Nudge (book)

🔗Connect

🔼Topic:: social science (MOC) 🔼Topic:: Nudge

✒️ Note-Making

💡Clarify

🔈 Summary of main ideas

1. Life is hard, so let's make good choices easier - Making choices requires attention, information and willpower. Things we don't always have in each decision we make, especially when there are so many of them to make, with growing complexity as our world develops. Therefore we need tools to make decisions easier, that the "better" choice will be easier to make. This is choice architecture.
2. Defaults don't indicate preferences - Default options have a gravitational power, which means that many people stick to defaults without reflecting on them, and even cases where it is against their best interests. Therefore we should avoid the temptation to assume that when many people stick to defaults, that's an indication of their preference.
3. Maintaining freedom is crucial - We don't want to assume we know what's best for people and make the decision for them. We do however see some choices that leave people better off based on their preferences, at least to the level that we can surmise. And in any case, we should remember that there's no such thing as "no decision", if it's not the government, it is the private sector and it's reversed incentives that will influence people. But as a fallback, we should be vigilant and maintain the freedom to choose any option, so that the potential harms are minimized.

🗒️Relate

⛓ Life lessons, action items

🔍Critique

✅ by following this method, what will happen?

❌ the logical jumps, holes or simply cases where it is wrong...

🧱 Implementations and limitations of it are...

🗨️Review

💭 my opinions on the book, the writers style...

🖼️Outline

📒 Notes

Introduction

A choice architect is any person who has control on the way a certain choice is displayed, which options are available and the method in which people choose which action to follow. It is important to know that there is no such thing as a "neutral" setting Neutrality, since we are highly sensitive to Context, there can be no option where the environment doesn't affect us. Therefore, we can't avoid affecting people, true libertanism doesn't exist, it is rather a matter of who we prefer to influence us, money seeking marketing teams Attention Economy, or those who are interested in our own wellbeing (nudge teams)

A nudge, is the implementation of a certain dogma of choice architecture called "paternal libertinism", which means that we want to model choices such that all options are still available, while making the choices that are better off based on the choice maker's perception and wellbeing (not the architecture). For example, creating better defaults for saving, or arranging the food in the cafeteria such that people would choose more healthy foods are types of nudges, while banning junk food is not. As we said, libertarianism isn't possible, but we do want to also avoid hard paternalism which involves coercion.

Such measures are needed because we don't believe that people are perfectly rational beings, Econs. We don't always operate with full attention, information, or will power, which means we make mistakes, and that our behavior isn't always indicative and aligned with our preferences and wellbeing Behavioralism. We prefer the present, fall to temptations or distractions, and we are hate uncertainty.

We make better choices in cases where we have better knowledge and control, like choosing a meal at a restaurant, but less so in difficult choices like savings and investments.

Introduction

• small changes in context can greatly influence schoolchildren, just as they can greatly influence adults. The influence can be exercised for better or for worse. (Location 206)
• A choice architect has the responsibility for organizing the context in which people make decisions. (Location 231)
• There are many parallels between choice architecture and more traditional forms of architecture. A crucial parallel is that there is no such thing as a “neutral” design. (Location 238)
• A good rule of thumb is to assume that everything matters. In many cases, the power of these small details comes from focusing people’s attention in a particular direction. (Location 246)
• Our goal, in short, is to help people make the choices that they would have made if they had paid full attention and possessed complete information, unlimited cognitive ability, and complete self-control. (Location 283)
• A nudge, as we will use the term, is any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives. (Location 291)
• Changing the default can be an effective nudge, but it is decidedly not the answer to every problem. (Location 346)
• The false assumption is that almost all people, almost all the time, make choices that are in their best interest or at the very least are better than the choices that would be made by someone else. (Location 363)
• Generally, people make good choices in contexts in which they have lots of experience, good information, and prompt feedback—say, choosing among familiar ice cream flavors. People know whether they like chocolate, vanilla, coffee, or something else. They do less well in contexts in which they are inexperienced and poorly informed, and in which feedback is slow or infrequent—say, in saving for retirement or in choosing among medical treatments or investment options. (Location 369)
• by insisting that choices remain unrestricted, we think that the risks of inept or even corrupt designs are reduced. Freedom to choose is the best safeguard against bad choice architecture. (Location 406)

Part 1 - Humans and Econs

Biases and Blunders

Life is complicated and full of Decision points. That's why we can't dedicate full attention, time and research for each decision, so we most often use Heuristics to simplify decisions. One problem is that some heuristics are prone to biases. They are:

