Summary of “Nudge”: The book “Nudge” is about how everyone can use a little judicious nudge to make one decision over another without the need to infringe upon individual freedoms. Nudge is co-authored by a professor of economics and behavioral sciences (Nobel Prize in economics) and an internationally renowned jurist who heads the Harvard Program on Risk Prevention.
Richard H. Thaler and Cass R. Sunstein, 2012, 412 pp.
This guest column was written by Pierre-Favre from the blog Learning to convince; in which he shares with you the methods and tools to understand and convince a speaker.
Chronicle and summary of “Nudge”:
First of all, Thaler and Sunstein make us aware that everyone is likely to be what they call an “architect of choice”.
What would an architect of choice say to me?
It is a person who, by virtue of his or her prerogatives; organizes the context in which people make their decisions. Here are the examples they give: design a ballot, describe to a patient the different possible treatments; create a form, describe the advantages and disadvantages of a particular course of study to one of your children; work in sales. Their favorite example, which they give a number of times in the book, is that of Carolyn; who decides where food should be placed in a school canteen. A choice that therefore influences the health of children…
The authors consider it legitimate to influence a choice when one has the opportunity to do so, but to also allow people to easily escape that influence. They call this view “Libertarian paternalism”.
To illustrate this, we have the right to some pictorial examples that compare the Econs to mere mortals. The former are fictitious characters who always act in a reasoned, just and thoughtful manner. The latter are the homo sapiens that we are with our emotions, finite knowledge and natural inclinations. Only the latter is subject to cognitive bias and, consequently, susceptible to nudge.
Besides, what is a nudge? It is simply a “nudge”, which can be given in many ways.
We mere mortals are in no way able to make good choices in all areas of life. There are, of course, areas where we are expert, trained and informed, but for all others, let us recognize that we cannot have an informed opinion. Especially if feedback takes a long time to reach us (the choice of the flavor of an ice cream cone vs. the choice of options for our home insurance, for example).
As social animals, our choices and behavior necessarily influence those of others. That’s why it’s normal to consider that to encourage one behavior more than another is not a bad thing at all.
“Libertarian paternalism is neither left-wing nor right-wing, Democrat nor Republican,” the authors tell us. It would be part of a broader dimension where there would no longer be any political posture or opposition of principles.
In the first part of the book “Nudge”, the authors will try to show us that mere mortals are full of flaws and that these flaws allow “nudge” to work. This is the part that interested me the most, and I will suggest to the reader in a hurry to read at least this first part.
As in any good book that wishes to popularize our cognitive functioning, it is appropriate to insert a chapter on optical illusions, it is in this first chapter of Nudge that we address the question. To be fooled by an optical illusion “does not mean that human beings suffer from a design flaw, but that their behavior can be better understood if we identify the reasons that lead them to make systematic mistakes”.
Then comes the demonstration of the errors of judgement produced by our brain and the advantages and disadvantages of our automatic and reflective cognitive system. The first one is fast and instinctive; it serves us in simple and/or habitual situations. The second is more deliberate and more conscious, and is used to gauge a more complicated situation. As you have understood, the first is more prone to error.
After the illusions? Cognitive biases of course, the authors present three of them for the moment:
- Anchoring (start from a figure, even a fictitious one, gives a basis for reflection to decide on a response value)
- Availability (having a risk in mind makes you think it more likely, and vice versa)
- Representativeness (heuristic consisting in wanting to attribute this or that cause to events that do not depend on it)
After bias, it’s the turn of our unfailing optimism when it comes to self-evaluation. Let’s take an example: on the whole we are very lucid about the level of risk of a situation (a divorce for example) but when we have to consider the risk of divorce on our wedding day, our only thought is that our marriage is almost certain to be for eternity.
Now let’s talk about loss aversion. We prefer to keep what we have, whereas if we were to acquire that “something,” we would place a fairly insignificant value on it and not want to have it.
