Nudge: Improving Decisions About Health, Wealth, and Happiness (Hardcover) by Richard H. Thaler

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100+ Book Challenge: 100 for Alan 2009	70	167	17 hours, 19 min ago

02/08/09

Trevor rated it:

This one took me longer to read that is reasonable for a book of its length or the clear style it is written in. I mean, such a simply written text of 250 pages ought to have finished in no time. The problem was that I don’t live in the US and so many of the examples made the book a struggle for me. All the same, there are ideas in this book that are important no matter where you live.

Don’t you just love the internet? I wanted to start this paragraph with that quote by Görin...more

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04/18/08

David rated it:

bookshelves: read-in-2008

Read in October, 2008

This is a terrific book. The authors cover terrain which has been explored recently in a whole slew of books: loosely speaking, why we humans persistently engage in behavior patterns which do not benefit us in the long term. Their own research, at the University of Chicago, builds upon the work of Tversky and Kahneman in behavioral economics (very much in vogue this past few years).

In the book, they provide a funny, engaging, remarkably clear exposition of the various factors which...more

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06/26/08

Publius rated it:

Read in August, 2008

I second-guessed my purchase of Richard Thaler and Cass Sunstein's Nudge: Improving Decisions About Health, Wealth, and Happiness, almost the minute I received my Amazon e-mail receipt -- I had already read Malcom Gladwell's Blink, and heard about the literary disaster that is Sway, and yet there I was, reading Nudge's introduction about the arrangement of cafeteria food.

I'm glad I did. While Thaler and Sunstein are happy to revel in the small ways that their insights into "choi...more I second-guessed my purchase of Richard Thaler and Cass Sunstein's Nudge: Improving Decisions About Health, Wealth, and Happiness, almost the minute I received my Amazon e-mail receipt -- I had already read Malcom Gladwell's Blink, and heard about the literary disaster that is Sway, and yet there I was, reading Nudge's introduction about the arrangement of cafeteria food.

I'm glad I did. While Thaler and Sunstein are happy to revel in the small ways that their insights into "choice architecture" can lead to better or worse choices, they also lay out their political principles and detail their impact on current policy debates (e.g., Social Security, Medicare Part D, Education.) To top it all off, they begin the book with a treatment of our cognitive failings, distinguishing between our automatic and reflective processing systems (what's not to love!), leading right into their arguments for how to help the automatic majority overcome their cognitive frailty without infringing the reflective minority's ability to choose.

So what is choice architecture? Well, are you choosing out of ten choices, or 100? Are you automatically enrolled in one choice or another if you don't make an active decision? How is that default set? How is information presented to you to about the available choices? All of these questions speak to choice architecture -- in other words, the arrangement and organization of choices -- which has a nasty habit of leading individuals to choices that they themselves would not find optimal (see don't be bob bias, the mind and morality).

Furthermore, "choice architecture, both good and bad, is pervasive and unavoidable." This point is essential to Thaler and Sunstein's argument if you are a libertarian. Ignoring choice architecture won't make it go away, it will only make it more likely that the choices favored by choice architecture are more likely to be poor. For instance, you can make the default option for new employees enrolled at 5% in a 401(k) with an option to opt-out, or you can make the default option to not be enrolled (as is often the case). If you stick with the current default, many who would otherwise enjoy being enrolled will not do so because of the choice architecture. Thaler and Sunstein recommend acknowledging the importance of choice architecture and deliberately deciding on its design.

Thaler and Sunstein aren't interested in helping individuals pick out their dry cleaners; as the authors note, if a dry cleaner performs poorly, it is fairly easy for individuals to make a better decision the next team.

Rather, "people are most likely to need nudges for decision that are difficult, complex, and infrequent, and when they have poor feedback and few opportunities for learning."

Individuals are primed to make poor choices for Medicare Part D, Mortgages, and retirement investments. Thaler and Sunstein don't advocate for eliminating choices because of these problems. On the contrary, their final chapter points to the infamous "third way" -- separate from both the command-and-control left and the single-minded 'choice' monkeys of the libertarian right.

