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Simply by rearranging the cafeteria, Carolyn was able to noticeably increase or decrease the consumption of many food items.
For example, Carolyn knows that she can increase consumption of healthy foods and decrease consumption of unhealthy ones.
A choice architect has the responsibility for organizing the context in which people make decisions.
There are many parallels between choice architecture and more traditional forms of architecture. A crucial parallel is that there is no such thing as a “neutral” design.
The libertarian aspect of our strategies lies in the straightforward insistence that much of the time, and so long as they are not harming others, people should be free to do what they like—and to opt out of arrangements they deem undesirable if that is what they want to do.
Libertarian paternalists want to make it easy for people to go their own way; they do not want to burden those who want to exercise their freedom.
The paternalistic aspect lies in the claim that it is legitimate for choice architects to try to influence people’s behavior in order to make their lives longer, healthier, and better.
The paternalistic policies that we favor aim to influence choices in a way that will make choosers better off, as judged by the choosers themselves.
Our goal, in short, is to help people make the choices that they would have made if they had paid full attention and possessed complete information, unlimited cognitive ability, and complete self-control.
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.
Nudges are not taxes, fines, subsidies, bans, or mandates. Putting the fruit at eye level counts as a nudge. Banning junk food does not.
Those who reject paternalism often claim that human beings do a terrific job of making choices, or if not terrific, certainly better than anyone else would do (especially if that someone else works for the government).
We do not claim that everyone who is overweight is necessarily failing to act rationally, but we do reject the proposition that all or almost all people are choosing their diet optimally.
Unlike Econs, Humans make predictable mistakes. Take, for example, the planning fallacy—the systematic tendency toward unrealistic optimism about the time it takes to complete projects.
Human decision making is not so great either. Again, to take just one example, consider what is called the status quo bias, a fancy name for inertia.
If private companies or public officials favor one set of outcomes, they can greatly influence people by choosing it as the default.
The false assumption is that almost all people, almost all the time, make choices that are in their best interest or at the very least are better than the choices that would be made by someone else.
In many areas, ordinary consumers are novices, interacting in a world inhabited by experienced professionals trying to sell them things.
The first misconception is that it is possible to avoid influencing people’s choices.
But active choosing is itself a form of choice architecture, and it is not one that everyone will prefer, especially when options are numerous and decisions are difficult.
People do not always like to be told to choose, and if they are forced to do that, they might not be at all happy.
The second misconception is that paternalism always involves coercion.
When no coercion is involved, we think that some types of paternalism should be acceptable even to those who most embrace freedom of choice.
Choice architects can make major improvements to the lives of others by designing user-friendly environments. Many of the most successful companies have succeeded in the marketplace for exactly that reason.
Apple’s iPhone became an enormous economic success in part because of its elegant style, but mostly because users found it easy to get the device to do what they want.
Choosers are human, so designers should make life as easy as possible. Send reminders (but not too many!) and then try to minimize the costs imposed on those who, despite your (and their) best efforts, space out.
Mandates and prohibitions have their place (and behavioral science can help to identify them), but when incentives and nudges replace requirements and bans, government will be both smaller and more modest.
Although rules of thumb can be very helpful, their use can also lead to systematic biases. This insight, first stated decades ago by two of our heroes, the psychologists Daniel Kahneman and Amos Tversky, changed how psychologists (and eventually economists, lawyers, policymakers, and many others) think about thinking.
This process is called “anchoring and adjustment.” You start with some anchor, a number you know, and adjust in the direction you think is appropriate. So far, so good. The bias occurs because the adjustments are typically insufficient.
Taxi drivers were initially reluctant to adopt the technology to accept credit cards in their cabs, because the credit card companies take a cut of roughly 3 percent. But those who did install the technology were pleasantly surprised to learn that their tips increased!
Notice this screen is nudging people toward higher tips by offering precalculated amounts that start at these percentages.
Also, the option to choose your own tip is a bit of an illusion. The screen appears only when the trip is over; the customer is ready to leave, others may be waiting to get into the cab, and entering one’s own amount requires some calculations and a couple extra steps.
This is connected with the behavioral phenomenon of reactance: when people feel ordered around, they might get mad and do the opposite of what is being ordered (or even suggested). Still, the evidence shows that, within reason, the more you ask for, the more you tend to get.
most people use what is called the availability heuristic. They assess the likelihood of risks by asking how readily examples come to mind.
The availability heuristic helps to explain much risk-related behavior, including both public and private decisions to take precautions.
Such misperceptions can affect policy, because some governments will allocate their resources in a way that fits with people’s fears rather than in response to the most likely dangers.
The third of the original three heuristics bears an unwieldy name: representativeness. Think of it as the similarity heuristic. The idea is that when asked to judge how likely it is that A belongs to category B, people answer by asking themselves how similar A is to their image or stereotype of B (that is, how “representative” A is of B).
Roughly speaking, the prospect of losing something makes you twice as miserable as the prospect of gaining the same thing makes you happy.
Once you have a mug, you don’t want to give it up. But if you don’t have one, you don’t feel an urgent need to buy one. What this means is that people do not assign specific values to objects; it often matters whether they are selling or buying.
Loss aversion helps produce inertia, meaning a strong desire to stick with your current holdings. If you are reluctant to give up what you have because you do not want to incur losses, then you will turn down trades you might have otherwise made.
One of the causes of status quo bias is a lack of attention. Many people often adopt what we call the “yeah, whatever” heuristic.
The combination of loss aversion and mindless choosing is one reason why if an option is designated as the default, it will usually (but not always!) attract a large market share.
It is useful to imagine the workings of the brain as consisting of two components or systems. One is fast and intuitive; the other is slow and reflective.
We call them the Automatic System and the Reflective System.
People speak their native languages using their Automatic Systems and tend to struggle to speak another language using their Reflective Systems. Being truly bilingual means that you speak two languages using the Automatic System.
One way to think about all this is that the Automatic System is your gut reaction and the Reflective System is your conscious thought.
The Automatic System can be trained with lots of repetition—but such training takes a great deal of time and effort.
The bottom line, from our point of view, is that people are, shall we say, nudge-able. Their choices, even in life’s most important decisions, are influenced in ways that would not be anticipated in a standard economic framework.
We call something “tempting” if we consume more of it when we are in a hot state.
When in a cold state, we do not appreciate the extent to which our desires and our behavior will be altered when we are “under the influence” of arousal. As a result, our behavior reflects a certain naivete about the effects that context can have on choice.
