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My first 'econ' book in a while and I enjoyed it thoroughly. The book is more behavioral decision making and advocates for using 'nudges' that encourage people to choose better. It was interesting to read about what the authors term 'libertarian paternalism' and how such policies can lead to better outcomes when implemented carefully. I especially enjoyed seeing the stories and examples of how humans (v. econs) are easily biases, blunders, etc. and can benefit from carefully thought out choice architecture. Recommend the book highly, even if all it does is get you to more carefully save more for tomorrow.
First I want to say that it’s not this books fault that is was chosen for my work’s Leadership Book Club. I am thrilled to have finished this because I will no longer feel like screaming every time I turn the page. Part 1 seemed ok enough, but Part 2 is where I started losing my mind as the authors laid out half baked ideas and what ifs, theoretically practicing their libertarian paternalism in long drawn out scenarios. I’m unsure if the authors knew the intended audience for this book, because felt like they were casting a wide net, but it most certainly wasn’t me. I do not feel like I’ve improved my decisions about health, wealth, and happiness.
Came to get some insights on how to apply nudges to my product management work.
Instead heard how to fix the American society (not used to sharing/caring at a large government scale). Lots and lots of US centered form filling, government policy details.
Good points are:
- raises awareness on the fact that nudges matter
- authors does not put himself too much at the center of the book like other non-fictions these days (thought the use of "we" instead of "I" creates a weird pattern of wondering who he is talking about sometimes)
Instead heard how to fix the American society (not used to sharing/caring at a large government scale). Lots and lots of US centered form filling, government policy details.
Good points are:
- raises awareness on the fact that nudges matter
- authors does not put himself too much at the center of the book like other non-fictions these days (thought the use of "we" instead of "I" creates a weird pattern of wondering who he is talking about sometimes)
informative
medium-paced
The title of this book "Nudge: Improving Decisions About Health, Wealth and Happiness" might be overreaching it a tad but Thaler and Sunstein's discussion on "choice architecture" is a great read. Essentially, Thaler and Sunstein argue that contrary to conventional economic theory, humans do not act like the rational homo economicus who is capable of processing hundreds of choices, weighing their costs and benefits rationally and systematically. Real humans have difficulty handling complexity. They get tired, confused and they are influenced by their emotions (e.g. over-optimism, loss aversion, inertia), environment and peers. We use tools like anchoring, the "availability heuristic" (where we assess the probability of events by trying to see how readily examples come to mind), and representativeness to help us make sense of info. These tools, while useful as navigational devices, can sometimes lead us down the wrong path. That's why choice architecture, or the way we structure choices, matters as much, if not more so, than the choices themselves.
The idea is, if you understand how real humans think and process information, you can design how choices are presented and nudge people towards making better decisions. For example, setting decent default choices taps on our sense of inertia and tendency to stick with the status quo. Providing meaningful feedback helps pp learn from their mistakes and improve decision making as they go along (e.g meters that tell you how much electricity you're consuming and how much it's costing you). Providing appropriate incentives - and not just the quantum but the salience of these incentives since people may overlook a lump sum incentive, but not recurrent ones - can also nudge people towards better decisions. We can use social norms to nudge people to do the right thing (e.g. not littering, paying taxes on time). Structuring complex choices - e.g. by filtering - and mapping, to help pp map the info provided to them onto parameters that are meaningful to them (what does all this mumbo jumbo on duration, service levels, technology used etc mean in terms of how much I have pay out of pocket?) are other strategies we can employ to guide better decision making.
Some of the examples Thaler and Sunstein use are familiar - e.g. the structuring of retiring plans to get pp to commit upfront to saving more when they earn more, and how the incidence of organ donation rises if, as a default, pp are required to indicate if they don't want to donate their organs, rather than the reverse - and some of their suggestions e.g. to privatise marriage seem like a forced attempt to demonstrate the vast applicability of choice architecture. But overall, Nudge is a thought provoking read and its breezy tone - Thaler and Sunstein adopt a bantering, collegial tone throughout the book - makes it an accessible read about a serious topic.
[Edit: Read the 2021 updated version. Some of the things that stood out for me reading this version a decade after I read the original book was the observation that curation is another powerful tool for choice architecture; "small shops compete via curation, while online megastores use navigation tools to make finding and choosing among so many options easy....good curation combines getting rid of bad options and introducing novel ones...choice architecture in [various] domains must use some combination of curation and navigation tools. If they don't, people will flounder." Thaler and Sunstein also advocate making things fun to induce people to do the right thing, e.g. rewards and lotteries to encourage recycling or picking up after oneself.
