Nudge: Improving Decisions About Health, Wealth and Happiness [Paperback]

I can't help thinking that the authors could very easily written the book in less than 5 pages. Much of it is little more than a collage of work which you can find in the likes of 'The Tipping Point' by Malcolm Gladwell (namely, the story about the Yale students who were more likely to go get vaccinated against tetanus if the brochure showed the map to the medical office) and 'Undercover Economist' and 'The Logic of Life' by Tim Harford (since most of both books rave about free markets and response to incentives) as well as many others of that 'genre'.

No new concepts are introduced in this work - okay, I hadn't heard about 'libertarian paternalism' but even that is only a new name for a very old concept - think about Milton Friedman and you're not far - and 'choice architect' is nothing but a fancy name for what designers do since forever - be it store designers, systems analysts or commercial managers.

You don't believe me? Well, here's a list of topics from the book. See if they really sound new to you:
1. Arrangement of items in a cafeteria (read: any restaurant or shop) influences the choices made by customers. Doesn't explain how, though it's perfectly obvious that it does.
2. Although 'pure' free market followers believe that perfect information will be used by people to make perfect choices, many people just can't or won't. The authors call these people 'Humans' and 'Econs' to those people who make perfect decisions.
3. Biases such as anchoring, availability, representativeness, status quo, framing (think about lawyers) and the feeling of loss being higher than if you win something.
4. Clocky is a vicious little wake-up clocks that runs around your bedroom until you get up and shut it down. This was an internet meme a long time before this book came along.
5. We are influenced by what other people around us do or think about us. I always thought this was called 'peer pressure' and see no reason to rehash it into this book as though it's something new.
6. The fact that we make terrible decisions in large part because the costs of that decision are far into the future - medical insurance, pensions, mutual funds - or because they occur very infrequently - such as buying a house or choosing your university degree.
7. If you are designing something that a lot of people will use and you want to ensure enrollment by as many people as possible just set sensible defaults and make it easy for people to change if they need to.
8. Expect mistakes by people, who are Humans, not Econs, and design whatever you need to design having in mind these mistakes. It's called usability but the authors didn't mention it. Do they ignore the existence of the concept?

I could go on, but I think you get the picture. If you're new to that genre of books that seem to cover everything under the sun (Business/Economics/Politics/Sociology/Psychology), then Nudge is all very interesting. But if, like me, you already follow the genre, you will find very little here. I suggest you borrow it from a friend, and skim it.

Whilst I don't know if this book is quite as significant as is being made out, it's a nice and straightforward primer on behavioural economics and some of its applications.

The first section sets the scene for why nudges - policy interventions that encourage rather than mandate certain types of behaviour - may be necessary. So it builds up the argument for why we aren't the rational self-maximizers that economics has tended to assume we are. This section includes a useful run-through of some of the key heuristics and biases that have been identified and what kind of outcomes they result in. This does provide a pretty good overview of some of the major factors like anchoring, availability, representativeness, loss aversion and so on. It also stresses the importance of the design of choice, or choice architecture, and that in many cases there is no option to be 'neutral' - some kind of structure of choices has to be offered.

The second section is about financial issues, so much of this is familiar ground if you know much about recent pension reform. Still the points are worth reiterating. If you auto-enrol people into a pension most tend not to opt-out. Whereas if you don't auto-enrol many don't join. This, combined with what non-savers say themselves, suggests that non-savers aren't making a rational choice not to save. People also adopt naive diversificaton strategies - the equity content of their asset allocation (if they have made an active choice) will be heavily influenced by the allocations of the funds on offer (and what stocks are popular at the time) and what's more people don't tend to shift their initial allocation. Also it seems pretty clear less in more in fund choices - too many options puts us off choosing.

The section on health has a bit of a US focus, but there is interesting stuff in there. The example of the Part D prescription drugs system is useful if only to demonstrate why a random choice for non-choosers is a bad idea. Also the section on organ donations is worth a read - I think I still favour the assumed consent approach, but the idea of mandatory choice (ie having to state your position on your driving liscence) is at least worth thinking about. Also in this section are some fairly interesting suggestions for nudging people to reduce energy consumption. These are definitely worth a look since they involve, for example, being able to make peer group comparisons. I think this would work on two levels - firstly simple self-interest, wouldn't you be annoyed to know you are spending more on energy than comparable households? Secondly I think it would give people smug points for being more energy efficient.

The fourth section I probably found the least interesting, as it deals with ideas I'm not that impressed by, such as school vouchers. Having said that the idea of privatising marriage is intriguing, if unlikely to happen. Basically they argue that the state should restrict itself to civil partnerships and the legal rights that flow from them, but that 'marriages' could be arranged by other groups. That way churches could choose whether or not they want to carry out same-sex marriages. Equally other organisations could carry them out anyway. That way, the authors argue, no-one's values get compromised but neither are anyone's rights denied.

The final section sketches out some further ideas for nudges, as well as combatting some of the counter arguments that have been put forward. This latter chapter is well worth a read as the authors do a pretty good job at arguing back at some of the half-decent arguments there are out there that challenge them. Some good pro-nudge points here include the one I've already mentioned that often there isn't a neutral option - so the absence of a nudge is a kind of nudge itself. Also it is important that nudges are made explicit, so there is no sense that Government (or whoever else is doing the nudging) is being underhand.

Thaler and Sunstein argue that their approach offers a real 'third way' since it seeks an alternative to both state mandated paths on the one hand and complete laissez-faire on the other. This they call Libertarian Paternalism. That's obviously an Americanism, since in the UK libertarianism of any stripe is not a strong theme in our political culture. As such I don't expect the label to catch on here. However overall the book does provide quite a few ideas for how we could achieve some beneficial behavioural changes without being too heavy-handed. And if you want to get into behavioural economics this probably isn't a bad place to start.

Everyone seems to be talking about this book, and the Tories like it a lot (which may not necessarily be a good sign). The book shows how people often behave in irrational ways and offers some gentle 'nudging' techniques for making them behave more responsibly and sensibly. There are some very entertaining illustrations and examples - I love the story about the urinals at the airport (but I won't go into any more detail here or else I'll spoil it for you.) Sometimes, however, the strategies seem to be a little less subtle than the authors suggest - for example, the idea that there should be a waiting period before people get married. Surely that's a little too much interference? Nevertheless, the book is an excellent and stimulating - and optimistic - read.