Nudge: Improving Decisions About Health, Wealth, and Happiness

by Richard H. Thaler

Some tasks are easy, like choosing a flavor of ice cream; other tasks are hard, like choosing a medical treatment. Consider, for example, an ice cream shop where the varieties differ only in flavor, not calories or other nutritional content. Selecting which ice cream to eat is merely a matter of choosing the one that tastes best. If the flavors are all familiar, such as vanilla, chocolate, and strawberry, most people will be able to predict with considerable accuracy the relation between their choice and their ultimate consumption experience. Call this relation between choice and welfare a mapping.

As a piece of choice architecture, however, it suffered from a cumbersome design that impeded good decision making. It offered a menu with lots of choices, which is fine, but it had four major defects: • It gave participants little guidance to help them make the best selections from that menu. • Its default option for most seniors was nonenrollment. • It chose a default at random (!) for six million people who were automatically enrolled, and it actively resisted efforts to match people and plans based on their prescription drug histories.

It failed to serve the most vulnerable population, specifically the poor and the poorly educated.

The second problem that contributes to excessive pollution is that people do not get feedback on the environmental consequences of their actions.

Much of the time, the best approach to pollution problems is to impose a tax on the harmful behavior and to let market forces determine the response to the increased cost.

But raising the tax on gasoline, for example, would eventually induce drivers to buy more fuel-efficient cars, drive less, or both. As a result, emissions of carbon dioxide, the leading contributor to global warming, would decline. And if gas taxes were increased, automobile manufacturers would have plenty of incentives to develop new technologies to meet the demand for more fuel-efficient cars.

The bad publicity can result in all sorts of harms, including lower stock prices.8 Companies that end up on the list are likely to take steps to reduce their emissions.

With this example in mind, we can now sketch an initial, low-cost nudge for the problem of climate change. The government should create a Greenhouse Gas Inventory (GGI), requiring disclosure by the most significant emitters.

A simple nudge would be a Give More Tomorrow program. The basic idea, modeled on Save More Tomorrow, is to ask people whether they would like to give a small amount to their favorite charities starting sometime soon, then commit to increasing their donations every year.

Keeping track of donations and listing them on a tax return is burdensome for some Humans, who end up donating less than they would if the tax savings were automatic. An obvious solution is the Charity Debit Card—a special debit card that would be issued by banks and accepted only by charities.