A return to a bias, that of the “status quo”, or the heuristic of “as you wish, I don’t care”. It leads people to continue in a choice they have made, if an effort is needed to end it. Two examples: change TV channels, or cancel a tacitly renewed subscription.
Before closing this first chapter of “Nudge”, there remains one phenomenon that I find quite interesting: framing. It is the impact of the way things are presented to us. The idea is that choices depend in part on how problems are framed. To have a 90% chance to survive surgery is more of a reassurance than to have a 10% chance to die in surgery…
In conclusion: humans, to escape from the complexity of the world, use simple but false rules of thumb. This is why, from the authors’ point of view, people are likely to be guided by small, carefully chosen signs.
Who has never succumbed to temptation? Whether it’s in front of the dessert trolley at the restaurant or when you buy a pair of shoes on sale (even if it hurts your foot a bit) for example. Self-control, simple and obvious for the Econs, is an ordeal for mere mortals. The struggle between their reflective system (prudent) and their automatic system (impulsive) requires a consequent effort. That is why, as you will have understood, lack of choice will ease the situation.
But is it really just a simple problem of self-control? Not sure, because in many situations, we put ourselves in “autopilot” mode, a very practical function that allows us to devote our attention to something other than what we do. Like when we watch the movie at the cinema rather than focus our attention on the popcorn we eat there.
However, self-control counts for a part, so we must help ourselves to strengthen it. To do this, the authors show that if you put yourself in a situation with a strong likelihood of an unpleasant outcome that you have to deal with it quickly, this can be an effective method. There are several examples, such as the Clocky alarm clock that rings and rolls around the room so that you can’t catch it, so it forces you to get up.
Another method to reinforce self-control is to attribute, mentally or factually, a difference to something fungible (that does not have a label); this is the case when you make different budgets (food, bill, rent, …). In such a case, we sometimes postpone an important expense to the next month due to lack of money (from the corresponding budget) when in reality there is money on the account (but put towards another budget).
In this chapter the authors will show us that, because we are a gregarious animal, we devote part of our attention to the thoughts and behavior of others, and therefore they influence us. This is the case, for example, when your best friends get fatter, there’s also the risk that you will get fatter.
The man tends to conform to the opinion of the group, even in cases where it is obvious that the group is wrong (e.g. de Asch and line length). This is the “compliance effect”. There are two reasons for this:
“The first is the information conveyed by the responses of others; the second is peer pressure and the desire not to be the object of group disapproval“.
It works both ways (e.g. from communism in the former Soviet bloc, which remained the regime in place because people had no idea how many other people hated the regime). This is the effect of “pluralist ignorance”.
Many other examples of social conformation are given such as: the most important problem faced by the country, the suspension of freedom of speech, the rise of fascism, collective suicides, the reduction of rubbish on the roadsides, … In any case, the majority of people “did like everyone else”, whether for better or for worse.
You may ask yourself the question: but why is social conformation so powerful?
The answer is called the “spotlight effect”, we all think that people pay more attention to us than they actually do. It is this effect that leads us to conform to social norms.
Some cultural tastes and political choices are highly unpredictable. The phenomenon of “social proof” has been demonstrated, for example, a phenomenon that leads to someone to like a song, that they already know, a lot more and as they know it has been enjoyed by many people before them. Whereas the same song is not appreciated more than others if we do not specify that it is loved more than others.
On the other hand, many events or facts go unnoticed until someone points them out to us. The authors cite the “epidemic of impacts in Seattle’s breezeways”, which led the federal government to create a “scientific committee” dedicated to the issue. The committee concluded that the impacts were due to “small objects hitting the windshields of cars under normal driving conditions”.
In the same vein, the amount of food consumed by our table neighbors affects the amount of food we eat.
Advertisers are not outdone when it comes to social proof. This is the case when they use phrases such as “most people prefer…” or “an increasing number of people…”
You will have understood that social influences also play a role in politics, food preferences and economics. All you have to do is let people know what behavior is expected, and put forward that it is the behavior adopted by a large number of people. This is an effective nudge.