There needn't be a war between 'no choice' and 'unlimited choice.' Thaler and Sunstein spend around 250 pages explaining that this is indeed a false choice. Like myself, they side with the libertarians when it comes to the importance of choice, and side with the left when it comes to the failure of 'choice' to solve all problems. Choice is important. Coercion isn't necessary. Focus on the choice architecture.

Oh, and I have to add. As someone who has long supported responding to the gay marriage debate by taking government out of the marriage business (perhaps keeping a civil union or partnership business) and leaving it to independent churches, I was very happy to see Thaler and Sunstein put forth such an argument in Nudge.

Whether you are on the left or right, worth a read! (Taken from my post)(less)

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05/04/08

Nina rated it:

Read in June, 2008

I really like a lot of the ideas presented in this book. I completely agree with their major points - that policies should pay close attention to the default option, and that one of the most effective ways of helping people make good decisions is complete and clearly presented disclosure. I know I complained that Ariely's book didn't take his theories far enough because he didn't talk about the implications of people's predictable irrationality, but now I'm going to complain that this book foc...more I really like a lot of the ideas presented in this book. I completely agree with their major points - that policies should pay close attention to the default option, and that one of the most effective ways of helping people make good decisions is complete and clearly presented disclosure. I know I complained that Ariely's book didn't take his theories far enough because he didn't talk about the implications of people's predictable irrationality, but now I'm going to complain that this book focused too much on the practical application of what behavioral economics has taught us without laying a solid theoretical or moral foundation. (Ok, so maybe I'm a little hard to please.)

In fact, I don't know if such a foundation is even necessary. This book would have worked best as a series of individual essays or empirical articles. The ideas alone are great - automatic enrollment is a clever way to get people to save for retirement by not giving them the option of succumbing to inertia, and I'm all for companies making public their carbon output. The problem with putting all these great ideas together in a book is that you have to develop an overarching theory that encompasses all your great ideas, coin it, and prove that you can generalize your theory to many other areas you may not know much about. And this is how we end up with "libertarian paternalism."

When the authors try to apply this theory to things like privatizing marriage and school choice, it comes across that they are using their nifty theory to solve complex problems, whose solutions in reality need to take into account much more than just practical considerations. Since they coined their theory with such a politically-charged term (not an oxymoron, they insist), I was expecting a more thoughtful discussion of government's responsibility to nudge people in the right direction or to let people make their own mistakes. Actually, this term kind of muddled what they were trying to say - they didn't seem to be arguing for smaller or no government (libertarians go much farther than just wanting the ability to opt out of a government's default decision, from what I gather), and paternalism just sounds scary, so they make a great effort to try to defend the parternalism part of their theory. And a lot of what they talk about actually has nothing to do with government or politics - the automatic enrollment plan has been adopted by private employers without any government mandate.

In a nutshell, this book has a lot of interesting and clever ideas that I really believe can work, but the grand theory of libertarian paternalism was not a good umbrella under which to throw all the random interesting and clever ideas the authors have. (less)

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11/28/08

Seth rated it:

Read in November, 2008

This is one of those rare combinations of a book that is both banal and ennervating. It is not ennervating because it is popular, but rather because it is based on a flawed premise for how we should go about improving the world. Its banality stems from the fact that it seems to circumscribe the improvement of the world within such themes as getting people to quit smoking, invest in solid 401(k)s, and choose items on the cafeteria menu that will not make them too fat.

I could spend a v...more This is one of those rare combinations of a book that is both banal and ennervating. It is not ennervating because it is popular, but rather because it is based on a flawed premise for how we should go about improving the world. Its banality stems from the fact that it seems to circumscribe the improvement of the world within such themes as getting people to quit smoking, invest in solid 401(k)s, and choose items on the cafeteria menu that will not make them too fat.

