Nudge

Thaler and Sunstein start from a simple premise: people are not the perfectly rational Econs of textbook economics but Humans, who procrastinate, follow the herd, stick with defaults and are swayed by framing. Since every form, menu and plan has to be laid out some way, someone is always acting as a choice architect. The authors argue for libertarian paternalism, meaning designs that steer people toward choices they would endorse while leaving them free to opt out at low cost.

Thaler, of the University of Chicago, built much of behavioral economics, won the Nobel Prize in 2017 and, with Shlomo Benartzi, designed the Save More Tomorrow savings plan. Sunstein, a Harvard law professor, went on to run the White House Office of Information and Regulatory Affairs. The first edition helped inspire the British government's Behavioural Insights Team. The 2021 Final Edition adds sludge, the paperwork and friction that keep people from what they want.

Critics have pushed back. Elizabeth Kolbert asked why, if people choose so badly, policy should stop at nudges; Gerd Gigerenzer argued that the label has been stretched until it means little; and a 2011 House of Lords committee found limited evidence that nudges alone change behavior at scale.

It pairs well with Thaler's Misbehaving for the backstory.

1. Defaults are powerful. Automatic enrollment in retirement plans raises participation sharply because most people never change the preset option.
2. Commit future raises, not current pay. Save More Tomorrow works by scheduling savings increases to coincide with pay raises, so take-home pay never falls.
3. There is no neutral design. Fund menus, fee disclosures and statement layouts all steer decisions, so design them deliberately.
4. Simplify complex choices. When options are many and hard to compare, as with pension funds or mortgages, people need structure and clear disclosure.
5. Remove sludge. Friction, such as hard-to-cancel subscriptions or long claim forms, can stop people from doing what they intend.

The book moves from the psychology to the tools and then to applications, and ends by answering critics.

1. Humans and Econs. The authors explain the automatic and reflective systems of thinking, and the biases that follow: anchoring, availability, optimism, loss aversion, status quo bias, framing, weak self-control and the pull of what others do.
2. The choice architect's tools. They set out how defaults, feedback, simplified options, structured complex choices and designing for predictable error change outcomes, and why there is no neutral design.
3. Money. The finance chapters cover automatic enrollment and Save More Tomorrow, the mistakes investors make in choosing funds, credit cards and mortgages, and lessons from Sweden's partly privatized pension system.
4. Health and society. Applications include prescription drug plans, organ donation, environmental policy and, in the 2021 edition, more on climate change and some thoughts on the pandemic.
5. Objections. The authors address slippery-slope and manipulation concerns, while the Final Edition adds a new chapter on sludge.

From the winner of the Nobel Prize in Economics, Richard H. Thaler, and Cass R. Sunstein: a revelatory look at how we make decisions—for fans of Malcolm Gladwell’s Blink and Daniel Kahneman’s Thinking, Fast and Slow * More than 1.5 million copies sold * New York Times bestseller * Named a Best Book of the Year by The Economist and the Financial Times Every day we make choices—about what to buy or eat, about financial investments or our children’s health and education, even about the causes we champion or the planet itself. Unfortunately, we often choose poorly. Nudge is about how we make these choices and how we can make better ones. Using dozens of eye-opening examples and drawing on decades of behavioral science research, Nobel Prize winner Richard H. Thaler and Harvard Law School professor Cass R. Sunstein show that no choice is ever presented to us in a neutral way, and that we are all susceptible to biases that can lead us to make bad decisions. But by knowing how people think, we can use sensible choice architecture” to nudge people toward the best decisions for ourselves, our families, and our society, without restricting our freedom of choice.