Nudge: Improving Decisions About Health, Wealth, and Happiness

by Richard H. Thaler

To produce a user-friendly design, the architect needs to understand how to help Humans. Software and building engineers live by a time-honored slogan: keep it simple. And if a building has to be complicated to be functional, then it is best to offer plenty of signs to help people navigate. Choice architects need to incorporate these lessons.

One of the EPA’s major goals has been to show that energy efficiency is not merely good for the environment; it produces significant savings as well. But from the standpoint of standard economic theory, no such savings should be predicted. Here’s why. If companies could actually save money while protecting the environment, they would already have done that. In a market economy, firms should not need the government’s help to cut their own costs. Competitive pressures should ensure that those that don’t cut costs soon find themselves losing money—and out of the market. In practice, however, things don’t always turn out this way. Managers in firms are busy and can’t pay attention to everything. To implement some change, someone in the firm has to champion the change. In most firms, managers do not think that being the guy who pushes an energy cost–saving policy is the route to the CEO office, especially when the cost savings are small relative to the bottom line. The project sounds boring and penny-pinching, and the manager who suggests it might be destined for a job in accounting rather than the president’s office. In theory, the EPA’s programs shouldn’t have worked. So much for theory. As it turned out, both programs have succeeded in promoting greater use of low-cost energy-efficient technologies.

Insofar as it operated through government, the marital institution was originally a means of government licensing of both sexual activities and child rearing. If you wanted to have sex or to have children, you were in a much better position if you had a license from the state. In fact you might well have needed that license, no less than you now need a license to drive.

As a matter of history, a primary reason for the official institution of marriage has been not to limit entry but to police exit—to make it difficult for people to abandon their commitments to one another.

The first is that reliance on a slippery-slope argument ducks the question of whether our proposals have merit in and of themselves.

Those who make this argument sometimes speak as if government can be absent—as if the default terms that set the background come from nature or from the sky. This is a big mistake. To be sure, the default terms that now apply in any particular context might be best, in the sense that they promote people’s interests overall or on balance. But that view must be defended, not assumed. And it would be odd for those who generally hold government in extremely low esteem to think that in all domains, past governments have somehow stumbled onto a set of ideal arrangements.*

To approach these problems we once again rely on one of our guiding principles: transparency. In this context we endorse what the philosopher John Rawls (1971) called the publicity principle. In its simplest form, the publicity principle bans government from selecting a policy that it would not be able or willing to defend publicly to its own citizens. We like this principle on two grounds. The first is practical. If a government adopts a policy that it could not defend publicly, it stands to face considerable embarrassment, and perhaps much worse, if the policy and its grounds are disclosed. (Those who participated in, or sanctioned, the cruel and degrading actions in the Abu Ghraib prison might have benefited from using this principle.) The second and more important ground involves the idea of respect. The government should respect the people whom it governs, and if it adopts policies that it could not defend in public, it fails to manifest that respect. Instead, it treats its citizens as tools for its own manipulation. In this sense, the publicity principle is connected with the prohibition on lying. Someone who lies treats people as means, not as ends.

As we have seen, people are most likely to need nudges for decisions that are difficult, complex, and infrequent, and when they have poor feedback and few opportunities for learning.

So to summarize, when choices are fraught, when Nudgers have expertise, and when differences in individual preferences are either not important or can be easily estimated, then the potential for helpful nudging is high.

Note in this regard that mandatory cooling-off periods make best sense, and tend to be imposed, when two conditions are met: (a) people make the relevant decisions infrequently and therefore lack a great deal of experience, and (b) emotions are likely to be running high. These are the circumstances in which people are especially prone to making choices that they will regret.

14. Procrastinator’s Clock. For those who are chronically late to meetings, there’s the Procrastinator’s Clock, a downloadable program for your computer, that displays a digital clock that is guaranteed to be up to fifteen minutes fast. How fast? Well, that’s the nudge. You are never exactly sure because the clock unpredictably speeds up and slows down. That assures that users can’t game the system. We think that this device might help the lawyer of this team (who shall remain nameless) get to Noodles on time for lunch. A physical version of this clock has already been patented by a company called Emergent Technologies.

15. Put a stop to people who blabber on. Stickk.com cofounder and Yale professor Ian Ayres has turned his interest in commitment strategies to the biggest fib in public speaking: “I’ll be brief.” Ayres is not a fan of this phrase and neither are we. Ayres says the phrase is nothing but cheap talk—easy to say, easy to ignore—and wants groups to develop a social norm that would have speakers publicly estimate how long they plan to talk. He suggests a speaker begin with the statement “Please interrupt me if I speak more than X minutes,” arguing that individuals retain the right to blabber—ahem, speak—for as long as they want while giving them a credible commitment device to cut it short. “The problem of speakers droning on at conferences and meetings isn’t one of the biggest problems in the world,” he writes, “but it is an example where cognitive error leads to a persistent dysfunction.”16 We like Ayres’s idea and think it could be combined with an idea that Thaler has been pushing for years. The goal is to design a plan to discipline people who make outrageously confident statements among groups that meet regularly. Thaler first thought about the idea in the context of academic workshops, but the solution is perfectly general, and indeed, has been adopted by his monthly wine-tasting group. Suppose that someone makes a claim whose truth can be determined such as, “These wines are obviously aged in American oak.” To avoid an endless, boring series of, “No they are not” and, “Y...

Often the last thing travelers see when they are getting ready to board their plane is a clear plastic box in which they can deposit their leftover local currency, which will be donated to charity. Since currency exchanges rarely accept coins and charge a fixed rate for any transaction it can be barely worthwhile to exchange amounts as high as $20 or more, so why not donate the money to a good cause? For those of us who are not organized enough to keep and then remember to bring our Euros on our next trip, this is a no-brainer. Why don’t we see these in every international airport?