1. Anchoring - when we are affected by an initial arbitrary number. Anchoring. This does have a limit though. When we feel that the anchor is exaggerated, Reactance happens, which means we do the opposite of the desired anchor as a "pay back" .
2. Availability - when the salience of an event causes us to wrongly estimate it's probability, only because it's easier to remember or recent than other events. Availability Bias
3. Representativeness - aka stereotypes, we tend to perceive things according to what we believe they are, rather than what they truly are.
4. Overconfidence - when it comes to ourselves, we are very likely to underestimate negative events and overestimate positive events. Meaning that "I will beat the odds" no matter what. over confidence
5. Loss aversion - we are willing to go to greater lengths to avoid a loss, even by missing statistically beneficial decisions Risk Management
6. Status quo bias - we tend to stick to the defaults, even when they are not beneficial, either due to lack of awareness or Friction Status-quo bias
7. Framing - framing a topic can cause us to switch answers even when the consequences are the same. Framing

System 1 (automatic) vs system 2 (reflective) thinking fast and slow (book) - some decisions are done by system 1, which means more information or tools for system 2 are irrelevant. We should design choices to improve system 1 decisions

Biases and Blunders

• the problem is that we are fallible and life is hard. (Location 500)
• This process is called “anchoring and adjustment.” You start with some anchor, a number you know, and adjust in the direction you think is appropriate. So far, so good. The bias occurs because the adjustments are typically insufficient. (Location 521)
• reactance: when people feel ordered around, they might get mad and do the opposite of what is being ordered (or even suggested). (Location 553)
• Unrealistic optimism is a pervasive feature of human life; (Location 632)
• people are “loss averse.” Roughly speaking, the prospect of losing something makes you twice as miserable as the prospect of gaining the same thing makes you happy. (Location 638)
• Loss aversion helps produce inertia, meaning a strong desire to stick with your current holdings. (Location 650)
• The combination of loss aversion and mindless choosing is one reason why if an option is designated as the default, it will usually (but not always!) attract a large market share. (Location 686)
• choices depend, in part, on the way in which problems are described. (Location 706)
• AUTOMATIC SYSTEM Uncontrolled Effortless Associative Fast Unconscious Skilled REFLECTIVE SYSTEM Controlled Effortful Deductive Slow Self-aware Rule-following (Location 736)
• Automatic System is your gut reaction and the Reflective System is your conscious thought. Gut feelings can be quite accurate, but we often make mistakes because we rely too much on our Automatic System. (Location 766)
• Econs never make an important decision without checking with their Reflective Systems (if they have time). But Humans sometimes go with the answer the lizard inside is giving without pausing to think. (Location 788)

Resisting Temptations

We often fall into temptations despite our best wishes to act otherwise. This is another example of the system 1/2 case, or "hot-cold" thinking. Commitment Devices could offer a solution, however we are underestimating which cases would cause a "self control" issue, therefore we fail to put such devices in place, since we believe we won't be tempted at all, or not be affected by it.

While private commitment devices are common, it is worth noting that the private sector is not run by benevolent incentives, but rather monetary ones. Meaning that in some cases, it would be wise for the public sector to add nudges of its own.

Another way to combat temptation is with mental accounting, when we designate money for a specific purpose, even though money is technically identical to other money. We can create "accounts" for bills and essentials, while having a smaller more flexible account for leisure. Separating the accounts (mentally or physically), can stop us from spending without control.

Resisting Temptation

• When in a cold state, we do not appreciate the extent to which our desires and our behavior will be altered when we are “under the influence” of arousal. As a result, our behavior reflects a certain naivete about the effects that context can have on choice. (Location 857)
• Markets provide strong incentives for firms to cater to the demands of consumers, and firms will compete to meet those demands, whether or not those demands represent the wisest choices. (Location 955)
• Mental accounting is the system (sometimes implicit) that households use to evaluate, regulate, and process their home budget. (Location 968)
• many households continue to designate accounts for various uses: children’s education, vacations, rainy day, retirement, and so forth. In many cases, these are literally different accounts, as opposed to entries in a mental ledger. The sanctity of these accounts can lead to seemingly bizarre behavior, such as simultaneously borrowing and lending at very different rates. (Location 1000)
• Many of us could benefit from both a near sacrosanct “rainy day” account for emergencies and an “entertainment and fun” account. (Location 1011)

Following the Herd

We humans tend to follow others Herd Mentality because:

1. Information - we believe the actions of others convey information on best practices
2. Social pressure - we want to be "part of the group" and avoid scrutiny Social Environment