I could spend a very long time critiquing the 'behavioral economics' approach to research upon which this book bases its policy agenda; however, because the book is much more about policy, I will hold off on the behavioral econ issues and just point out the fundamental failure of an approach that terms itself 'libertarian paternalism.' The oxymoronic nature of this term should be immediately obvious. In its broadest sense, it stems from Thaler and Sunstein's observation that some people are in positions to be 'choice architects,' which for them is like being the framer of the 'default setting' of a given decision (one of their analogies is to the engineer who decides what the initial ringtone and display settings of a cellphone will be). Who gets to be a choice architect and how they come to get there is of little concern to the authors. They believe that their libertarian paternalistic approach will utilize minimal coercion in pursuit of maximum individual choice. In fact, most of their attempts to defend their philosophy stem from exactly this defense, as if to assuage all fears that they are happily presenting us with a slippery slope to authoritarianism.

My main complaint with their approach is entirely different - I take issue with their separation of process from outcome. They seem to think that as long as the outcome appears to involve choice, and the process to reach that outcome was based on ethical principles, then we are all square. In this way their view recalls that of Walter Lippmann, who famously debated against John Dewey in the 1920s over what structure of public discourse and democracy would best suit the United States. Like Lippmann, Thaler and Sunstein aver that the complexity of modern society, and its confounds for sound, fully informed decisionmaking compel the individual to make 'shortcuts.' Because the cumulative effects of this shortcut-based thinking may produce negative outcomes, the argument is for there to be a set of people with expert knowledge to structure the array of choices for the less knowledgeable. Notably, Dewey's argument against this approach is not at all one that Thaler and Sunstein anticipate. Thaler and Sunstein think that their approach is most offensive to economists and serious libertarians who think either a) people are fully rational and need no help with their choices, b) any paternalism is a step too far, or both. Quite apart from these, Dewey's argument (in very brief form) is that your outcome is entirely inseparable from your process: that the process of discourse - who is talking about the decisions being made, and what their relationships are to each other in that conversation - actually has important effects on what choices are POSSIBLE. I think this is a very serious critique of the Thaler/Sunstein approach which cannot be ignored. This, plus the historical argument that I mentioned above (who are the choice architects? how do they get to be there?), seriously call into question the applicability and desirability of any quick resort to 'libertarian paternalism.'(less)

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02/17/09

Terry rated it:

Read in February, 2009

recommended to Terry by: I think it was Ars Technica
recommends it for: policy wonks

The book focuses on cases where simple changes in choice architecture (how people are exposed to options) can create significant changes in behavior. The authors immediately recognize this could be used "for evil" as it were or against the chooser such as arranging food in a cafeteria so kids buy more high margin foods but most of the cases revolve around "stove" examples. Stove cases are where slight changes in presentation create a good situation for the user like stove b...more

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04/26/09

Gordon rated it:

(review of isbn 014311526X)

Part of the flood of books on behavioral economics that have come out in the last few years, this book synthesizes a lot of excellent research in the field – including research by the authors themselves. The fathers of this whole field, based on research that first published in the 1970’s, are two Israeli-born academics, Amos Tversky and Daniel Kahneman. Kahneman won the Nobel prize in Economics in 2002 for this work (Tversky died in 1996). The authors of Nudge in fact co-authored a number...more Part of the flood of books on behavioral economics that have come out in the last few years, this book synthesizes a lot of excellent research in the field – including research by the authors themselves. The fathers of this whole field, based on research that first published in the 1970’s, are two Israeli-born academics, Amos Tversky and Daniel Kahneman. Kahneman won the Nobel prize in Economics in 2002 for this work (Tversky died in 1996). The authors of Nudge in fact co-authored a number of papers with Kahneman. The gist of their message is that human beings are not rational in their economic decision-making, but are irrational in some very predictable ways. Thaler and Sunstein take this knowledge about predictable errors, explain it further, and propose ways that people can be “nudged” into making better decisions. They call this approach “libertarian paternalism”. It’s libertarian because it allows choice. It’s paternalistic in that it structures those choices and/or presents those choices in a way that is judged to be “better” for the chooser.

