Thursday, May 29, 2008


So I've made my way through Nudge, the new book from Richard Thaler and Cass Sunstein; thank you to TPS regular Thomas Johnson for the book. People are lazy, so default or path-of-least-resistance choices should be well thought out since a lot of people will (irrationally) end up there.

On the plus side, there do exist a lot of scenarios where the "easy" choice gets the nod, and this is important to recognize. In general, there are categories of choices that tend to fall into the nudge-able range, like those with large intertemporal disconnects between costs and benefits and choices where feedback is low.

I think it falls a little short in a few areas; namely, that we could design a government capable of steering people in better directions. It felt a bit like the foreign aid arguments-- it's not that foreign aid is bad, it's just that we haven't done it correctly up until this point. Information issues that would prevent people from wise choices in the first place would be information issue for our utopian government as well. (The 1950s called, they want their assumptions back.) And that's independent of any public choice problems we may have; that issue gets only two pages at the back of the book.

There also was an interesting part about needing to worry about private sector nudgers at least as much as public sector ones; I'm hesitant to agree, only because I have the choice of opting out of a private sector scenario if I want. On top of that, any choices that fall into the typical nudge range from the private sector seem to have a decent amount of aggregated information to be had. I know the tradeoffs for smoking and fast food; you can't categorically say that people who smoke or eat unhealthy food and die sooner are making illogical choices any more than someone who forces himself to eat healthy food and doesn't live any longer-- or perhaps dies an early death. In the case of large scale purchases, there's a big profit incentive to provide this information. I'm not certain people are making consistently poor decisions here. Transactions costs in figuring out the "right" choice for yourself need to be factored into all of this as well.

An interesting read nonetheless.

No comments: