Sunday, May 20, 2018

Thoughts on Thaler & Sunstein's Nudge: General points about human decision making, with practical implications for one's day-to-day life

I read Cass Sunstein and Richard Thaler's Nudge with great interest. This work provides an overview of choice architecture from a policy planning perspective but also offers practical thoughts and tips that are related to how people might make their decisions in day-to-day life. It introduces the notion of essentially two brains. The one of the prefrontal cortex and the rational decision making and also the human brain that is rooted a little bit lower down. These make decisions differently, and all too often we think about decision making only regarding a mythical species called the homo economicus that is making decisions entirely irrationally. The authors go over some places where choice architects can help structure decisions either through creating defaults, placing options intelligently to help us make faster decisions with our less econ-like brain. They give some examples from simple design in food placement in cafeterias to default choices for organ donation that produce a relatively significant difference, without apparently affecting issues related to fairness. They discuss the notion of libertarian paternalism where people are free to choose but the State steps in, in a paternalistic way, to help them with these choices. People have the hardest time making decisions that they do not often confront, which often have significant consequences such as those they have to make when facing a disease, when choosing a job and so forth. Whereas they are good with everyday choices that they get rapid feedback on, deciding what to eat, products in a store and so forth.

The authors go through some simple situations where people tend to make misguided choices, forgetting the total costs in economic ventures such as buying a car in relation to the cost to rent or use one. They also talk a bit about practical ideas for changing things such as having taxes precomputed for us or having lights to remind us to change our air conditioner filters. I thought a lot of this was useful for simply arranging one’s everyday life, putting reminders out to help them make quick decisions and remembering that people, while they do have a rational brain, are also human.

Overall, a good book that I recommend heartily.

Nudge: Improving Decisions About Health, Wealth, and Happiness Paperback – February 24, 2009
by Richard H. Thaler (Author), Cass R. Sunstein (Author)