Nudge: Improving Decisions About Health, Wealth, and Happiness

by Richard H. Thaler

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

Libertarian paternalism is a relatively weak, soft, and nonintrusive type of paternalism because choices are not blocked, fenced off, or significantly burdened.

A nudge, as we will use the term, is any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To

Take, for example, the “planning fallacy”—the systematic tendency toward unrealistic optimism about the time it takes to complete projects.

First, never underestimate the power of inertia. Second, that power can be harnessed.

The first misconception is that it is possible to avoid influencing people’s choices.

Self-control issues are most likely to arise when choices and their consequences are separated in time.

Naïve diversification apparently starts young. Consider the following clever experiment conducted by Daniel Read and George Loewenstein on Halloween night.4 The “subjects” were trick-or-treaters. In one condition, the children approached two adjacent houses and were offered a choice between the same two candy bars (Three Musketeers and Milky Way) at each house. In the other condition, they approached a single house, where they were asked to “choose whichever two candy bars you like.” Large piles of both candies were displayed to ensure that the children would not think it was rude to take two of the same. The two conditions produced quite different results. In the house with both kinds of candy, every child selected one of each candy. In contrast, only 48 percent of the children picked one of each candy when they were choosing in sequence in two houses.