Example: Left to their own devices about saving for retirement, most Americans mess it up. Unless they’re lucky enough to have an employer with a “defined benefit” pension plan, they are very likely to end up with not much more than Social Security when they retire. The reasons are that they:
• Save too little
• Invest in low return assets like money market funds
• Allocate their assets poorly so that, if they do stray into investing in higher return assets like equities, then they typically diversify too little (investing it all in their employer’s stock is a common mistake) and chase yesterday’s hot performer (which is probably next year’s dog)
• Run up big expenses and tax bills by trading too much or investing in mutual funds with high management expenses
• Fail to take advantage of retirement programs offered to them by their employers, such as 401K’s with a matching employer contribution

All of these errors are predictable, say Thaler and Sunstein. We save too little because saving involves pain today for gain tomorrow – in contrast with, say, eating ice cream, which is gain today for pain tomorrow. We make bad asset allocation decisions because it’s complicated as a result of having too many choices and a lot of uncertainty about what outcomes those choices will result in. We chase yesterday’s hot performer because we assume tomorrow will be just like yesterday and also because we want to run with the crowd. We fail to take advantage of employer-provided retirement matches because if the default choice in the program is choosing “no thanks”, then we stick with that choice because of our persistent inertia.

The above behaviors are well-studied by economists, psychologists and sundry other social scientists. The causes of these behaviors have names like the availability heuristic (choosing outcomes that are easy to visualize), the status quo bias (inertia), social contagion (acting like lemmings) and so on. The labels may not be familiar, but the behaviors themselves are all very easy to recognize because we all suffer from them. Or to be more precise, the behaviors are easy to recognize in others, even if we fail to recognize them in ourselves.

Fortunately, there are some easy ways of working around these problems – if we recognize that the underlying behaviors are baked into all of us, but can be “nudged” into new directions. Take retirement saving. Instead of serving up a plan with so many choices that employees don’t even bother signing up, the default choice in these plans should be that the employee is automatically enrolled in a standard plan based on the employee’s age, which provides for a reasonable asset allocation (say, between stocks and bonds) based on the employee’s likely age of retirement. This plan would also have low management fees and be tax-exempt. Of course, employees would still have the ability to over-ride these default choices, but the vast majority would be unlikely to do so – due once again to the inertia factor.

The authors provide scores of these kinds of examples, from prescription drug programs to organ donation campaigns to predicting the outcome of sports games. Some of these examples are targeted at individual consumers, some are more relevant for business executives, and still others are about public policy. It’s very well-written, well supported by research, and relevant to just about anyone who ever has to make a decision. All of which makes for a pretty good page-turner of a book.
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04/25/09

Sarah rated it:

Read in April, 2009

As someone who agonizes over some decisions, goes with my gut on others, and actively avoids making choices in certain areas in my life, I was intrigued by this book's premise. In essence, the authors explore the external forces guiding our decision-making and proposes ways to channel those forces into making wiser life choices.

Having finished it, I am not convinced that I am substantially better equipped to make wiser choices. However, I am glad to have read the book, if only for ...more

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05/11/09

MCOH rated it:

Read in May, 2009

Similar to, but not nearly as fun as Freakonomics, Malcolm Gladwell's books, The Paradox of Choice, or some other books I've read lately. This book is less geared towards the average layperson than to policy makers, employers, and others in a position of influence.

The central thesis of this book is that people don't make great choices a lot of the time, due to their own laziness, stupidity, ignorance, etc. It would really help if society could structure things such that it was ea...more

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12/16/08

d.school Hasso Plattner Institute of Design at Stanford rated it:

Read in November, 2008

i thought this book was fantastic in the sense that it is going to help me frame any project i do that aims to change human behavior. it showcases the power of a very small change to what you're doing for the purposes of reaping huge benefits. my favorite example was in the field of home power usage: one town in california (can't remember which) started telling people whether they were above or below the town's average power consumption on their bill each month. those who were above average cut ...more