In 2021, Thaler and Sunstein introduce the term "sludge", which they define as "any aspect of choice architecture consisting of friction that makes it harder for people to obtain an outcome that will make them better off (by their own lights)". Think: extensive paperwork that you have to fill in, bureaucratic red tape and hurdles to cancel a subscription, long waits (e.g. TSA clearance procedures at the airport)
The 2021 version also has updated examples and advice, for instance:
- suggesting that governments make all disclosures machine readable to make it easier for people to shop around for the best deals by sharing that data with third party intermediaries who aggregate deals from all providers in the market and match you with the best one.
- advising people to avoid "deductible aversion" and to choose the largest deductible available when purchasing insurance (Thaler and Sunstein go as far as to say that the reader can "skip the rest of the chapter if you promise to follow this one rule of thumb")]
The idea is, if you understand how real humans think and process information, you can design how choices are presented and nudge people towards making better decisions. For example, setting decent default choices taps on our sense of inertia and tendency to stick with the status quo. Providing meaningful feedback helps pp learn from their mistakes and improve decision making as they go along (e.g meters that tell you how much electricity you're consuming and how much it's costing you). Providing appropriate incentives - and not just the quantum but the salience of these incentives since people may overlook a lump sum incentive, but not recurrent ones - can also nudge people towards better decisions. We can use social norms to nudge people to do the right thing (e.g. not littering, paying taxes on time). Structuring complex choices - e.g. by filtering - and mapping, to help pp map the info provided to them onto parameters that are meaningful to them (what does all this mumbo jumbo on duration, service levels, technology used etc mean in terms of how much I have pay out of pocket?) are other strategies we can employ to guide better decision making.
Some of the examples Thaler and Sunstein use are familiar - e.g. the structuring of retiring plans to get pp to commit upfront to saving more when they earn more, and how the incidence of organ donation rises if, as a default, pp are required to indicate if they don't want to donate their organs, rather than the reverse - and some of their suggestions e.g. to privatise marriage seem like a forced attempt to demonstrate the vast applicability of choice architecture. But overall, Nudge is a thought provoking read and its breezy tone - Thaler and Sunstein adopt a bantering, collegial tone throughout the book - makes it an accessible read about a serious topic.
[Edit: Read the 2021 updated version. Some of the things that stood out for me reading this version a decade after I read the original book was the observation that curation is another powerful tool for choice architecture; "small shops compete via curation, while online megastores use navigation tools to make finding and choosing among so many options easy....good curation combines getting rid of bad options and introducing novel ones...choice architecture in [various] domains must use some combination of curation and navigation tools. If they don't, people will flounder." Thaler and Sunstein also advocate making things fun to induce people to do the right thing, e.g. rewards and lotteries to encourage recycling or picking up after oneself.
In 2021, Thaler and Sunstein introduce the term "sludge", which they define as "any aspect of choice architecture consisting of friction that makes it harder for people to obtain an outcome that will make them better off (by their own lights)". Think: extensive paperwork that you have to fill in, bureaucratic red tape and hurdles to cancel a subscription, long waits (e.g. TSA clearance procedures at the airport)
The 2021 version also has updated examples and advice, for instance:
- suggesting that governments make all disclosures machine readable to make it easier for people to shop around for the best deals by sharing that data with third party intermediaries who aggregate deals from all providers in the market and match you with the best one.
- advising people to avoid "deductible aversion" and to choose the largest deductible available when purchasing insurance (Thaler and Sunstein go as far as to say that the reader can "skip the rest of the chapter if you promise to follow this one rule of thumb")]
fast-paced
A provocative discussion of how choices are influenced both naturally and purposefully by environment, marketers, etc. and how we can create our own "choice architecture" thus enabling our own success. The concept of "nudge" simply means it doesn't take much influence to get people to do the right, or the wrong, thing. Bit dry to read, but the ideas are profound.
This book was recommended by my sports psychology teacher. So was expecting more about why people have certain behaviours and how to change them and not so much about the business side of it. However it is what the books says on the cover, so I feel that is was my teachers fault by the way he talked about the book.
Over all, I found it interesting.
Over all, I found it interesting.
Needed to read this for a course, it was interesting in some aspects but had hoped it would be more applicable than it read to be.
This was such a great book about framing choices for desired outcomes. A lot of the examples were more economically based, but really the applications are endless. Definitely useful for anyone professionally as well as personally.