Either way, we tend to Conformism. When norms are not yet placed, small nudges, or confident people can shift the norm to a certain direction, which explains why similar groups can have very different norms in the end. Path Dependence Randomness Luck. Similarly, social trends have a strong effect on opinions, a kind of self fulfilling prophecy. If we think everyone is doing something, we will do it as well. To increase the chances of a successful nudge, consider:

1. Identity - the more people relate with the identity of the people who lead the trend, or that the behavior is related to their beliefs and identities, the more powerful it gets Interpersonal Identity
2. Viability - the more visible the trend, the easier it is to follow
3. Underlying beliefs - some trends are only held by the misguided notion that this is what everyone beliefs, although beneath the surface people believe otherwise. In those cases, a small nudge would be sufficient, exposing that the "emperor has no cloths" and give courage to reverse the trend.

Following the Herd

• Sometimes massive social changes, in markets and politics alike, start with a small and even serendipitous social nudge. (Location 1021)
• most people learn from others. This is usually good, of course. Learning from others is how individuals and societies develop. But many of our biggest misconceptions also come from others. (Location 1028)
• Telling people that a new norm is emerging—say, in the domain of sustainability—can create a self-fulfilling prophecy. (Location 1034)
• seemingly similar groups, cities, and even nations can converge on very different beliefs and actions simply because of modest and even arbitrary variations in starting points. (Location 1108)
• consistent and unwavering people, in the private or public sector, can move groups and practices in their preferred direction. (Location 1114)
• For choice architects who want to use social influences, a challenge is to work with, rather than against, people’s sense of who they are. (Location 1243)
• if nudges use social influences and social norms, they are most likely to be promising if people are asked to learn from and act like people who are like them—and whom they trust. (Location 1266)
• if people wrongly think that most people are committed to a long-standing social norm, a small nudge correcting that misperception can inaugurate large-scale change. (Location 1292)

Part 2 - Tools for Choice Architects

When Do We Need to Nudge

In general, where people make smart, informed decisions that match their preferences, you don't need a nudge. When do you need?

1. Forgetfulness - when we wanted to make a decision, but forgot to do so, like voting. Forgetfulness
2. benefit vs costs - when the cost and benefits of an action are far between. This is both the underconsumption of "investment goods", things that are costly in the present but worthwhile in the future, like saving money and working out, and the overconsumption of "temptation goods" like junk food and binge watching. Present Bias
3. high difficulty - decisions that require expertise or information that we lack and is hard to get
4. one-time decisions - cases where we don't have a second chance, where we only make it once or it is very costly to change, like choosing where to do a surgery.
5. no feedback - where it's difficult to assess the result of the choice we made, and the expected result of all other options
6. unknown preferences - when the situation is foreign to us and we don't know what are our preferences towards these options - like going to a foreign restaurant for the first time

WHEN DO WE NEED A NUDGE?

• 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. (Location 1392)
• 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. (Location 1399)
• people were more likely to fulfill their goals if they had made explicit “implementation intentions.” (Location 1421)
• Self-control issues are most likely to arise when choices and their consequences are separated in time. (Location 1439)
• some of life’s most important decisions do not come with many opportunities to practice. (Location 1459)
• Even practice does not make perfect if people lack good opportunities for learning. Learning is most likely if people get immediate, clear feedback after each try. (Location 1469)
• It is particularly hard for people to make good decisions when they have trouble translating the choices they face into the experiences they will have. (Location 1489)
• people may most need a good nudge for choices that require memory or have delayed effects; those that are difficult, are infrequent, and offer poor feedback; and those for which the relationship between choice and experience is ambiguous. (Location 1503)

Choice Architecture

How to have an effective choice architecture?

1. Low friction - We wish for choices to be as easy as possible, to remove friction. In the physical world, friction can be expressed through matching signal to action, for example, to have a green "go" sign and a red "stop" sign, instead of the other way around. In the choice architecture world, one such way is to use Defaults. Sometimes they are unavoidable, and in most cases people would stick to defaults. However, when people are focused, aware of their preferences, and the cost of switching is low, people would choose otherwise. The problem with defaults is that you don't really know if the default represents the true preferences of the person. To be sure of that, you can use "active choosing", which means the process doesn't have a default, and you couldn't continue without selecting an option. However, in those cases it's harder to implement in multi-option/complicated decisions, and it could annoy the agents, causing them to leave the process all together.
2. Error resistance - Nudges help create a more robust systems that deal with errors and forgetfulness, for example making card readers be able to read from all possible directions, instead of people having to guess which way to insert it. Automatic reminders to add attachments in email, getting your credit card back at the ATM, and building nuzzles in different sizes to avoid adding the wrong kind of gas to your car.
3. Feedback - People should know what the expected utility from this decision or others should be. Similarly, they need information and reminders to notify them when they are about to make a wrong decision, like warning systems in cars. The more accurate, relevant, specific, and in proximity the reminder, the better Feedback
4. Simple - Complicated decisions should be broken down into a more manageable size, usually by eliminating irrelevant options, or at least increase their friction. Rearranging choices in ways that "make sense" is also a type of simplification. Simplicity
5. Incentives - First ask yourself: who pays, who uses, who chooses, and who profits. The best case is when all these are aligned, meaning that it's the same person. At minimum, the incentive for each group should be clear and visible Incentives

