In a surprisingly simple bestselling book, Nudge, Improving Decisions About Health, Wealth and Happiness (2009, Penguin, 312 pages), authors Richard Thaler and Cass Sunstein deliver ideas and strategies that could strengthen government policies and individual decision-making almost everywhere.
But international readers may scoff that too many of the book's details and examples – about retirement-savings plans, market regulations, social-security programs, education systems and more -- pertain only to Americans. So it's a New York Times bestseller, not a China Daily bestseller.
The authors, respected academics from Chicago, insist that gentle “nudges” work better than fierce pushes or legal decrees to move people toward healthy decisions and along positive pathways. They focus on how best to facilitate better choices by setting up sensible “choice architecture”, namely structures that include helpful nudges.
“Seemingly small features of social situations can have massive effects on people's behavior; nudges are everywhere, even if we do not see them. Choice architecture, both good and bad, is pervasive and unavoidable, and it greatly affects our decisions.
“It is not only possible to design choice architecture to make people better off; in many cases it is easy to do so.”
If handled properly, the results can be healthier lifestyles, stronger investments, happier families, better governments and wiser use of global resources. Best of all, individual freedoms to choose remain intact.
“A nudge 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 count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting the fruit at eye level counts as a nudge. Banning junk food does not.”
People at every level – from big governments to small organizations, from huge families to lone individuals – have an interest in giving and taking nudges. “If incentives and nudges replace requirements and bans, government will be both smaller and more modest. So, to be clear: We are not for bigger government, just for better governance.”
Hospital patients usually consent to surgery when nudged with a statistic that “90 per cent survive”. If told that “10 per cent die”, they may balk, despite the identical odds.
Many folks improve their financial status almost effortlessly by establishing automatic monthly savings plans. That's a self-nudge.
Thaler and Sunstein demonstrate their intellectual prowess with 40 pages of notes, references, a bibliography and an index. Most readers will ignore these sections.
Luckily, the authors also succeed to explain their concepts in easily understood terms. When not citing the work of other academics, notably economists, they quote some surprising non-experts, including the buffoonish cartoon character Homer Simpson. They argue that average folks may not behave and make decisions based on solid logic and self-interest, no matter what the economics textbooks say. “People perform amazing feats, but also commit ditzy blunders.” That's exactly like Homer, a point pounded home so hard that many readers may resent it.
“When self-control problems and mindless choosing are combined, the result is a series of bad outcomes for real people. Millions of Americans still smoke in spite of the evidence that smoking has terrible health consequences…. Nearly two-thirds of Americans are overweight or obese. Many people never get around to joining their company's retirement savings plan, even when it is heavily subsidized. Together, these facts suggest that significant numbers of people could benefit from a nudge.”
Along the way, Thaler and Sunstein shed light on some lesser puzzles, even those between husbands and wives. “Conventional wisdom has it that if two people live together for a long time, they start to look like each other. This bit of folk wisdom turns out to be true. (For the curious: they grow to look alike partly because of nutrition – shared diets and eating habits – but much of the effect is simple imitation of facial expressions.) In fact, couples who end up looking alike also tend to be happier!”
Thaler, who teaches economics and behavioral science at the University of Chicago's Booth School of Business, likes to probe “the gap between psychology and economics”. Sunstein, a legal scholar, has taught law at the University of Chicago and at Harvard.
Before last year's historic U.S. election, both authors acted as advisors to the Barack Obama campaign. Then Sunstein joined the new government as director for the office of information and regulatory affairs.
Frankly, the notions that people react well to gentle and respectful guidance in helpful directions, and that they want to keep their freedoms to choose, amounts to little more than common sense. Thaler and Sunstein have delivered an uncommon book full of common sense.
Approval rating: 71 per cent.
For more information: www.penguin.com
(September 21, 2009)
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