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05/11/09

Kevin is currently reading it

bookshelves: currently-reading

A book co-written by Cass Sunstein, the Harvard law professor recently tapped by President Obama to become the administration's regulatory czar as the head of the White House Office of Information and Regulatory Affairs (OIRA), describing the myriad ways in which choice architects control the world around us in subtle ways. The key philosophical term Thaler and Sunstein use to describe their system is "libertarian paternalism," which sounds so conflicted and ominous and Orwellian that ...more

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06/01/09

Maggie rated it:

The authors of Nudge promote "libertarian paternalism" - basically, ways to guide or "nudge" people towards better decisions without taking away their freedom of choice. Nudges they espouse include providing decision makers with easy-to-understand information, creating incentives (market or other), and otherwise structuring choices so that real people are able to navigate some of the more complex decisions in life. The book discusses how nudges could help with issues includin...more

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03/26/09

Yoni Samlan rated it:

Read in April, 2009

Bizarrely similar to software user interface design books I've read. The dominant message is "people are impatient and impulsive," and "set sensible defaults."

Some great low-hanging fruit as examples (fixing medicare part D so it defaults to saving seniors money, for one). It's written in a plain-talking style that assumes no political or philosophical knowledge, but that borders on condescending at times.

It's pretty hard to argue with the particulars ...more

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12/05/08

Catherine is currently reading it

bookshelves: currently-reading

I am in the middle of this book. I had to take it back to the library because I ran out of time and someone else wanted it. So I am still on the wait list to get it back. My main thought so far about this book is that it is sort of like that book Social Intelligence. I mean, a lot of the stuff in common sense really if you have ever thought about the subject. But it is interesting to have all the information together. And sometimes you have a moment where you are like, "Oh shit - I ne...more

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06/06/09

Dia rated it:

Good things about this book: It's cheerfully written; it gives basic yet oft-ignored investment and other financial advice (turns out Dad was right); its thesis is sensible and does unite right and left; one of the authors is advising President Obama. (Hm. Goodreads doesn't seem to recognize "Obama" as a word -- and now I see that Goodreads doesn't recognize "Goodreads" as a word!)

Less than impressive things about this book: It acts as if it's offering a panacea,...more

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04/10/09

Timmy rated it:

Read in May, 2009

Add this to my extensive list of unfinished books.

It contained some interesting ideas, though in some ways nothing that we didn't already know from marketing, i.e. the way you display things or present choices to people effects their decision making.

The book posits that the benevolent people who display items for us, should, knowing what is best for us, create displays that cause us to lean in the direction of making the best decision for ourselves. Sounds kind of ins...more

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01/19/09

matt rated it:

Read in January, 2009

This book essentially argues for a re-think of how the government and private companies design complex and important choices, such as the choice of a health care plan or a home mortgage. While the traditional free-market capitalist idea has simply been to maximize the number of options in any scenario, this design fails to recognize the limited knowledge and expertise and motivation that any given person is likely to have in the field of, say, investing for retirement.

The chief desi...more

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05/09/08

Tara rated it:

bookshelves: fromthelibrary, nonfiction, skimmed

Read in May, 2008

I'll sound like an old lady for saying this but the text was super tiny. And it read like a text book, so only read it if you need a headache or are researching the topic.

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01/08/09

Jennifer rated it:

Read in January, 2009

Interesting ideas about how "choice architecture" or the way you structure the choices that people make about health, investment and social institutions, can influence outcomes. For instance, one researcher found that by moving the positions of various foods in school cafeterias, you could change by as much as 25% which foods the kids chose. (Putting fruit at eye level, rather than cake, for instance, does more than lecturing kids about calories and the risk of diabetes.) I found th...more

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01/05/09

Nathan King is currently reading it

bookshelves: currently-reading

Read in January, 2009

Very interesting read from the emerging school of behavioral economics. The book seeks to answer the question, how do you design a product/service/government program that rewards the appropriate selection by the customer. In my line of work, our revenue depends on how successfully we persuade people to make good health choices. As we all know from our own lives, even though we nominally desire to not eat too much and to exercise regularly, we're not too good at it. What incentives do we need to ...more

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