The most important thing is to tell people the desired behavior and not the other way around. If you remind people that the “right” behavior is more prevalent than they think, it puts them on the “right” track. Take the example of student drinking. What the authors say is that when students believe their peers drink more alcohol than they actually do, they tend to increase theirs. This belief is partly due to the availability heuristic, in that students remember alcohol-related incidents, rather than those that happened without it.
There is an interesting piece of information to note about our need for social compliance. If we learn of a gap between how we behave and what the average is; we instinctively seek to reduce it. It doesn’t matter whether our behavior has been virtuous or not (the example given concerns our consumption of electricity). On the other hand, if a non-verbal sign (for example, an emoticon) accompanies the information, those in the virtuous part continue with their efforts, and those in the non-virtuous part do the same.
To increase the ease with which certain information comes to mind we can play on other factors.
For example, if people are asked what they intend to do it encourages them to do more of what they said. Or ask them how they propose to do it. There are also non-verbal elements that will encourage certain behaviors. At the sight of a briefcase, people are more competitive, less cooperative and less generous. The smell of a cleaning product encourages people to leave the place cleaner. Even the temperature of our coffee influences our judgment of others!
In this chapter, the authors show us situations where nudges are essential and draws our attention to the fact that markets tend to play on human weaknesses in order to make a profit.
First of all, let’s be aware of two things. The first is that the efforts, the consequences of which will pay off later, are part of the difficult choices (dieting or stop smoking, for example). The second is that human beings will always be faced with problems that they find difficult to solve, regardless of their skills. Thus, to become competent, one must practice. However, in life, problems with high stakes do not arise often enough to practice (marriage, buying property, professional choices, etc.). In life, we have too little feedback, which makes it difficult to improve.
It is easy to know your preferences on options that you may have tried (choice of an ice cream flavor for example), but when it comes to complex choices, due to a misunderstanding of the terms of the proposal (restaurant menu written in a foreign language or choice of a pension insurance for example), it becomes more complicated to make the right decision.
The choices that need to guide people are: decisions that have far-reaching effects, those that are difficult and/or infrequent, and those that do not offer feedback.
All this complexity leads us to judge the relevance of a product in relation to its price, the more expensive would be synonymous with quality. It even becomes possible to charge for unnecessary services if the consumer is not able to judge the relevance of the product (e.g. extended warranty). And competition should not be relied upon to contribute to lower prices as it has nothing to gain from it.
Our environment conditions us to have certain reflexes; when the stimulus does not correspond to the expected choice, we make mistakes. If we manage to select the right stimulus, we become good architects of choice.
The default options can make life easier for the user or be beneficial to the proposer. In cases where the user is competent, it is advisable not to put any, conversely; in cases where the user is not, it is advisable to “spoon feed” a mere mortal.
When we lack expertise in a field, we lack benchmarks.
This lack of benchmarks means that we don’t make informed choices. The authors advocate government intervention to make it mandatory for companies to easily compare their product offerings. In this, they are faithful to their “libertarian paternalism,” which means to help those in need as much as possible; but not to hold back others when possible.
Organizing efficiently is necessary to make a satisfactory choice. This may involve “the compensatory strategy” (accept a disadvantage in a choice because another option is very advantageous), “elimination by attributes” (prioritize our wishes so that we can then discriminate), follow a relevant architecture of choice (example: the classification of DVDs by genre/actor/director). However, each of these techniques suffers, of course, from disadvantages.
Price is a factor in the choices we make when we buy goods or services. However, we are less sensitive to the price when we pay for it indirectly. In fact, what holds us back from spending money is its “salience,” the fact that we notice what it costs us (like the maintenance of a car but not how much it cost us). The authors then recommend that we study the loss or gain we make (loss of calories at the gym for example) to consent more easily to the effort.
The aim of this second part is to help “mere mortals” to act a little like the Econs.
