Emily's Reviews > Nudge: Improving Decisions About Health, Wealth, and Happiness

Nudge by Richard H. Thaler

's review
Oct 17, 12

Read in October, 2012

Nudge, is a motivational best seller about behavioral economics. It mainly illustrates a number of principles about decision making, and how society may give a “nudge” to all our ultimate decisions. The book begins by explaining the types of people in our society or How We Think. There is an intuitive, automatic system, and then a reflective, and rational system. According to Thaler and Sunstein the automatic system is uncontrolled, fast, and effortless. While the reflective system is controlled, slow, rule-following. (Nudge 20). They then go into explaining the Rules of Thumb which are anchoring, availability and representativeness. Many decisions people make are by irrelevant activity, or events that are very recent in our minds. For example if a tornado have had greater estimates of likelihood to die from rather than a more common cause. Representativeness is one concept I find particularly interesting. If a basketball player shoots from the same spot and makes it almost every time, it is a “sweet spot” but this has been proved that a “sweet spot” or hot hand is ultimately a myth. Optimism and Overconfidence is said to be when we, as a society over-estimate our abilities to achieve. For example, Thaler gives an anonymous survey at the beginning of the year with one of the questions being, “In which decile do you expect to fall in the distribution of grades in this class?”. (pg31). Realistically only 10 percent will be in the top decile. Many studies will show that we are overachievers, we have more confidence than we should in most cases. Losing is never something someone can enjoy, in our society people hate losing. Thaler and Sunstein talk about Loss aversion, which is that losing something is valued at least twice as highly as gaining something. If I own a bag, and my neighbor does not, I am not willing to give it up buy offering a very high price for her to purchase it. The emotion of decision-making plays a major role. Someone whom is very energetic and easily motivated has more of a nudge to go for a run, rather than someone whom has just worked a 12 hour day.
The authors next go into a section of mindless choosing, which I found very fascinating. We as a society mainly do daily tasks on autopilot, not thinking about that route we take to work every morning or eating meals. One experiment by Brian Wansink and his colleagues in a Chicago movie theatre, where consumers were given a free bucket of stale popcorn. Some said it did not taste good, yet of those given a big bucket a remarkable 53% ate more popcorn, than those who received medium size buckets.(pg 43) This to me expresses how robotic our society has become that we can not differentiate between stale and fresh popcorn. Mental accounting is a skill that we each obtain at some point. It is technically known as a form of inner-self control. If someone has a certain account that they will strictly use for home repairs, and another they will use for vacations, this is form of mental accounting. Following the Herd is the next point made by Thaler and Sunstein, does being in a group effect a person’s decision? Well the answer is yes, politics, and social influences are all a bit of a nudge in decision making. The three social influences Nudge spotlights are information, peer pressure and priming. Feedback is really a wonderful concept that some may not be able to accept. Positive or negative feedback is all effective in helping each of us learn and better ourselves. Practice is often designed for negative feedback to make us better with what we are attempting to achieve. Choice architecture is a great way of having an influence over decisions, or being able to overcome the difficulty of choice architecture. By having a door that looks designed to be pulled, actually opens outward. This is an example of choice architecture. (pg83). Thaler and Sunstein have created six principles of good choice architecture, Incentives, Understand mappings, Defaults, Give Feedback, Expect Error and Structure complex choices. (pg102).
Money and the difference of Humans and Econs are discussed in the last parts of the book Nudge. It goes into detail about saving, investing, borrowing and how we can do a better job with these tasks. Econs are savers and they spend money responsibly. While the same cannot be said for humans. The book discuses the nudges in our society that can be influencing humans saving decisions. Social Security, retirement funds, and credit cards are all within the choice architecture approach. They way we want them to be viewed are how we will base our decision. Health is also a major choice architecture. Doctors, Medicare and Organ donations are all nudges in our health decisions. As much as we do not believe so they truly are great influences in our lives.

sign in »

No comments have been added yet.