1. Nudge
Improving Decisions about Health,
Wealth and Happiness
Richard H Thaler and Cass R Sunstein

2. Rearranging a cafeteria seat plan
can increase or decrease
consumption of food.

3. This can be used to increase
consumption of healthy food and
reduce consumption of unhealthy
food.

4. The concept of a choice architect.
A choice architect is one who has
the responsibility for organizing
the context in which people make
decisions.

5. 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.

6. As good architects know,
seemingly arbitrary decisions,
such as where to locate the
bathrooms will have subtle
influence of how people who use
the building interact.

7. As we shall see, small and
apparently insignificant details can
have major impact on people’s
behavior. A good rule of thumb is
to assume that ‘ everything
matters”

8. We welcome you to our new
movement libertarian
paternalism.
The libertarian aspect of our
strategies lies in the principle that
people should be free to do what
they like. As Milton Friedman put
it – free to choose.

9. In our opinion, a policy is
paternalistic if it tries to influence
the choices in a way that will
make choosers better off , as
judged by themselves.

10. Libertarian paternalism is a
relatively weak, soft and non
intrusive type of paternalism
because choices are not blocked,
fenced off or significantly
burdened.

11. A nudge, 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.

12. Whether people have studied
economics or not, we always think
like homo economicus, a notion
that each of us thinks and chooses
well, fitting the description
offered by economists of human
beings.

13. 60 % of Americans are either
considered obese or overweight.
Not everyone is choosing the right
diet. Sensible people care about
the taste of food, not simply
health and eating is a source of
pleasure in itself.

14. People and society have a status
quo bias , a fancy word for inertia.
Never underestimate the power of
inertia. A nudge is any factor that
alters the behavior of econs(
economic minded people)

15. Humans respond to incentives
too, by properly deploying both
nudges and incentives, we can
improve people’s lives., while
insisting on their right to choose.

16. There is a false assumption that
people always choose in their best
interest, or at the very least make
choices better than what others
can make for them.

17. We favor nudges over commands,
requirements and prohibitions.

18. Paternalism does not involve
coercion.

19. Choosers are human, so designers
should make life as easy as
possible. Send reminders and
minimize the costs for those who
space out.

20. If nudges and incentives replace
requirements and bans,
government will be both smaller
and more modest.

21. The human brain is befuddling.
How can we be some ingenious at
some tasks and so clueless at
others?

22. Two cognitive systems
Automatic system
• Uncontrolled
• Effortless
• Associative
• Fast
• Unconscious
• Skilled
Reflective system
• Controlled
• Effortful
• Deductive
• Slow
• Self aware
• Rule following

23. The automatic system is a gut
reaction system and the reflective
system is your conscious thought.

24. We use rules of thumb , because
they are quick and useful.
However, they come with
systematic biases.

25. Next is anchoring and adjustment.
In our view, anchoring can alter
behavior. When charities ask for
donations, people give more when
the options are $100,500 and 1000
as opposed to 50,75 and 150

26. In many domains, evidence shows
within reason that, the more you
ask, the more you tend to get.

27. MBA students are not the only
ones overconfident about their
abilities. The ‘ above average ‘
effect is pervasive.

28. About 50 % of marriages end in
divorce in the US. However, almost all
couples believe that their marriage
will not end in divorce when they are
getting married, even people getting
married a second time. Samuel
Johnson once quipped “ second
marriage is the triumph oh hope over
experience’

29. People hate losses, losing
something makes you twice as
miserable as gaining something. In
technical language people are
‘loss averse’

30. Loss aversion helps produce
inertia, meaning a strong desire t
stick with the current.

31. Loss aversion operates as a
cognitive nudge, stopping us from
making changes , even when they
are needed.

32. Choice depends in part on the way
problems are stated. This matters
a lot for public policy.

33. Eating turns out to be the most
mindless activity we do. We
simply eat what’s put in front of
us.

34. Large plates, large packages, trays
mean more eating and also more
wastage.

35. Most people learn from other.
This is usually good. Learning from
others is how individuals and
societies develop.

36. Many groups fall prey to ‘
collective conservatism’ the
tendency of groups to stick to
established patterns even as new
needs arise.

