The original Nudge went through major updates to create this edition—The Final Edition. What are some of the major revisions you’ve made? Why did you decide to update Nudge now?
A lot has changed since 2008 – and we can fail to appreciate, as we witness them in real time, the sheer magnitude of such changes. Psychologists even have a name for this phenomenon: change blindness. To set the stage, when we were writing the original edition Sunstein had just gotten his first Blackberry and Thaler his first iPhone. Real estate developer and reality television star Donald Trump was proclaiming that Hillary Clinton was “fantastic” and would “make a great president.” If we want to fully appreciate how much the world has changed over these years, just think about how much worse the COVID experience would have been if it had arrived back then. Virtual meetings and teaching would have been infeasible. The science to create the Moderna and Pfizer vaccines did not exist. Worse, streaming video did not exist. What would we have done?
So, although twelve years does not seem like such a long time, when we looked through the original edition, it just felt dated. And one of us was bored during the lockdown. The time seemed right. So, we decided to give ourselves what golfers call a “mulligan,” which is a fancy term for a do-over. The world had changed so much that we felt the entire book could be improved and updated.
During this interval, it has not just been technology that has been exploding; there has been an explosion of research that applies the concepts of psychology and behavioral economics to study numerous problems in both the public and private sectors. Over 200 so-called “Nudge Units” have been formed in countries across the globe, countless private sector firms have created in-house groups to use the same tools, and the widespread adoption of smart-phone technology has led to exponential growth of apps that help people deal with various aspects of their lives including health, fitness, diet and nearly every aspect of household finance. What these apps have in common is that they all engage in nudging! All this means that we have learned a lot in these dozen years, and we wanted to share a bit of what we had learned.
What does the book’s title Nudge refer to? When do we need a Nudge?
First things first, let’s make sure we get the pronunciation right. To clear this up early in the book we quote from William Safire, who for many years had a weekly column devoted to language in the New York Times.
The “Yiddishism noodge” is “a noun meaning ‘pest, annoying nag, persistent complainer’ . . . To nudge is ‘to push mildly or poke gently in the ribs, especially with the elbow.’ One who nudges in that manner—‘to alert, remind, or mildly warn another’— is a far geshrei from a noodge with his incessant, bothersome whining.” Nudge rhymes with judge, while the oo sound in noodge is pronounced as in book.
That settled, in our usage, a nudge is anything that steers people in a particular direction, but does not interfere with freedom of choice. A warning is a nudge (THIS PRODUCT CONTAINS SHELLFISH!); so is a calorie label; so is a reminder (YOUR BILL IS DUE TOMORROW). A GPS device nudges you. The key to all these examples is that the receiver of the nudge is free to ignore it, but still gets some help.
People can benefit from a nudge whenever they are likely, without the nudge, to make what they will consider to be a mistake. We might need a nudge to find the best way to a restaurant in an unfamiliar neighborhood. We might need a nudge to attend to an emerging health problem (such as heart disease). Sometimes we need nudges to eat better, or get more exercise, or to remember to take our medicine. We need nudges when we are required to make decisions in complex settings such as choosing a health plan, a mortgage, or saving for retirement.
There’s a new chapter on Sludge. What is Sludge?
A basic principle of nudging is that if you want to encourage people to do something, you should remove the barriers that impede them. Our mantra is Make It Easy. But sometimes doing the right thing is complicated. Sludge consists of frictions that make it harder for you to get where you want to go. Paperwork is sludge. Waiting time is sludge. Forms are sludge. Confusing websites have plenty of sludge.
Sometimes sludge is introduced intentionally by firms seeking to make a profit. Rebates are notoriously difficult to redeem. Governments can introduce sludge to make it hard for people to get things – licenses, permits, visas, health care, money. All the required steps are sludge. And the same tools that can be used for good, such as automatic enrollment in retirement savings plans, can be used in self-serving ways. It has become common for firms to make it easy to start a subscription or membership but difficult to cancel. This is intentional sludge. We try to alert readers to sludge traps and encourage the creators of sludge to clean up their acts. And there’s plenty of unintentional or inadvertent sludge out there – we want governments and companies (and the rest of us) to reduce it.
How do “Humans” and “Econs” differ from each other?
“Econs” are fictional creatures that exist only in economics textbooks, classrooms, and journal articles. These “agents” (as economists call them) can solve even the most complex economic calculation (such as choosing among a slew mutual funds), have perfect memories, no emotions, and never suffer from self-control problems. “Humans” are the people we deal with daily. They have trouble with long division if they don’t have a calculator, they forget birthdays and appointments, and they sometimes eat or drink too much and exercise too little. Humans can often use a little help. Or a nudge.
What is Choice Architecture?
Choice architecture is the term we coined to describe the setting in which people make decisions. When you go to a restaurant, the chef has decided what items she wants to offer to her guests, but someone has to design the menu. That menu designer is a choice architect. He has to decide how many categories there should be (are soups a separate category?), in what order the options appear, whether some options combined into pre-theater special, and so forth. Book authors are choice architects too. In what order should the topics be covered? How long should the chapters be? Doctors are choice architects, and so are lawyers. Parents are choice architects. So are website designers.
