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Improving Decisions About Health, Wealth, and Happiness by Richard H.Thaler& Cass R. Sunstein An Introduction to NUDGE Redefined by ProfessorPuttu Guru Prasad VVIT
Thaler's 'Nudge Theory' Came From Flies In Men's Urinals PGP
US economist Thaler won the Nobel prize for his contributions in the field of behavioural economics, showing how human traits affect supposedly rational markets. An introductionto Nudge
A nudge is any aspect of the design of a choice(“choice architecture”)that alters people’s behavior in a predictable way, without forbidding anything or actually changing the choice at all. What is anudge?
Tomatoes: OneChoice Mixed Nuts Ketchup
Many economists like to say that we should present all options to people, and let them choose. • The authors say this makes the false assumption that almost all people, almost all of the time, make choices that are in their best interest Freedom of choice is best, right?
half- human/half-Vulcan Star Ship: Enterprise Spock Fictional character in Star Trek
"Star Trek" T V Serial star ship USS Enterprise mission in space in the 23rd century. Captain James T. Kirk -- along with half- human/half-Vulcan science officer Spock,
They are assuming that we are all like Spock. And like Spock we always only choose the most logical choice. However, while part of our mind really is like Spock, we all have TWO decision makers in our head who battle it out for each decision – our 1.Spock (in scientific terms, our Reflective Cognitive System) and but also our 2.Homer (Simpsons) (Automatic Cognitive System).
The Simpsons is an American animated sitcom created by Matt Groening for the Fox Broadcasting Company. The series is a satirical depiction of working-class life, epitomized by the Simpson family, which consists of Homer,Marge, Bart, Lisa, and Maggie.
vs. “Gut” basic feeling or reaction without a logical rationale (Automatic CognitiveSystem) “Mind” (Reflective Cognitive System) Star Trek TV Serial Fictional character Mr. Spock Homer Simpson Fictional character
Here’s a classic example. Spock would look at this image and see clearly that the two tabletops are exactly the same size. But most of us feel pretty sure that the one on the left is longer and skinnier than the one on the right.
So the conclusion the authors draw from this is that SOMETHING is always influencing your choices. People are influenced by small factors in the design of an experience, so even if you don’t consciously design your choice architecture, it is still there, affecting the actions of the choosers.
Here’s another example. In this cafeteria, Spock would only put food on his tray that is good for him, only taking as much as he needs and only what he can afford.
So say you are designing a cafeteria layout. What should you do? Ignore the fact that the layout affects what people buy? Randomly rotate the placement of foods? Set it up to sell the most of the expensive stuff? Or set it up so people choose more healthy foods?
The book encourages that last option with what they call “libertarian paternalism” - Nudging the user(through placement, in this example) to make the best choice for his well being – WHAT OUR SPOCK WOULD WANT, while not restricting choice at all. They are not banning junk food, just making it less likely that someone will choose it on their own.
Homer Spock
When is our Spock particularly weak and our Homer particularly strong. This happens predictably in the following scenarios:
D Donut
I enjoy the benefit of this donut now, • I pay the cost (to my health, waistline) later. • I enjoy coming home to a cool house because my AC was running all day, • I pay the costs (both bills and environmental) later.
We get better at everything through practice. If you had to optimize your investments as frequently you have to drive your car, you’d probably be better at it.
Think of the impact digital cameras had on hobby photography, largely because you can see right away what your picture looks like. Making investment decisionsis kind of like the old film photography model. You rearrange some stuff, and hope when you go back to see the results you can remember what you did and extrapolate what worked and what didn’t.
Imagine ordering at a restaurant from a menu in a language you do not understand. For many people, this is what it is like to try to decide between investing in a “capital appreciation fund” vs a “dynamic dividend fund.” The language of the choice selection makes it very hard to imagine what the options really mean to you.
So we know that our gut, our Homer, has more influence our decisions in those types of situations. Fortunately, he’s pretty predictable, and therefore relatively easy to set up safeguards against.
1. 8.We have predictable mental biases.
