When Do We Need a Nudge?
People need nudges most when decisions require scarce attention, are difficult, lack prompt feedback, or involve unfamiliar or rare situations; the golden rule of libertarian paternalism is to offer nudges that help most and harm least.
THE IDEA
When Do We Need a Nudge?
We have seen that people perform amazing feats, but they also commit ditzy blunders. What’s the best response? Choice architecture and its effects cannot be avoided, and so the short answer is an obvious one. Call it the golden rule of libertarian paternalism: offer nudges that are most likely to help and least likely to inflict harm.*1 A slightly longer answer is that people are most likely to need nudges when decisions require scarce attention, when decisions are difficult, when people do not get prompt feedback, and when they have trouble translating aspects of the situation into terms that they can easily understand. When people are in situations that are unfamiliar or rare, they might well need a nudge. If you are trying to drive from your home to the local grocery store, you probably do not need to rely on a GPS device. If you are trying to find your way around a town you have never visited, that device might be indispensable.
In this chapter we try to put some flesh on these points. We begin by specifying the kinds of situations in which people are most likely to make poor choices. We then turn to questions about what some people think to be the potentially magical powers of markets. We ask whether and when free markets and open competition tend to exacerbate rather than mitigate the effects of human frailty. The key point is that for all their virtues, markets often give companies a strong incentive to cater to (and profit from) our frailties, rather than to try to eradicate them or to minimize their effects.
When to use it
Designing retirement savings plans to automatically enroll employees while allowing opt-out.
Arranging cafeteria layouts to place healthier foods at eye level and less healthy options further away.
Using default options in software settings that protect privacy or safety unless the user actively changes them.
Posting comparative energy usage feedback on household bills to encourage conservation.
FROM THEORY TO EVERYDAY LIFE
In practice
GPS navigation
When driving from your home to the local grocery store (a familiar route), you likely do not need a GPS. But when navigating an unfamiliar town, a GPS device helps you make decisions while leaving you free to choose your route, functioning as a nudge.
A MOMENT TO REFLECT
Put it to work.
Think of a recent difficult decision you made. Did you have enough attention, clear feedback, and familiarity with the situation? Would a nudge have helped?
In what areas of your life do you rely on technology (like GPS or reminders) as a nudge? Could over-reliance on such nudges ever be harmful?
Consider a market where companies profit from your biases (e.g., junk food placement in stores). How might a nudge counteract that without banning the product?
Often confused with
CONTINUE THE CONVERSATION
Source texts
- Nudge The Final Edition (Richard H. Thaler Cass R. Sunstein)