In order to receive an income after retirement, it is necessary to contribute to a “pension scheme”. Each person must therefore define the amount that he or she is deprived of during his or her working life, in order to benefit from an income once he or she has left the work environment. The equation to be solved is: how much am I willing to put aside in order not to have to make too many sacrifices today and to enjoy a comfortable old age?
In the opinion of the authors, it would seem that people, in order to have a comfortable level of retirement; believe that they do not have the resources to do so. This is why they consider themselves “ready” for a gentle incentive.
Pension plans set up by companies for the benefit of their employees are often neglected; even though it is in the employees’ interest to use them. Here too, Thaler and Sunstein would welcome an incentive to help employees.
To remedy this previous problem; they recommend that the choice to participate in the pension plan should be a default option. The effectiveness of this option is demonstrated and quantified in this chapter.
An alternative is to set no default choice, and force a “yes” or “no” choice.
Note: the easier the consequences of the “yes”, the more people will make this choice.
Another observation is that when employees choose to contribute, they generally choose a contribution that is too low or a “round” figure rather than take the time to properly estimate the implication of their choices.
The conclusion is that education is not the most effective tool to convince employees to join the savings plan.
The “Tomorrow I’ll save more” plan involves the use of five psychological principles that underlie human behavior. This is done in order to get employees to agree to increase their contribution rates.
In the United States, Congress has passed the Pension Protection Act; which creates a financial incentive for companies to encourage retirement savings plans for their employees. This idea has been taken up by other countries.
Chapter 7 (How to invest the money)
The way to invest your money is a series of Cornelian choices where the oscillation is between the level of risk and the level of profit. The difficulty of these choices is illustrated by the differences in return and risk between stocks and bonds.
It takes about 20 years for a large amount of money invested in action to pay off. The problem is that mere mortals take too short a period into consideration and therefore tend to invest when stocks rise and conversely when they fall.
Overall, in terms of how to divide a sum of money among different options, people share that sum equitably among the different options and don’t look at what the options are. However, it is a good idea to “rebalance” the allocation of the sums invested in relation to earnings.
With this in mind, the authors propose some nudges:
- Historically, the pension plans did not have default options; they had them from the moment participants were automatically enrolled in them. Since it is neither reasonable not to take risks to earn so little; nor to take too much to perhaps earn a lot, several systems have emerged. Such as a pre-mature balancing: conservative/balanced/dynamic; or set a retirement date and, as retirement approaches, reduce the level of risk.
- Some pension plans could be designed for participants who wish to be actively involved in the management of their funds, with the goal of putting all their savings into it.
- That there is a ready-made formula for those who do not take the step to register.
- They advocate making sense of the contribution rate, which is far too abstract for most employees (e.g. to match the rate in their plan with a picture of real estate they are likely to be able to acquire).
- They warn of the conflict that can arise between employee and company when employee savings are invested in their own company. Many companies outsource the establishment and management of a pension fund to an internal team assisted by an external consultant.
First of all, the authors find that mere mortals are incompetent when it comes to the issue of obtaining credit. For example, for real estate loans, because of the amount involved. It should also be noted that people with the lowest incomes are less competent; and not so well advised to choose them. The latter benefit from worse interest rates because of the higher risk they represent. One consideration is to limit the number of existing loans, but this is not a matter of libertarian paternalism. A track more in line with the authors’ vision is to add up the different costs of the loan into a single exact figure.
Another example with credit cards: they have replaced cash payment because of their very practical side; yet they have largely contributed to the creation of interest that the owner must pay to the credit organization. The authors believe that if users had the amount; they pay for their credit cards in front of them, they would be more careful with their expenses.
In terms of credit, human weaknesses are largely used to the benefit of lending organizations.
Some lessons can be drawn from the Swedish experience with the privatization of old-age insurance:
- It appears that many Swedes have made inappropriate choices due to excessive choice.
