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Nudge: Improving Decisions About Health, Wealth, and Happiness

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Why I bought this book -
This was a Christmas present for my economist son. He was pleasantly surprised and said he had heard so much about it since he has been an Obama fan for a long time and knew that Barack Obama had read it and recommended it.

I chose the book for that reason but also it looked like a novel approach to the overworked subject of self-improvement. But I have not read the book yet. Will borrow it after my son reads it and will report back at that time.

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Why Every Doctor Should Change Their Last Name to Aardvark -
This is one of those rare books that can actually make you change the way you look at things. Specifically, Thaler and Sunstein discuss what they refer to as choice architecture or the conscious ways in which choices can be presented to people in various situations, particularly in areas where people can be helped (nudged) in making better decisions. They rely heavily on the existing psychological knowledge base related to decision making, but they take this knowledge and reconfigure it in a way that can make for powerfully beneficial choice architecture.

Thaler and Sunstein provide ample examples and areas of public policy where their choice architecture process can be applied - health insurance, savings, and investments, for example - areas where, generally speaking, choices are plentiful, complex and feedback (results) take a long time to be seen. They give good examples of where good choice architecture has met the desired goals, or at least helped move people in the right direction. They also describe the human tendencies that choice architecture overcomes or counteracts- the status quo bias - for example.

The one area where I think their proposal for choice architecure is naive is in same sex marriages. Creating a dichotomy between the two by having civil authorities approve civil unions (for anyone) and only private institutions, religious ones primarily, conducting marriages, as they see fit, does not address the larger cultural and religious issues which are super-charged with emotion. This is not the same as trying to nudge someone to save more or to reduce their smoking.

Anyone who influences others, particularly government policy makers, needs to read this book to determine whether how they structure choices is helping or impeding their goals, and if the latter, adjust according to Thaler's and Sunstein's suggestions.

Oh, and this is why every doctor should change their last name to Aardvark. When I pick a doctor, after I find the specialty (usually a mental health practitioner), I start looking at the directory alphabetically, and I usually pick my doctor from the first few letters of the alphabet. So, if you are a doctor and want to apply better choice architecture, change your name to Aardvark.

a book written by Libertarians nudging the reader to be a libertarian -
To be fair, I think only first five chapters are worth reading. After that...it's really a long yawn unless you are sympathetic to Libertarian ideas. There is nothing new in this book. I'm little tired of picking up books with rehashed examples already mentioned in other books like "Blink", "Freakonomics" or "Influence".

The fallacy of free will ... -
An excellent treatment and analysis of human predisposition to making choices - and how one can influence them. This book clearly establishes the fact many of us suspect - that there is no such thing as pure rational decision-making (realistically), free will, and most importantly, independent thinking. Understanding this critical aspect let's us engineer our own decisions and choice presentations in a more persuasive way. Highly recommended!

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BEHAVIORAL economics -
This review is a work in progress; I'll post updates as I work through the book.

`Nudge' appears to be mainstream behavioral economics; economists attempting to make hteir analysis more realistic by replacing the completely rational `Economic Man' of classical economic analysis with a more realistic version derived from the decision theoretical work of Tversky and Kahneman. Nothing theoretically radical here. In fact, its roots can be traced back to John B. Watson (yes, that Watson), the founder of advertising psychology.

The authors' point is that this is in fact a poor guide to action if we want to be effect in changing what people do. Instead they propose some empirically supported strategies for behavior change which they derive from some recent work in the area of decision theory, although (as I will point out) many of the stragegies they propose can be more parsimoniously derived from other conceptual systems.

There is another field of behavioral economics.
This is a group of behavior analysts (Skinnerian or Radical Behaviorism) who have incorporated some of the concepts of economics such as value delay discounting and demand elasticity into the terms of behavior analysis, and can be looked at as an application of proven behavioral principles. Specifically, they avoid coercion by emphasizing existing stimulus control rather than programmed reinforcement or punishment. Their distinction between Automatic and Reflective Systems maps easily onto the behavioral distinction between contingency and rule governed behavior: behavior governed by direct contact with outcomes versus behavior controlled by learned verbal rules.

A 'nudge' itself sounds very much like what a behaviorist would call a prompt -- the minimal stimulus necessary to produce a behavior that is already likely to occur. Much of their discussion seems to concern how to prompt behavior rather than compelling it with obvious rewards and punishments -- good behavioral practice.

One might say that it is a plea to identify and use existing stimulus control (the way we learn to behavior in a given way in a given situation) as well as some descriptions of common patterns of this sort of influence on our behavior. For example, their RECAP procedure (a simple and readable breakdown of costs) makes the costs and benefits of things like mortgages and credit cards more discriminable.


In general, the book's analysis is very consistent with the predictions and recommendations that a behavior analyst would make, to the point where I wonder if the ghost of Israel Goldiamond is still roaming the halls of the University of Chicago where the authors work.

One of the strengths of the book's approach to human behavior is the acknowledgement that we make choices for a reason -- and that these reasons can often be identified. There is no such thing as purely autonomous choice independent of outside influences. Therefore, our choice is not between influence and lack of influence, but whether we will study and use these influences to better our lives. Ignorance is not bliss, nor is it healthy.
Thaler and Sunstein sugar coat this by using the label `libertarian paternalism', but underlying their argument is the assumption that behavior is not ultimately autonomous, and that the job of `choice architects' (those who manage behavior in any sense) is to identify the aspects of the environment that control actions of interest, and to change behavior by changing the relevent aspects of the environment.

The book follows a basic pattern:
The authors first describe how a rational and knowledgeable Economic Person (an Econ) would approach some decision situation, then document how real people (Humans) actually behave, and finally describe some way of restructuring the situation (a Nudge) that would cause Humans to behave in a way more to their long term benefit.

Some examples of the behavioral processes involved:

Contingency traps
One behavioral concept that they appear to be developing is that of the contingency trap.
This is the observation that immediate consequences (reinforcers) are more effective than delayed ones. Many human problems are due to the fact that a given action usually has more than one consequence. If the immediate consequence is reinforcing, but the long term outcome is harmful, we have a contingency trap. Health risks like overeating and smoking fit into this category. Again, the problem is how to rearrange the environment (particularly the social environment) to provide prompts for behaviors with delayed positive outcomes rather than immediate ones.

Social Influence
Not surprisingly, the authors devote a chapter to this topic; again it's pretty straightforward.
In behavioral terms (not theirs) social influence can be divided into two categories: modeling (doing what one sees others doing, and getting reinforced for doing) and social reinforcement (direct peer pressure; approval or disapproval of one's actions). An additional process is referred to as `priming': prompting an initial step in the sequence of actions necessary to achieve a goal.
Despite their `libertarian' stance, they don't seem to find peer pressure unacceptable as a way to change behavior, although their preference is for various forms of prompting.

Response cost
T & S have discovered that the cost of doing something affects the likelihood of taking action.
In particular, people tend to follow the Law of Least Effort (this concept goes back to Thorndike). Among other things, this results in behavioral `inertia' since doing nothing (no change) requires less effort than doing something (such as changing one's asset allocations)
Thus, in discussing `opt-in' vs `opt-out' methods of having people enroll in programs such as retirement savings, they recommend structuring the programs so that the default action is enrolling in a program, with a positive action required to opt out of it.
Another point: the default payment options on credit cards are a minimum payment that maximizes the company's interest income. Their alternative: make it an equal effort forced choice between minimum payment and complete balance payment.