Choice Architecture

• stimulus response compatibility. The idea is that you want the signal you receive (the stimulus) to be consistent with the desired action. When there are inconsistencies, performance suffers and people blunder. (Location 1558)
• if you want to encourage some action or activity, Make It Easy. (Location 1591)
• Defaults are ubiquitous and powerful. They are also unavoidable in the sense that for any node of a choice architecture system, there must be an associated rule that determines what happens to the decision maker if she does nothing. (Location 1615)
• people will be more likely to override the default if the outcome is obviously bad and the cost of opting out is low. (Location 1634)
• Active choosing has the advantage of overcoming inertia, inattention, and procrastination; (Location 1657)
• An excellent way to help Humans improve their performance is to provide feedback. Well-designed systems tell people when they are doing well and when they are making mistakes. (Location 1755)
• A good system of choice architecture helps people to improve their ability to map choices onto outcomes and hence to select options that will make them better off. (Location 1785)
• Good choice architects often winnow the choice set down to a manageable size. (Location 1797)
• Structuring choice sometimes means helping people to learn, so they can later make better choices on their own. (Location 1849)
• One way to start to think about incentives is to ask four questions about a particular choice architecture: Who chooses? Who uses? Who pays? Who profits? (Location 1855)

But Wait, There's More

A good way to nudge is to make it fun. It can either be a direct gratification, like making musical stairs, or using lottery, which is a good way to create dopamine hits due to the uncertainty of it, but also to maximize resources by giving the sum to a few instead of everyone, this enabling a small budget to still be large enough of a prize. Gamification

But Wait, There’s More

• a well-curated small selection and/or a good default can produce quite satisfactory outcomes. (Location 1951)
• the first mantra of nudging is to make it easy to take the desired action. A good complement to this advice is to make the desired activity fun. (Location 1953)
• When lotteries are used to motivate people, it is important to get the details right. Participants are likely to find a lottery more enticing if they find out whether they would have won. (Location 1992)

Smart Disclosure

To make choices more easily comparable, we have to:

1. standardize - to compare apples to apples, companies/products need to talk in the same language. For example, measurements of calories, gas consumption, and processing power should be identical across similar products Standardization
2. Smart disclosure - not only products need to speak the same language, but it also must be published in a digital accessible way, so that choice engines (like booking for hotels) could be created, which simplify the comparison for us. Transparency

Smart Disclosure

• through regularization, consumers can easily compare the offers from competing suppliers. (Location 2064)

Sludge

The opposite of a nudge, a method for making things harder in order to prevent people from making better decisions for themselves. Common methods are paperwork, tests, physical (non digital) delivery, waiting in line, etc. bureaucracy Common examples:

1. Unsubscribing - when it's easy to join, but very difficult to leave
2. Reimbursements - the temptation of "fully refundable" causes us to buy, even though the conditions for reimbursements are very limiting
3. Hidden costs - a service offered with partial or hidden costs, only to be discovered after it is too late

Sludge

• if you want to discourage some behavior, make it harder by creating barriers. (Location 2202)
• “shrouded attributes.” 5 The headline price of the good understates the true cost to the user because the shrouded attributes, and their costs, are hard to discover. (Location 2330)

Money

Save More Tomorrow

One example where people need a nudge is in their savings for retirement, as self indicated by them. Three areas and the nudge to solve it:

1. Enrollment - enrollment in a pension plan should be automatic, with an opt out.
2. Savings - people don't save enough of their paycheck, Especially when employers match employees contribution, essentially free money. A "save more tomorrow", which is an automatic increase in savings rates after a pay raise can solve it and avoid cases where people don't increase their savings so that their paycheck won't get smaller
3. Investments plan - the default portfolio is a very conservative and safe option, which is a waste when considering how far away retirement is. The default should be stocks, when the ratio decreases as retirement is closer