- The suitability of the default choice (taking into account the competence of the experts who define it and the competence of the people who choose it) as well as a massive advertising campaign seem to be the keys to ensure that people are well covered by their old-age pension.
- Active participants scored lower than the default fund (particularly because of the tendency of the uninitiated to follow trends rather than anticipate them).
- Advertising has led to inappropriate choices, as the primary interest of advertising is to generate a return on investment rather than offer helpful advice.
- This experience shows that it is good to guide people as well as to respect their freedom and also to help them to make the most efficient choices. To do so, the authors advocate a system where the most relevant options are put forward and only if they are refused (at least momentarily) can one gain access to others. Freedom of choice is respected as well as guidance provided to people.
Section D” (improving social protection (Medicare) in the USA under the Bush presidency) by leaving too many choices has led to inappropriate choices. In order to understand this chapter, the authors take the time to explain the characteristics of this “section D”.
The flight from a “one-size-fits-all system” has opened the door to the confusion caused by a plethora of offers. This oversupply leads people (mainly poor and poorly educated) to find the system too complicated and the desire for simplification.
It is an aberration to assign plans randomly to those who have not chosen, since chance does less well than an “intelligent allocation” system. Most importantly, because those who will benefit are those who need help the most, because “among them are the most severely disabled Americans, both physically and cognitively”.
The tool made available to those who need it is not adapted (an IT tool for the elderly, in this case). Moreover, as the system is complex and the data changes from day to day, even if you know how to use the tool, the results are not necessarily relevant.
Whether it was allocated at random or as a result of the choice of beneficiaries, it is clear that the choice cannot be described as a “good choice”.
Still with the aim of clarity that characterizes this book “Nudge”, Thaler and Sunstein expose the paths that a “libertarian paternalistic” could have followed:
- Because random assignment is a very bad idea, the state of Maine has implemented a system called “smart assignment”. It selected “10 plans that met the required coverage criteria that were evaluated from three months of data”. Participants whose plans covered less than 80% of their medications were transferred to one of these plans (with the option to decline).
- Another approach is to make it compulsory to publish a summary of the drugs consumed and the monthly payments over a period of one year. This allows everyone to have the relevant data in front of them so that they know which plan is the most suitable for them.
Now comes a topic that contributes enormously to saving thousands of lives every year. This can be done if the default rules are changed for organ donation.
The authors argue that a substantial majority of the population is in favor of organ donation but that a small minority has taken steps to make this known. This is problematic when the default rule is clearly and only by consent.
One option is to authorize, by default and with no need for anyone’s permission, the removal of organs from dead people or those in a clinically desperate condition.
Unsurprisingly, the default choice, whatever it is, is the one people choose. The authors cite the example of Germany where 12% of the population is a donor (default choice: no donor); and Austria where 99% of the population is a donor (default choice: donor).
Even in the case of a default choice, the situation remains complex as it may depend on what the family may think of the potential donor’s opinion. In the case of the default choice “donor”, the family’s approach is easier for the transplant team.
There is also the option to force a choice. The point is to close the door to any ethical and political debate; as well as to take away the chance of any possible opposition from relatives. (The authors make no secret of their preference for mild (but effective) incentives for greater organ availability for recipients).
The authors introduce us to an environmental dimension where, despite the fact that coercive government action can be found simpler, more logical and effective, they wish to show us that the soft approach can be the right way to deal with the situation.
The coercive method for CO2 emissions is the carbon tax. The soft method is, for example, the quota system. The advantage lies in the fact that a company that cannot do otherwise than pollute can do so on the condition that it “pays for the social nuisance it causes”. Whereas a company that reduces its emissions is given a “bonus” because it can sell its superfluous allowances on the market. In this case, the quota system costs companies more than the carbon tax, but the “mental compatibility” works in favor of quotas. The level of expenditure is acceptable for companies and very favorable from a societal point of view (e.g. fewer premature deaths and chronic bronchitis).
