Nudge: Improving Decisions About Health, Wealth, and Happiness

The false assumption is that almost all people, almost all of the time, make choices that are in their best interest or at the very least are better than the choices that would be made by someone else. We claim that this assumption is false—indeed, obviously false. In fact, we do not think that anyone believes it on reflection.

Those who favor Just Maximize Choices don’t realize there is plenty of room between their policy and a single mandate. They oppose paternalism, or think they do, and they are skeptical about nudges. We believe that their skepticism is based on a false assumption and two misconceptions.

Just Maximize (the number and variety of) Choices—full stop! The policy has been pushed in many domains, from education to prescription drug insurance plans. In some circles, Just Maximize Choices has become a policy mantra. Sometimes the only alternative to this mantra is thought to be a government mandate which is derided as “One Size Fits All.”

The standard policy advice that stems from this way of thinking is to give people as many choices as possible, and then let them choose the one they like best (with as little government intervention or nudging as possible).

Humans respond to incentives too, but they are also influenced by nudges.* By properly deploying both incentives and nudges, we can improve our ability to improve people’s lives, and help solve many of society’s major problems. And we can do so while still insisting on everyone’s freedom to choose.

Econs respond primarily to incentives.

In accordance with our definition, a nudge is any factor that significantly alters the behavior of Humans, even though it would be ignored by Econs.

As we will show, setting default options, and other similar seemingly trivial menu-changing strategies, can have huge effects on outcomes, from increasing savings to improving health care to providing organs for lifesaving transplant operations.

one policy produces better outcomes, they can greatly influence the outcome by choosing it as the default.

First, never underestimate the power of inertia. Second, that power can be harnessed.