In Part 1, I discussed that the way choices are presented to us matters. It can greatly influence how we make decisions. We are human after all, and can’t help but be affected by the frame of the situation.
Many of those situations in which we face choices are designed in some way. The particular arrangement of soup cans on the shelf at the supermarket? No mistake. The layout of the form you are required to fill out to select your health insurance coverage? Selected by someone. These designers, or choice architects, play a bigger-than-expected role when it comes to influencing those choices exactly. A supermarket may encourage you to purchase their cheaper store-brand chicken noodle soup over the pricey name-brand by displaying them directly side by side on the shelf (instead of arranging soups directly by brand, for example). Whether we like it or not, choice architects play a role because framing matters.
So, what should that role be? Clearly, the supermarket has a particular interest in getting you to buy their product, regardless of the benefit or detriment to you as the consumer. But in many cases, the right choice architecture can benefit all parties and society as a whole. Consider this seminal example from Sunstein and Thaler:
A friend of yours, Carolyn, is the director of food services for a large city school system. She is in charge of hundreds of schools, and hundreds of thousands of kids eat in her cafeterias every day. […] Carolyn gave the directors of dozens of school cafeterias specific instructions on how to display the food choices. In some schools the desserts were placed first, in others last, in still others in a separate line. The location of various food items was varied from one school to another. In some schools the french fries, but in others the carrot sticks, were placed at eye level. […] Simply by rearranging the cafeteria, Carolyn was able to increase or decrease the consumption of many food items by as much as 25 percent. Carolyn learned a big lesson: school children, like adults, can be greatly influenced by small changes in the context. (Nudge, p. 1-2)
Thus, the nudge:
A nudge, as we will use the term, 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 fruit at eye level counts as a nudge. Banning junk food does not. (Nudge, p. 6)
Nudges play a crucial role in influencing individuals’ decisions in health, finance, and everyday lives. [And perhaps the most crucial aspect of what qualifies as a nudge is that a nudge differs greatly from a mere economic incentive. A nudge would, theoretically, have no impact on a hyper-rational economic decision maker, but would have a clear impact on an actual human.] One avenue of application related to the design of default options. For example, take organ donation. Should individuals applying for a driver’s license be forced to select an option (organ donor vs. not organ donor)? Or should there be a default option for those who don’t feel like choosing? If so, should the default suggest donation or not?
The choice of path turns out to be critical. Numerous studies (one such here) suggest that increasing participation in organ donation is positively correlated with attributing organ donor status as the default option. This simple conclusion had baffled observers for years when they had observed vast differences in organ donation participation rates across countries. “Why,” they wondered, “would residents in some nations be so willing to be organ donors, while those in others are so reluctant?” Instead of relying in cultural factors (Spaniards are just a more generous people), they should have been examining how the respective governments were nudging their citizens to (or to not) participate.
For a multitude of reasons, choice architecture matters. And when it does, it’s possible for the architect to do some good by nudging choosers in a direction which may benefit them. When are nudges most needed? Sunstein and Thaler suggest the following types of choices are ideal candidates for nudges:
- extremely difficult choices, with high levels of complexity and/or high stakes (how to choose between hundreds of potential retirement plans, for example);
- choices the consequences of which occur at a separate time (such as dieting decisions when the long-term ramifications only occur much later);
- infrequent choices (most people take out very few mortgages in their lifetimes);
- choices which provide little to no feedback
In a perfect world, choice architects would use these nudges only for the benefits of the choosers. Since all such architects are not so benevolent, however, we must be wary of the nudges inherent in many choices we have in front of us. Nevertheless, nudges are everywhere – and a little nudge can go a long way.
[Edit (1/2/13): Nudge mini-rant from @UnlearningEconomics: “Why does *everyone* insist on missing the central point of Nudge, saying stupid things like ‘why do we have the right to ‘Nudge’ people?’ The point of ‘Nudge’ is that it is impossible *not* to Nudge people. Their choices are always pushed in one direction or another.
Yes, this is a central theme in the book. Even opting to exclude a default option is a nudge. It is crucial to keep this in mind.]
[Edit (3/24/13): Here is a link to Cass Sunstein’s Storrs Lecture (PDF) on Paternalism.]
- When installing new mandatory credit card machines in New York City taxis, the choice architects had options. The average taxi cab tip was roughly 10% prior to their installation. But now, when paying with a credit card, each machine presents three “suggested” tip options: 20%, 25%, and 30%. Sure enough, the average tip percentage increased to 22% after their implementation! A million dollar nudge if I’ve ever heard of one! (Source: Cheap Talk, from notes.unwieldly.net)
- I am acutely aware of how having too much choice (also known as the Paradox of Choice) can be less than optimal for my decision making in everyday life. I try to arrange the food in my refrigerator such that the items which are most perishable and most likely to be forgotten are often placed in the front so I notice them – and eat them! My extensive iTunes library can make it difficult to find what I want to listen to, so I constantly compose and (re-)configure playlists so it becomes easier to find what I want when I want it. By clarifying and simplifying my options, I can nudge myself to make better decisions!
- As discussed here, New York City has implemented a new mandate that restaurants display their sanitation grades in easy-to-read, brightly-labeled signs in windows facing the sidewalk (previously, the information was public, but took some effort on the part of the diner to obtain). This makes their sanitation grades more accessible to would-be diners, and can provide an important incentive to restaurants to clean up their acts!
- Image of an energy saving nudge – as shared on twitter by @JamesLKimmel.
- Google employees have been nudged to develop healthy eating habits by the company. Google has organized cafeterias placing salad bars right at the entrance, since most eaters are likely to load up on the first item they encounter. Vending machines stack spring water at eye level, making less-healthy soft drinks more challenging to find. Story here.
- Prevent pill overdoses by packaging pills in blister packs. These packs force people to individually pop out each pill one at a time, rather than consume an entire bottle in one gulp.