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Turns out choice architecture is pretty interesting!
This was surprising political for a book on psychology and design, but I can understand why they took that route. I enjoyed how specifically the defined the idea of nudging (people are oriented towards a specific choice, but they are still given the freedom to choose other options) and the idea that all choices nudge people towards something - it often just isn't 'designed'.
This book also introduced me to the new label of "choice architect" which sounds super cool. I'm going to describe myself as a Choice Architect sometime.
This book also introduced me to the new label of "choice architect" which sounds super cool. I'm going to describe myself as a Choice Architect sometime.
1 of 2 books recommended by my manager to become familiar with behavioral economics. Thaler and Sunstein propose a system of politics and policy they call "libertarian paternalism" which fundamentally looks to make intentional use of "nudges" to influence behavior for good (while always preserving individual liberty and promoting transparency). The book provides a crash course in how our minds work (overlap with Ariely's Predictably Irrational) and then moves on to specific policy/choice architecture observations and recommendations under the topical umbrellas of money, health, and "freedom" (school, medical malpractice insurance, marriage). Admittedly I wouldn't have picked this up on my own but I learned a lot and really did enjoy it.
Random comment: the argument for privatizing marriage and giving the government the power to license nothing more than a civil union was pretty darn compelling. Not the first time I've heard of this idea but theirs was the most developed argument I've read.
Random comment: the argument for privatizing marriage and giving the government the power to license nothing more than a civil union was pretty darn compelling. Not the first time I've heard of this idea but theirs was the most developed argument I've read.
The short version: Humans have cognitive biases that affect their decision making. Using what we know about these biases, we can design choice architectures that make it easy for people to make good choices without taking the freedom to choose away from those who want to do so. Thaler and Sunstein describe these principles and give examples of how they can be applied to saving money, health care, and preserving freedoms.
Nudge acknowledges both the failures of one-size-fits-all government solutions and why cognitive biases cause the market to fail as a mechanism for providing social good.
Details on the later since the former seems more obvious to me. The purpose of the market is to maximize profit. Ideally, this goal lines up with the goals of general social good. This is often the case because competition allows people to go with the solution that best meets their goals.
However, cognitive biases can throw a wrench in this system. Advertising is the most obvious way. The whole purpose of marketing departments is to figure out how to provide information in a way that takes advantage of cognitive biases.
Things still work out for the most part for choices that are frequent and give good feedback. No amount of marketing is going to make people like a bad candy bar. This is less true for decisions that are rare or have no feedback (e.g., health care, marriage, retirement investing, buying a house). Good decisions are hard because information is lacking, feedback is slow, and educating yourself can be difficult and confusing.
The authors suggest, and I agree, that a fruitful compromise is to use nudges. A choice architecture structured around nudges allows users to make choices but ensure that the easy decision is good enough for most users*.
An example: Many companies provide 401k plans with automatic enrollment. Getting out of these plans is easy enough, and this nudge has greatly increased 401k plan enrollment. Wonderful! The market is working all on its own**. But we can still make things better. When automatic enrollment is used, some default investment must be chosen. The default is often overly conservative because companies do not want to be liable for losses. Employees will often stay with this plan, even if they increase their contribution, because they assume the default choice is a good choice. A useful nudge here would be for the government to give best practices guidelines that suggest better investments and remove liability for losses for defaults which follow those guidelines.
That is just one example. The point is that by changing the choice architecture, we can create decisions that allow for choice while still making it easy to make a decision that is good enough. These nudges may come from the government or from the market, but both are necessary because they both have their own strengths and weaknesses.
* Yes, nudges could be used for bad as well as for good and you have to trust those making the choice architecture to make the nudged decision a good one without making alternatives too difficult. Given that, I still think nudges are better than one-size-fits-all solutions. I also believe that we already have nudges used for (sometimes) bad; it is called marketing. We may as well give the same tools to those who would use them to get rid of one-size-fits-all solutions.
** Not strictly true. There are laws that incentive companies to offer 401k plans, but we will ignore those for now.
Nudge acknowledges both the failures of one-size-fits-all government solutions and why cognitive biases cause the market to fail as a mechanism for providing social good.
Details on the later since the former seems more obvious to me. The purpose of the market is to maximize profit. Ideally, this goal lines up with the goals of general social good. This is often the case because competition allows people to go with the solution that best meets their goals.
However, cognitive biases can throw a wrench in this system. Advertising is the most obvious way. The whole purpose of marketing departments is to figure out how to provide information in a way that takes advantage of cognitive biases.
Things still work out for the most part for choices that are frequent and give good feedback. No amount of marketing is going to make people like a bad candy bar. This is less true for decisions that are rare or have no feedback (e.g., health care, marriage, retirement investing, buying a house). Good decisions are hard because information is lacking, feedback is slow, and educating yourself can be difficult and confusing.
The authors suggest, and I agree, that a fruitful compromise is to use nudges. A choice architecture structured around nudges allows users to make choices but ensure that the easy decision is good enough for most users*.
An example: Many companies provide 401k plans with automatic enrollment. Getting out of these plans is easy enough, and this nudge has greatly increased 401k plan enrollment. Wonderful! The market is working all on its own**. But we can still make things better. When automatic enrollment is used, some default investment must be chosen. The default is often overly conservative because companies do not want to be liable for losses. Employees will often stay with this plan, even if they increase their contribution, because they assume the default choice is a good choice. A useful nudge here would be for the government to give best practices guidelines that suggest better investments and remove liability for losses for defaults which follow those guidelines.
That is just one example. The point is that by changing the choice architecture, we can create decisions that allow for choice while still making it easy to make a decision that is good enough. These nudges may come from the government or from the market, but both are necessary because they both have their own strengths and weaknesses.
* Yes, nudges could be used for bad as well as for good and you have to trust those making the choice architecture to make the nudged decision a good one without making alternatives too difficult. Given that, I still think nudges are better than one-size-fits-all solutions. I also believe that we already have nudges used for (sometimes) bad; it is called marketing. We may as well give the same tools to those who would use them to get rid of one-size-fits-all solutions.
** Not strictly true. There are laws that incentive companies to offer 401k plans, but we will ignore those for now.
informative
Good for policy makers. Good for psychology. Not a self help book
Some interesting premises, and a well presented collection of ideas. Hard to get through.
Interesting information that raised several questions regarding marketing and government practices.
Had some interesting points but I found it a bit difficult to get through.
I was really hoping to find this book a little boring so I could put it aside and read my fiction books, but...darn it, it was interesting! There were really good examples of good choices provided by businesses and service providers, as well as government options.
To read the rest of the review, please visit A Reading Kabocha at http://areadingkabocha.blogspot.com
To read the rest of the review, please visit A Reading Kabocha at http://areadingkabocha.blogspot.com