(Mandatory) feedback to citizens makes them aware of the level of risks and/or pollution of a particular company and enables them to consume with full knowledge of the facts and, above all, to mobilize against this or that product or company (inspired by the mandatory messages on tobacco established in 1965). This also works for risks in the workplace; the simple obligation for the employer to inform employees of potential risks has led to a decrease in the number of work-related accidents.
The reason for its effectiveness comes from the tendency to stigmatize the “bad pupils”.
For fuel consumption, as in other areas, to portray the environmental cost of a practice or how things are performed in terms of price is a very powerful nudge. In addition, “labelling” matters. This is the case for the driver of Prius (which at the time of the book “Nudge” was the only car model without a combustion engine) who is immediately seen as aware to their fuel consumption. This is not the case for the drivers of the same model of car whose engine is either thermal or electric.
One of the problems with energy is that it’s invisible, so people are not aware of their consumption. If it’s made visible it helps and encourages people to reduce it. Ambient Orb works very well, it’s a small sphere that changes color in accordance to your level of energy consumption. Another example, which seemed absurd from an economic point of view but which has paid off; is the Green Lights program. It’s a partnership between EPA and companies that committed to lowering their energy consumption levels in exchange for displaying the EPA logo.
The authors now discuss marriage with us, and particularly the conflicts generated by same-sex marriage. They advocate giving non-state organizations the freedom to marry whomever they wish; and allowing states to use terminology other than “marriage”.
But first, what are the advantages of being married? Tax benefits, social benefits, advantages in terms of inheritance, automatic rights towards each other, decision making in the name of the spouse and judicial privilege, but above all the advantage of official legitimacy! And it is all of these benefits that people who get married want. If you give the first without the last it will satisfy no one.
The state makes a number of arrangements available to its citizens that allow for agreement; and especially conflict resolution in the event of disagreement; so why should the domestic agreement of marriage not be considered in the same way as an economic partnership? Like an agreement for this book to be written, for example.
State control over marriage
State control over marriage is from another time inasmuch as the functions it used to fulfil are no longer relevant (authorize sexual relations, provide protection for children, help solve a problem of self-control, etc.). Moreover, since the indissoluble nature of marriage is no longer present, it merely gives an advantage to those who are entitled to it over others without any valid reason.
The authors recognize the importance of the protection of children or the most vulnerable spouse. However, just because a contract contains the word “marriage” does not mean that it is necessarily appropriate or that others are not. For them, the problem lies in the fact that the State “creates a monopoly on the legal form of marriage and imposes precise limits on the persons authorized to marry; moreover, it accompanies this legal form with material and symbolic benefits which it alone confers”.
The authors, as faithful paternalistic libertarians, propose to give us clues on the default rules that could be taken in to consideration (particularly in order to anticipate the complexity of the problems to be solved in the event of separation). The default rules are those that will be most respected, and it is with this in mind that they propose a few, such as “in the event of divorce, the person who cares for the children the most continues to do so and receives financial assistance”. Self-interest bias distorts (to their advantage) the judgment of those who are divorcing.
Fourth part (extensions and objections)
In this chapter Thaler and Sunstein make a list of 12 nudges that they propose on their site; and suggest that we send our suggestions. Here is the list:
- Nudge to give more to the associations. Give little now and commit to give later.
- “Donation cards and tax deductions”.
- Automatic tax return.
- To help people achieve their goals (to record money that will be returned after proof of achievement of the goal or to publicize the failure to achieve the goal).
- To quit smoking, voluntary deposit of money in an account for 6 months (the amount usually allocated to cigarettes).
- In return for a crash helmet not being compulsory for motorcyclists: special license + supplementary insurance for bodily injury (+ possibly mandatory organ donor badge).
- Self-imposed ban from entry to the casino.
- “Destiny” earns points from her insurance company if she can prove that she is in good physical condition; points that can be used to buy plane tickets, hotel rooms, magazines, etc…
- 1 euro a day to prevent another pregnancy.
- Red LED on the air conditioners when it’s time to change the filter.
