Nudge

I am not a huge fan of what people call “behavioral economics,” which is a subfield of economics that expands the standard economic models to incorporate systematic biases in the way humans act.

I’ve written about some of my concerns elsewhere, so I won’t reiterate them here. I don’t deny that the insights that emerge from behavioral economics can be important, it just seems that most often they are not — especially when subjected to the discipline of the market.

Something I loath far more than behavioral economics is fancy words and labels. My eyes glaze over when people come up with grandiose labels for ideas — especially newly invented ones.

So about a year ago when I had lunch with Richard Thaler and he told me that he and Cass Sunstein were going to write a popular behavioral economics book about what they called “libertarian paternalism,” I have to confess I cringed.

“Libertarian paternalism” is just the sort of phrase that makes me stop paying attention.

Which is why I could not have been more surprised and delighted when I finally got to read a copy of their new book Nudge. Despite my initial misgivings, I’m halfway through it, and this is a book I love.

The main point of the book (paraphrased) is as follows:

Since people don’t think very hard about the choices they make, it is a lot easier to trick them into doing what you want than to try to educate them or incentivize them to change their behavior. There are many ways to trick people, but one of the easiest is simply by giving thought to the way choices are arrayed to them, or what they call “choice architecture.”

This is an important insight, because as an economist my first instinct is always to jump right to incentives. What they show, pretty convincingly, is that there is often an easier way to get what you want.

What makes the book is the never-ending assault of interesting examples:

Let’s say you want men to stop accidentally peeing on the floor instead of in urinals in an airport bathroom. (Dubner is fascinated with airport bathrooms, so I’m sure he could think of some incentive schemes.) Or maybe someone could invent a new urinal. The choice architects have an easier solution: paint a fly in the urinal. It turns out with something to aim at, “spillage” is reduced 80 percent.

A more substantive example involves 401k plans. It has proven very difficult to get people to make intelligent choices regarding their 401ks: people fail to diversify, hold assets that give them no tax benefit, etc.

Some economists have tried to educate and inform, with little impact. The choice architects take a different approach: almost everyone opts for the default allocation of assets if a default is given. Thus, the answer is simply to make the default choice intelligently given what the choice architect knows about the person. The impact of savings behavior from altering defaults swamps everything else.

Picking and choosing a few examples can’t convey what is most surprising about the book: it is really fun to read.

Academics aren’t supposed to be able to write this well.

To give you a sense of the topics the book covers, here are just a few of the entries in the index:

ABBA, Gold: Greatest Hits, 194
accountability in schools, 200
air conditioners, filters for, 234
angels, 235
arousal, power of, 42
asbestos, warnings about, 189
Attila the Hun, 23-24
autopsies, corneas removed in, 177

And that is just under the letter “A.”


Mike

This post is causing my productivity to plummet. In the interest of bringing the rest of you down with me, I offer the following link to the urinals in question:

http://nudges.wordpress.com/the-amsterdam-urinals/

I suspect there are multiple issues here worthy of discussion.

Bill

"Dubner is fascinated with airport bathrooms, so I'm sure he could think of some incentive schemes."

Maybe he should run for the Senate:)

jz

Agree with Clint #7 about the bacteriology of hands/penis. Not true of the anus, however. I understand the mouth to carry an even heavier bacteriologic load, and we still kiss.

Cris

I'll have what Steve is having please... ;-)

sarahmas

@ #7

Clean or dirty, your genitalia is not something I want to have touched, even second hand. I wash my hands because I may have had to shake yours. Now that's rational.

acz

Hi Professor Levitt,

I would really be interested in seeing a blog entry concerning the Teen Beating Case as related to juvenile crime and deterrence.

Cliff

di,

It's a myth that dogs' mouths are cleaner than humans'. Also, of course it's more rational simply to lie to the people to whom it matters, since it does not actually make a difference, to keeping social peace or to infection. Even if we accidentally urinate on our hands (unlikely), urine is anti-bacterial.

di

Hey, it's a fun story, right up there with the urban legend names... If they ever find Orangejello and Lemonjello they can ask them about their handwashing habits.