37. A reason people expend so much
energy conforming to social norms
is that they think others are
watching them. That’s mostly not
true.

38. Advertisers are influenced by the
power of social influence. That’s
why they claim, ‘most people use
this’,’ the choice of the country’
etc. etc.

39. The three social influences we
have –information, peer pressure
and priming can easily be enlisted
by private and public nudgers.

40. Self control issues are likely when
choices and consequences are
separated in time, like exercise,
flossing and dieting.

41. Life’s most important choices
don’t come with many
opportunities to practice. The
higher the stakes, the less often
we are able to practice.

42. Learning is most likely if people
get immediate, clear feedback. We
usually get feedback on options
we select, not options we reject.

43. Humans make mistakes. A well
designed system expects its users
to err and is as forgiving as
possible.
E.g. leaving gas caps of cars and
the ATM card behind

44. The best way to help humans
improve their performance is
through feedback. Digital cameras
do that better than film cameras.

45. Credit card plans, mortgages, cell
phone plans are confusing. We
propose RECAP in such industries
– Record, evaluate and Compare
alternative prices, a mild form of
government regulation.

46. One way to think about incentives
is to ask four questions – who
uses, who chooses, who pays and
who profits?

47. In 2005, the personal savings rate
for Americans was negative for
the first time since 1932 and 1933
– the great depression years.

48. Most people spend more time
picking a tennis racquet than
picking a financial plan.

49. Saving for retirement is something
human beings find difficult to
handle. This needs immense
willpower over time to execute.

50. In investing, the first question we
need to ask is how much risk are
we willing to take. Stocks are
riskier compared to government
bonds. How much to save is
related in complex ways to the
risk one is willing to bear.

51. In the eighty year period between
1925 and 2005, a dollar invested
in treasury bills would be worth $
18, longer term bonds would have
made it $ 71, ,mutual funds would
have made it $2658.
Stocks have always been most
attractive.

52. Attitude to investment risks
depend on how often the
portfolio is monitored.
When in doubt about
investments, diversify!

53. Amazing but true, five million
Americans have more than 60 %
of their retirement savings in
company stock!
This is risky on two counts-single
stock and the examples of Enron
and WorldCom.

54. Most employees have difficulty
understanding how numbers like
savings rate, retirement benefits,
volatility and changes in lifestyle
affect the, Offering translations
into a few good concepts will help.

55. The cost of going to college in
America has been rising almost as fast
as the cost of healthcare and rare
baseball cards. Today it costs a
student more than 50,000$ in tuition,
room and board. About two thirds of
four year college students are in debt
when they graduate.

56. The credit card is a ubiquitous feature
of modern life. It is nearly impossible
to function without one. In 2004 USA,
there were 1.4 billion credit cards for
164 million card holders-an average
of 8.5 cards per cardholder and a little
above 4 for total population!!Average
credit card debt is $12,000,with an
interest payment of $2000 per annum

57. For mortgages, school loans and
credit cards, life is far more
complicated than it needs to be
and people can be exploited.

58. The more choices you give people,
the more help you need to
provide to help them resolve
things.

59. What is it like to pick a
prescription plan in the US? How
hard? The short answer – really
hard!!

60. The first successful organ
transplant took place in
1954,when a man offered his twin
brother a kidney. The first
transplant from a deceased donor
occurred in 1962. The rest is
history.

61. In the US , consumers want to
donate their organs, most states
use what is called an explicit
consent rule. Many willing to
donate do not take the necessary
paper steps to close it. They need
a different nudge.

62. The best choice for organ
donation is mandated choice.
Imagine tying it up with driving
license renewal et al.

63. In addressing climate control
issues, freedom of choice has
been the guiding principle.
Regulators choose some kind of
command and control regulation.
They do not specify technologies
as much as require an across the
board reductions in emissions.

