Nudge: The Final Edition

Great book wit easy to jnderstsnd laguage

"Nudge or sludge? This question indeed becomes thought-provoking when grappling with real-world complexities. As I delved into the book, I found myself enlightened, as it offers explanations for many phenomena we encounter daily. For example, consider the amount of tip you would leave for your cab driver when paying with a credit card. Let's say the options are 15%, 20%, 25%, or any other amount you choose to write in. If you select the 20% option in the middle, you've been nudged! Conversely, if you're enticed by a "deal" with a rebate and make a purchase because of it, you might be sludged. This is because the seller intentionally makes the rebate claim process burdensome to ensure only 10-40% of rebates will be redeemed. Interestingly, the term 'nudge' wasn't coined by Thaler and Sunstein, but by a publisher who initially rejected their book manuscript. However, the term has gradually become a standard in the field since the book's first edition was released in 2009. I read this book after finishing Daniel Kahneman’s 'Thinking, Fast and Slow' and Richard Thaler’s 'Misbehaving'. This turned out to be the right sequence, as the foundation of Thaler’s two books is rooted in Kahneman's work. Specifically, 'Nudge' is based on 'Misbehaving'. With this reading sequence, you can better grasp the content. My criticisms of the book are mainly in the following two aspects: (1) While the first two sections are enjoyable to read, the third and fourth sections become tedious. For instance, the third section is about money. I was hoping for strategies that could be used to profit from moments when the financial markets are irrational. To my disappointment, a significant portion of the text was about nudging in scenarios of retirement plan choices. As Thaler himself pointed out, the median number of people who change their retirement plan is zero! Discussing such scenarios is not interesting at all. (2) Regarding the fourth section about society, there are many points I couldn't agree with. The authors' attempts to use nudge and sludge to solve societal issues seem to be an over-extrapolation of their applicable domains. Societal issues are more complicated than what can be explained by these two simple terms. For instance, Thaler tried to explain the China issue on Page 291. In short, how should we deal with China's argument that it would not be fair for it to face the same restrictions as wealthier nations that have been emitting more carbon for centuries – and getting rich as a result? A nudge-sludge solution overlooks the fact that China is a dictatorship. Their argument does not represent the views of its people. If we understand that all the Chinese Communist Party cares about is maintaining its regime, we won't bother dealing with their logical trap that they try to nudge us into. Another example of disagreement is on Page 322 when Thaler proposes replacing trigonometry education with finance for high schoolers. He believes a little finance knowledge on APR calculations is more important than trigonometry. Well, I couldn't agree. In my opinion, high school education in mathematics should only be strengthened, not weakened. Those APR calculations will become intuitive after students have developed a solid mathematical foundation. After all, not all knowledge can be taught in school. There is a lot, such as APR calculations, that can be learned in the University of Society.

This is an updated and revised version of a book first published in 2008. The first four chapters are essentially the same. "They set out the basic framework of our approach, including the term [begin italics] libertarian paternalism [end italics], which only its authors love." How specifically, does this edition differ? "Two important topics are given new chapters early on. The first is what we call [begin italics] Smart DIsclosure [end italics] The idea is that governments should consider the radical thought of moving at least into the twentieth century in the way they disclose important information....Widespread use of Smart DIsclosure would make it possible to to create online decision-making tools that we call [begin italics] choice engines [end italics] , which can make many tasks as easy as it has become to find the route to get to a new restaurant. "We have also added a new chapter on what we call [begin italics] sludge [end italics], which is nasty stuff that makes it more difficult to make wise choices...We introduce several choice architecture concepts, in addition to 'sludge,' that are new to this edition...These concepts play a large role in the chapters about financial decision making. We have increased the space we devote to climate change and the environment." [Pages xiii-xiv] According to Barry Schwartz, "What Kahneman and Tversky did for the basic psychology of decision making, Thaler and Sunstein did for policy. In domains as disparate as savings, health care, driving, energy conservation, eating, and even urinating (by men), Thaler and Sunstein provide evidence that left to their own devices, people often make mistakes, sometimes very consequential ones, and that these mistakes can be mitigated or even eliminated if institutions take an active role in doing so. "The oxymoronic term 'libertarian paternalism' captures much of the thinking behind Nudge. Its recommendations are paternalistic in that they try to steer people in the right direction. But it is libertarian in that people are free to resist nudges if they choose to do so. This libertarian paternalist approach has come to be called 'soft paternalism,' in that people are influenced, but not required, to move in certain directions." So, what's a nudge? Sunstein has explained it this way: "A nudge is an intervention that maintains freedom of choice but steers people in a particular direction. A tax isn’t a nudge. A subsidy isn’t a nudge. A mandate isn’t a nudge. And a ban isn’t a nudge. A warning is a nudge: “If you swim at this beach, the current is high, and it might be dangerous.” You’re being nudged not to swim, but you can. When you’re given information about the number of fat calories in a cheeseburger, that is a nudge. If a utility company sends something two days before a bill is due, saying that “You should pay now, or you are going to incur a late fee,” that is a nudge. You can say no, but it’s probably not in your best interest to do so. Nudges help people deal with a fact about the human brain—which is that we have limited attention. The number of things that we can devote attention to in a day or an hour or a year is lower than the number of things we should devote attention to. A nudge can get us to pay attention." Thaler and Sunstein nudge their reader to consider being a "choice architect" who "has the responsibility for organizing the context in which people make decisions." They offer dozens of examples from their own experience and remind me of several of mine. Here's one. While attending a reception in Washington for a new UK ambassador to the United States, I became engaged in conversation with one of his aides. When I asked him how he defined diplomacy, he replied, "Letting the other chap have it your way." That in essence is what nudging others is all about. Moreover, many of those who read this book may be encouraged to use some of the material to nudge themselves when making what may initially seem to be relatively minor decisions but could perhaps have important implications and even very serious consequences in months and even years to come. That is what one of the characters in Hemingway's The Sun Also Rises indicates when explaining how his company became bankrupt: "Gradually and then suddenly." The same is true of tooth decay and compound interest on credit card debt. Here's a positive example: What if you set aside only one dollar a day, every day, since you first went to work full-time? Those who share my high regard for this book are urged to check out Daniel Kahneman's Thinking, Fast and Slow.

Absolutely GREAT book. I read Behavioral Economics books regularly, and this is one of my favs. In my view, it’s a must-read for every lawyer, manager, leader, parent, salesperson — heck, anyone who deals with other people, which I suspect is most of us. It’s easy to read and easy to understand. Can’t say enough good things about it.

It took me a while to get my hands on this book despite the various recommendations I got from reading a few other books. I've enjoyed delving into the world of libertarian paternalism and choice architecture, much needed lessons for my career and personal life. I've found two subjects of particular importance and worth consideration in my own country: Mandated Choice and Cap-and-trade systems. Another topic that would be considered radical but warrants as much consideration is the 'Civil Union Forms'. I've always thought along similar lines that Governments should let private institutions (churches, mosques etc) handle marriages, this would help with with many things including public debates on same sex marriages. The book however, didn't meet some of my other expectations. Many of the psychological principles mentioned here have been covered in much greater detail by other authors, most notably, Daniel Kahneman and Robert Cialdini. There was a lot of politics covered in the book that I didn't find helpful. My best quote from the book: "If you look at economics textbooks, you will learn that homo economicus can think like Albert Einstein, store as much memory as IBM's Big Blue, and exercise the willpower of Mahatma Gandhi."

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Excelente libro

So well written and insightful!

You’ll never make another decision without thinking back to this book

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