Some people just enjoy the attention they get by being contrarian. I used to work with a girl who made a point of using the word "faggot" to refer to gay people so she could go on an anti-P.C. rant if anyone didn't like it. Some people enjoy feeling smarter than other people when they don't wash their hands and others do.

JP

It may be true that there's no bacterial reason to wash your hands after urination, but there's enough bacteria around that one should wash their hands on a regular basis during the day, and it is convenient to do so when you're already at the bathroom. If you just washed your hands before a meal and then urinated after finishing the meal I could see an argument for not washing.

aeschenkarnos

Just make the washing of the hands (or at the very least, running of the tap) part of the process of undoing the door. Put up a sign: "Door locked until hands are washed for five seconds", and have a sensor detect that the tap has been turned on for five seconds, and off, and then the door is unlocked. Make sure the sign is visible inside and out. Under that model, one would have to go to some pointless effort *not* to wash one's hands.

There'll be vandalism for a bit, and some whining about the method, the same as there was with the first vending machines, but after three months, people will have formed the habit, and after six months, the locks could be disabled and it would make no difference.

Sean

"Something I loath far more than behavioral economics is fancy words and labels."

What you wrote here pissed me off. Language is vague and people have different meanings for different things. If the authors were trying to be precise then I commend them for the effort. It's similar to an economist calling him/herself an economist: he/she runs the risk of their audience misunderstanding what they do (according to how the economist views him/herself).

Give up the righteous Chicago economist BS please.

Paul Rebholz

While I like the idea of "nudging" people into making better choices, or in the case of defaults
making better non-choices, I do have one problem.
I have an Orwellian fear of the "enlightened" people who know, far better than I do, what is best for me and society at large. What is the agenda of these altruistic do-gooders?
PJR

adam smith turns over in his grave

you dont like behavioral economics because you operate in the vacuum of ceteris paribis with endless caveats, ALL OF YOUR MODELS BREAKDOWN UNDER HUMAN BEHAVIOR BECAUSE YOU CANNOT PREDICT HUMAN-ECONOMIC BEHAVIOR BEYOND STRAIGHT FORWARD SUPPLY AND DEMAND, and even then, you always say "well, everything else being equal, x, y and z will happen", my question is: WHEN HAS 'EVERYTHING' BEEN EQUAL? IN WHAT STATIC UNIVERSE DO YOU LIVE IN SIR? OH THATS RIGHT, THE "CONCRETE" WORLD OF YOUR SILLY LITTLE USELESS MODELS. what a house of cards! A grand joke and jip, all else being equal of course.

Chuck Robinson

"Despite my initial misgivings, I'm halfway through it, and this is a book I love."

I think you should read a book before you review it.

RJW

Libertarian Paternalism-implies I need the government's help to make choices I would make for myself-if only I had the strength of will and the sharpness of mind? I DO have strength of will and a sharp mind - plenty sharp enough to know this is a bunch of baloney, yet unfortunately when 'intelligent academics' make this stuff up people believe them! America is based on freedom of choice, not on governmental intervention to 'trick' us into 'the right decision.' Trick us?! These people are BAD NEWs if they are fostering an attitude of trickery when dealing with the American people. And saying we all have a Homer Simpson in us! I am completely offended by that! The Simpsons is one of the worst programs allowed to run on and on, without people realizing its not funny to make a mess of families.

Accepting this book 'Nudge' as a book of authority on behavioral economics...really think about what they are saying...taking choices out of our hands, while 'tricking' us that we still have choices... and because they think we Americans are as stupid as Homer Simpson we won't figure it out. Please don't follow their tricky lead... think for yourself, choose intelligently for yourself...remember, you don't need government to teach you how to pee.

Read more...

freespeech

My alarm clock nudges me to wake up early 5 days a week. If you want to make people happier, let them sleep in. Who's idea was it to make people wake up at 5:30am? ...and why did everyone agree to do this? I swear that most people could get the same amount of work done in 6 hours versus 8. We would just have less time to waste posting comments.

I say healthy people wake up at 8:00am and work 6 hours a day max.