64. In environmental issues , gentle
nudges will have no results, more
like catching a lion with a
mousetrap!

65. Much of the time, the best
approach to pollution problems is
to impose a tax on the harmful
behavior and to let market forces
determine the response to the
increased cost.

66. The acid deposition program in
the US has been a great success.
Because pollution reduction can
be turned into cash, strong
incentives are created for
environmentally beneficial
behavior.

67. A toxic release inventory report
listing the offending companies is
an example of social nudge. No
one wants to be in the list and
every company wants to be seen
as a good citizen. It has huge
impact.

68. One reason why a Toyota Prius is
successful compared to other
hybrid cars is that it is sold as one,
while the Camry is sold as a mix of
conventional and hybrid.

69. Past attempts to notify people
about energy use with e mails,
text messages hasn’t worked.
Imagine if we gave them a light
orb that signals red or green
based on their usage!!Something
that can be at home or a desk.

70. Libertarian paternalists care about
freedom. Some nudges are bad or
unwelcome. We would like to
create freedom where it does not
now exist.

71. When parents pick schools, status
quo plays a big role. The
neighborhood school wins always
versus a school thirty minutes
away.

72. If two students applied to a school
with one open seat, Seattle and
Louisville broke the tie on the
basis of race, a practice the US
Supreme court ruled
unconstitutional in 2007.

73. To get students to go to college, a san
Marcos Texas school showed kids two
concepts a kia and a Mercedes,
implying that a college grad had a
Mercedes and dropping out forced a
kia choice. This worked brilliantly.
Percentage of college students went
up from 11 to 45 %!!

74. Every healthcare consumer in the US
is forced to buy an option to sue the
doctor. Patients and doctors should
be free to make their own
arrangements about that right. It is
strange that we ‘purchase 'the right
to sue. It is not an itemized bill but
clearly included in the price.

75. Imagine if students could sue
teachers!
We would be in a mess.

76. The more insurance you buy, the
more you pay and the right to sue
is a form of insurance.

77. We now turn to marriage and
explore recent issues including
same sex marriage.

78. There is ambiguity about marriage
because it is both a legal status
and a religious choice.
The official institution of marriage
is essential as a way of promoting
stability of relationships.

79. As a matter of law, marriage is no
less than an official status created
by the state and accompanied by
government entitlements and
mandates. State laws vary but
benefits are similar.

80. The most vulnerable people in a
marriage are children and kids.
We recommend protecting them
with the right nudges.

81. We argue that states should
abolish marriage as such and rely
on civil unions instead.

82. Some workable nudges : Give
more tomorrow, credit card
deductions, self bans, destiny
health plans, the civility check.

83. Who can oppose nudges? Hard
line anti paternalists maybe.
Often life turns up problems
people did not anticipate. We
need rules to see how we handle
them.

84. The invisible hand works best
when people buy products
frequently and they are simple
products.
Skeptics might argue that we must
give people the right to be wrong
and not nudge them, in some
cases we learn through mistakes.

85. Although nudges are unavoidable,
we agree that we should provide
information and education as a
balance.

86. We have stressed that governments
cannot be purely neutral but a form
of neutrality is sometime both
feasible and important. Take the case
of how to list candidates on a ballot.
There is evidence to show that the
first listed has an advantage. Any
method will not remove this bias.

87. Other nudges – smart meters, energy
use and neighborhood comparisons,
carbon labels on packaging, make
believe speed bumps, calories count
in NY city,trayless
cafetarias.procastinator’s clock, stop
blabbers in a meeting, clear
transparent airline pockets like
Lufthansa.

88. We wrote this book in 2007 and 2008.
the economic crisis happened after
that. Alan Greenspan found himself in
a state of ‘shocked disbelief’.
Would we have been better
understanding human behavior and
how nudges could have helped?

89. Three of the human behaviors
listed earlier have played
important roles in the crisis-
Bounded rationality, self control
and social influences.