial entities to increase profits we call it "marketing" and sometimes see it as being coercive. Thaler and Sunstein, though, argue that some gentle nudging of people - adults - in the direction of basically making their actions match their professed desires is no worse than nudging a fifth grader to pick melon over pudding.

They talk about streamlining savings plans - 401(k)s and the like - by simplifying the paperwork and also making them opt-out instead of opt-in, thereby helping those who would otherwise be interested but never get around to filling out the forms. Ditto organ donation. A study undertaken by the state of Illinois found that 80+ percent of people, when polled, said they would be willing to be donors, but only around 60% had checked the box on their driver's license applications. When they switched to donation being the default, with the check box indicating unwillingness rather than willingness to donate, participation increased substantially. Thaler and Sunstein refer to this practice of adjusting the default, as well as a number of other nudgy behaviors, as "choice architecture." The choices remain the same - donate your organs or don't - but the presentation of those choices has an effect. Even a third option, eliminating any default and just requiring people to check 'yes' or 'no,' increased donation rates over the original non-donor default. Interesting!

Another example I found particularly intriguing is that merely presenting people with information can have a big effect. They talked about an experiment involving utility bills. Some customers were given the same bills they'd always received. A second group got bills that detailed their energy use for the month in comparison with how much energy their neighbors were using. Among this group, the high users were abashed into improving their energy conservation the next month, but the low users ended up assuming they had room to use some more energy and indeed did so. A third group was given the same information as the second group, with the addition of smiley and frowny faces on their bills. Amazingly, the smiley face was enough of a nudge to induce the good conservers to maintain their low energy use going forward. Pretty cool, no?

I'm going on a bit more than I intended to, but the bottom line is that there are a lot of really interesting ideas in this book. I'm glad I took the (albeit ridiculously long amount of) time to read it. Give it a look. I guarantee it won't take you 5 months to get through. ;)

1 comment:

Tom said...

I think one of the really important points is that in a number of experiments in varying situations we find that:

a) information with no connection to the question influences the answer given

b) something as simple as the order of choices (in a form, on a shelf) influences the choice made

c) when questioned about why people make the choices they give in these experiments, they're wrong on the merits a portion of the time

The only logical conclusions to me are: people frequently don't actually know what they want, and frequently don't actually know what they're doing. Even weirder: sometimes that's rational (but almost never in the cases which economists and behavioral scientists test).