One problem is that people don’t recognize that they are choice architects. One of us recently filled out an on-line three-page financial disclosure form in order to participate in a research project. At the end of the form there was a button labeled FINISH. He clicked that button, and figured he was done. Wrong! He got an email the next day from an administrator saying that the form had not been received. It turns out that to complete the form you have to go back to the first page and press a button labeled “SUBMIT”. An inquiry revealed that half the people who fill out this form miss this step. Like us, perhaps they thought that the definition of the word “finish” was “bring a task to an end; complete”. This is a choice architecture failure of which there are all too many examples. Some of those failures have big consequences, preventing many deserving people from getting access to some benefit that could change the lives of their families.
What are “default options” and how should they be used with regard to choices like organ donation?
A default is simply what happens when you do nothing. On some streaming networks, when an episode of a show ends, the next one starts unless the viewer takes an action. Since Humans are good at doing nothing, defaults can have powerful effects. But, as we stress in the Final Edition, defaults are not the solution to every problem. For example, it surprises many people, sadly including some who have read Nudge, that when it comes to encouraging organ donations we do not favor the policy called “presumed consent” in which people are deemed to have agreed to be willing to be donors, unless they explicitly opt out. Although it is true that few people opt out, we favor what we call “prompted choice”, in which people are asked whether they wish to be donors at convenient times. Our new chapter on this topic explains why this seemingly obvious application of nudge principles is ill-advised.
Who do you see as the primary reader of the book? Are there any groups in-particular that you hope will read Nudge?
We do not have a “target audience.” Something like 2 million people around the world have read the original book in a multitude of languages, and they come from every walk of life. Some are government officials. Some are students who have gotten hooked on behavioral economics. Some are policy wonks interested in new approaches to dealing with society’s major problems. Some are folks in the business world who want their organization to run more smoothly and take better care of both their customers and their employees. Some just read it for the fun of it. Our rule when we decided to rewrite the book from beginning to end was that we would only keep working on if it were fun. (We have a bunch of abandoned chapters – abandoned because at least one of us cried out, “Not fun!”) We followed that rule, and even included a section on how fun can be used as a nudge. (Hint: people like fun.)
What are your recommendations to human resources departments on how they can make employee benefits decision making easier?
It is hard to know even where to start. Maybe our first bit of advice would be for the managers to put themselves through the “onboarding process” every step of the way, and experience first-hand how much sludge is in the system. (And, maybe start by changing the name? Onboarding in not very enticing. How about the employee welcome program?) In many organizations, the process of choosing a health care plan is so tortuous that it might well be categorized as a human rights violation. (For the record: Sunstein does not think so.) Create good default options. Remove bad options. Help people re-evaluate periodically. How about creating some software to take a look at each employee’s current selections and suggest better ones? (There is enormous inertia in employee choices.) And don’t get us started on the hiring process itself.
What are some of the pitfalls you mention regarding mortgages and credit cards? What biases come into play with both of them?
People are spending thousands of dollars unnecessarily in both of these domains. We distinguish between the difficulties of “choosing” and “using.” With mortgages choosing the right one is hard, but once you get it, there is not much to master going forward except to pay your bills on time. With credit cards families make mistakes on both fronts. American families have an average of $6000 in credit card debt and collectively pay over $120 billion in interest and fees per year. We think that technology can be a big help in these domains. We suggest ways that disclosures can be machine readable to better enable FinTech apps help people make better choices and use their cards more wisely. We think there are enormous business opportunities in creating what we call “choice engines” in various domains to make picking a credit card or mortgage as easy as finding a flight from Chicago to Boston.
How can individuals, companies, and governments be nudged to reduce climate change, global warming, and greenhouse gas emissions?
Fighting climate change will be the defining challenge of the next couple of decades. We have good news and bad news about that. The bad news is that we cannot deal with climate change just by nudging. The most important step is to get the incentives right, which would mean, ideally, that there would be a carbon tax, ensuring that those who emit greenhouse gases pay a corresponding price.
It is no secret that open bars and all you can eat buffets lead to overconsumption, and right now polluters often bear no financial costs for the greenhouse gases they emit. What makes setting these prices correctly is that it requires global coordination. But an understanding of behavioral economics can help by showing ways that free riding can be discouraged. We spell that out.
The good news is that there are important roles for nudging, and we need every possible strategy to deal with this crisis. A few examples: In some places – including some countries - people are automatically enrolled in green energy! That is, they are getting electricity that was created with solar or wind energy – unless they opt out and say, please create my power with coal. This policy works. Another nudge-based policy is to disclose the emissions from large emitters. Many consumers will be willing to shift their business to companies that have cleaned up their acts. And, as it true in every domain, technology can help. On very hot days households could be reminded how much money they could save by turning up their thermostats, or even switching off the AC. Of course, people could opt out of such reminders. Someone who sends out too many nudges can become a noodge.