Book Review: Nudge by Thaler and Sunnstein

Looks like we have a Tipping Point / Made to Stick / Fooled by Randomness type instant classic here:

This year has seen a glut of books on topics in that strange area occupied awkwardly by behavioural economics, cognitive psychology, and experimental philosophy. Some fail to distinguish themselves, merely rehashing the many ways in which we aren’t perfectly rational creatures. Others, however, find an original angle to tack the last 30 years of work since Daniel Kahneman first thought “but wait, real people don’t make rational choices”. Nudge (Thaler and Sunnstein, Yale University Press, 2008) is from two leading University of Chicago economists and takes a public policy angle that has been rewarded in the bestseller lists.

The authors (who refer to each other by their last names, even in the blog that accompanies the book, an awkward affectation that makes me picture two 1950s men in suits at a work cocktail party) have coined a new term: libertarian paternalism. By this they mean that policy makers can use your brain’s decision-making shortcuts to steer you towards good behaviour while still leaving you free to choose bad. It’s opt-out public policy.

Libertarian Paternalism is a brilliant phrase because it has something for everything: libertarianism for the Small Government suit, paternalism for the Smug Liberal. Nudge has been required reading in the halls of English and US power, because it promises that you can have your cake and eat it. You can make decisions for other people, but not be hated by the people who don’t like you making decisions for other people! What’s not to love?

The book has a simple structure: first the authors walk us through our cognitive biases, the flaws in our decision-making apparatus; then they take us through different real-world scenarios such as social security, healthcare, and education; and finally they deal with objections and suggest future avenues of exploration. In each subject area, the authors suggest “nudges” (the authors endow the word with the same near-religious air that accompanies “social graph” and “RoR” in Web 2.0 circles) that will gently encourage people to do the right thing. For example, we tend to fear losing things more than we anticipate gaining things, so the authors suggest we not immediately deduct money from salaries to increase retirement savings (which would be perceived as a loss) but instead reduce future raises and put the reduction towards retirement. Then backing out would require losing the retirement saving you were doing (a loss, felt more keenly than the gain of the spending money).

[From Book Review: Nudge – O’Reilly Radar]

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.