Nudges Last Longer in Sweden

Do Nudges Last Forever? Perhaps in Sweden

• designers have to make decisions about how to describe the default plan, and these decisions will help determine the market share it attracts. (Location 2918)

Borrow More Today

nudges should be focused on minimizing debt, through taking smarter (better) loans and being aware of their credit card debt

Borrow More Today: Mortgages and Credit Cards

• When markets get more complicated, unsophisticated and less-educated shoppers will be especially disadvantaged by the complexity. (Location 3223)

Insurance

As a rule of thumb, take the insurance with the highest deductible (out of pocket cost), usually higher deductible = lower premium, and since we don't have a lot of insurance claims, in the long run we are saving more. For example, a 500$ deductible and a 1000$ premium vs 1000$ deductible and a 700$ premium means that if we have no claims during this year, we save 300$. If we have 2 claims in 3 years, we brake even, when in most cases we have much fewer than that.

Society

Organ Donation

This is a classic case that shows that defaults are not the most useful tool, and the importance of the meaning of consent when it comes to defaults. In this case, the relevant factor is that those who are signed as donors are not the only relevant actors, we also have to consider the opinions of the families, which are in most countries consulted before such a procedure. Therefore, the options are:

1. Explicit consent - people have to opt-in to register as doners.
   1. Advantages: this is a clear indication of their preferences, and based on that it is possible to bypass the families in case of death.
   2. Disadvantage: many people don't express their opinion (stick with default), so we don't know whether they wanted to donate or not
2. Presumed consent - everyone is an organ doner as default.
   1. Advantage: it makes it easier for people to donate.
   2. Disadvantage: Since this is automatic, this could not be considered as a strong preference, and therefore families are still consulted, and knowing that donating is the default, they are not more likely to see it as their "dying wish", so it doesn't really change the actual donations
3. Prompted consent - people are asked during other procedures such as renewing license, voting, etc, what are their preferences
   1. Advantage - this is a strong preference without the sludge of opting in
   2. disadvantage - not everyone is prompted, for example, people without a license
4. mandatory choice - people are obligated to voice their opinion
   1. advantage - we have a definite preference from each citizen
   2. disadvantage - this can cause backlash, and unnecessary sludge

Another option is to add incentives into the mix, like giving priority in the transplant list for those who opted in for donation, or those whose family had a doner.

Organ Donations: The Default Solution Illusion

• A Potential Donor who has failed to opt out in a presumed consent country is treated differently than someone who has decided to register as an organ donor in a country where explicit authorization is the law of the land. (Location 3640)
• If people are not opting out, it might be because of inattention or inertia, not because the default captures what they would do if they were actually to make a decision. (Location 3710)

Saving the Planet

The problems we face with the climate crisis that turns it into a wicked problem externalities:

1. Present bias - we prefer pleasure now instead of suffering in the present for a reduced pain in the future
2. lack of visibility - it's hard to "see" the climate crisis. Pollution is often invisible, and most of it's effects are at the industry level, specifically agriculture
3. no clear enemy - who is responsible? who should we stop? other than carbon emitters, it's hard to focus this problem on a specific target
4. probabilistic harms - it's hard to measure which damages were caused by global warming rather than other factors. For example, is this specific fire/hurricane caused by warming or general weather? the harder it is to measure, the less visible it is, the less we care
5. loss aversion - we inherently prefer to avoid paying a sure cost now, rather than the chance of paying more in the future
6. free rider - the best case is if everyone reduces emissions except me
7. historical justice - the west has "enjoyed" periods of undisputed pollution, why should developing countries "do right by the environment" now?

taxes and methods of cap-and trade as a potential solution. Taxes are a good deterrent, while a cap and trade could make sure that we don't pollute more than we should, while allowing trade for maximum efficiency.

Although, we should consider two additional interventions. The first is social nudge, by making it visible who pollutes and who is "green", we can create both positive and negative trends towards better ecological behavior. Additionally, we can consider regulation to make sure that certain, harmful options are not available, such as very polluting cars, since energy consumption is a very confusing and ambiguous topic.

Saving the Planet

• people are conditional cooperators. They are willing to contribute to the public good as long as others are doing so as well, but if others are free riding, contributions gradually dry up. Interestingly, if you let the members of the group talk to one another before they make their decisions, contribution rates go up. (Location 4125)
• If a tax is understood to be responding to a serious problem, people might respond even more than they would to the purely economic incentive. (Location 4228)
• Architectural solutions, making things easy or automatic, can have a much bigger impact than asking people to do the right thing. (Location 4365)