- Bitter Nail Polish and Disulfuram.
- E-mail courtesy check software.
In this chapter the writers want to respond to some of the most common concerns that are expressed to them.
The slippery slope. They follow it to the point of absurdity. This leads us to understand that this argument leads to disdain for a proposal without it even having been considered; and therefore they cannot subscribe to it. On the other hand, the sine qua non of a nudge is to be able to get out of it; so the “slippery slope” is not so slippery. Moreover, since there can be no neutral choice; if nudges aren’t used it is the same as if you applied the wrong one.
The architects of choice may develop it in terms of interests other than the common good. The authors reply that this is true whatever the domain under consideration and therefore that this reason alone is not sufficient for not ” structuring the choice “; what is needed, on the other hand, is transparency.
The right to make a mistake is formative. Yes, people have the right to make mistakes. But help for novices is still welcome. Especially if the risk is too great, as the mistake can be fatal (ski slope, direction of traffic in London); so not to help someone doesn’t make sense because it means they are not able to learn.
There is no reason for the State to deprive Peter in favor of Paul, and for total freedom to prevail. The authors believe that the minor inconveniences suffered by Peter are actually insignificant. And that if nudges are banned it is already an infringement of freedom; and therefore they have no point in their reasoning.
Is insidious manipulation acceptable? No, because to be acceptable nudges must be “visible”. In any case, the people who encounter them must be aware of the aims of the person who set them up.
Neutrality. It’s impossible. However, it is necessary to seek it in certain cases (political elections, religion, freedom of expression, etc.). Where the person’s wishes can be predicted, neutrality is not indispensable.
For those who would like to take the nudging method further; the authors reply that simplicity in refusing the incentive is important; and that to take it further requires a successful determination between what is acceptable; and what is not (in other words, between what is right and what is wrong). On the other hand, to go further makes the slippery slope argument salient…
Throughout “Nudge” there is an evident social will on the part of the authors to change society. In this final chapter, they acknowledge that they want to make their contribution to the construction of a life that is both free and well guided, a kind of “third way” that would transcend “some of the most difficult debates facing contemporary democracies”.
The first edition of the book “Nudge” was published in 2008. And the authors wish to come back to the crisis of 2008 to explain, at least partly; its reasons but also to propose some nudges. Mere mortals were unable to understand the level of risk of their investments because financial products had become so complex. Then, mere mortals gave in to the temptation to refinance their credit so much the credit buyback became sexy. Finally, mere mortals let themselves be carried away by popular belief (social contagion phenomenon); in this case that real estate prices will only go up.
The authors propose these nudges: transparency with regard to the risks incurred by borrowers; government/market collaboration to reduce the temptation for borrowers to take unwarranted risks; better information to reduce social influences and to have the opportunity to make an independent; and informed judgement (e.g. a list of the ingredients on food products); and a default recommendation “here is what we recommend for people whose situation is comparable to yours”.
Finally, the authors see three main ingredients in the crisis: greed, corruption (for credit issuers) and human weakness (for borrowers).
Conclusion on Nudge by Richard H. Thaler and Cass R. Sunstein:
Nudge opened my eyes to the balance, entirely legitimately; of the wish to guide the choice of others, without the need to do too much or too little; you can read my article on the subject “To have imposed oneself without overwhelming”. Throughout “Nudge”, the authors provide references to the facts they put forward; as well as many practical examples and possible applications. The authors share my view that individual liberties must be preserved. However, we must not forget that human nature leads us to make avoidable mistakes.
I think it can give people a more open; tolerant and effective view of how to deal with the major issues of our time; as well as the problems of everyday life.
- Easy to read, “Nudge” reads like a novel whereas its primary vocation is to teach us.
- Many practical examples (whether already in place or ones to be considered),
- Well-articulated arguments.
- Some overly specific examples remind us that “Nudge” is above all for an American audience,
- Some typos (probably due to translation)
My rating :
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