"Save more tomorrow" is a nudge to help people do what they know they want to do, which is save more, but they can't bring themselves to save more now. Just like many of us are planning to go on diets next month, or maybe in two months, certainly not tonight.
When should we nudge and when should we shove, I think, it's a political judgment. Obviously in some situations we need shoves, we need laws. Fraud is against the law, murder is against the law, drunk-driving is against the law. We don't need just nudges.
I practice what has come to be called behavioral economics.
I love Richard Thaler's 'Quasi Rational Economics.' A collection of some of his most interesting and inventive essays, the real foundation of behavioral economics.
It is true that I am one of the co-authors of 'Nudge,' and I am a behavioral economist, but it does not mean that everything we write about in that book is behavioral economics, nor does it mean that my co-author, the distinguished legal scholar Cass Sunstein, is a behavioral economist.
The lesson of my field, behavioral economics, is that we need to understand the ways in which we differ from the rational human assumed in standard economic theory.
Positive defaults align our short-term decisions with our long-term interests. And we don't always do that.
The lesson from behavioral economics is that people only save if it's automatic.
A nudge is some feature of the environment that changes the behaviour of humans but would not change the behaviour of rational economic agents, what we call Econs.
If you hear on the weather report that it's going to rain tomorrow, rather than reminding yourself to bring your umbrella, set the umbrella by the front door - now the environment is reminding you to bring the umbrella.
So, what's a nudge? A nudge is some small feature of the environment that attracts our attention and alters our behavior.
I'm all for empowerment and education, but the empirical evidence is that it doesn't work. That's why I say make it easy.
If we all make systematic mistakes in our decisions, then why not develop new strategies, tools, and methods to help us make better decisions and improve our overall well-being? That's exactly the meaning of free lunches- the idea that there are tools, methods, and policies that can help all of us make better decisions and as a consequence achieve what we desire-pg. 241
People still have a choice, but, if they find it all too confusing, or they just want someone else to make a choice for them, there's a default that works pretty well. That's this concept of libertarian paternalism. And it's handy.
In the world of traditional economics, it shouldn't matter whether you use an opt-in or opt-out system. So long as the costs of registering as a donor or a nondonor are low, the results should be similar. But many findings of behavioral economics show that tiny disparities in such rules can make a big difference.
In psychology and behavioral economics, people have shown that if you just describe options in a certain way, or make some features of a situation salient, you can get people to do and even see what you want. You don't have to be a Jedi to manipulate people's attention.
Whenever I'm asked to autograph a copy of 'Nudge,' the book I wrote with Cass Sunstein, the Harvard law professor, I sign it, 'Nudge for good.' Unfortunately, that is meant as a plea, not an expectation.
There is a sense that everything should be easy, but easy decisions are the ones we should be scared of because if they're easy then we're probably being sold something. This is why I'm worried about "nudge" - it's pushing people in the direction of what you think they should be doing. Easy decisions are dangerous ones.
