Saturday, May 29, 2010

The Dangers of Iced Coffee

Thaler and Sunstein, in Nudge, talk about how the initial conditions are so important in priming a group to react one way or another. They cite an experiment which went one way if the group was given hot coffee first, and a different way if they were given iced coffee.

“Those given iced coffee are more likely to see other people as more selfish, less sociable, and, well, colder than those who are given hot coffee.”

Friday, May 28, 2010

Don't Nudge Marriage

The one thing I thought Thaler and Sunstein were most wrong about in Nudge was the idea of privatizing marriage. They propose that the state "get out of the marriage business," offering only legal civil unions. Marriage would be left entirely to religious institutions.

Their account of marriage misses the fact that marriage as a social institution is not primarily about the feelings of the married couple, but about the best arrangement for raising children. Marriage works best for kids, and produces many of its benefits for married people, because it is a permanent, socially recognized and supported institution.

Marriage is not a nudge, but a permanent choice to change yourself into a part of something larger than yourself.

Thursday, May 27, 2010

Save More Tomorrow

The best-known example of a nudge from Thaler and Sunstein is "Save More Tomorrow."

Most Americans say they want to put more money away in savings accounts, but few do it. If you offer employees an option to select automatic savings from their paychecks, most will say they are for it, but only about a fifth will actually get around to setting it up. However, if the default is that they are all signed up for an automatic savings deduction of, say, 2%, unless they opt out, 90% will start savings.

And what has happened two years later, when the workers have had a chance to see that 2% flow out of their paycheck and into a savings account? 98% have joined the automatic savings plan.

That is a pretty good nudge.

The further nudge of Save More Tomorrow is that every time you get a raise, a hunk of it is added to your savings deduction, before you ever see it in a paycheck. Then your savings starts to really build up - and you never miss it.

Wednesday, May 26, 2010

Conformity, Proportion, and the Wisdom of Crowds

Thaler and Sunstein note that many people tend to follow the crowd, even when at their reflective best they know better. When Solomon Asch's conformity experiments are tried around the world, 20 - 40% of people will go along with the crowd of the experimenter's secret collaborators even when they can see that the crowd is wrong.

Thaler and Sunstein conclude that this fact means we should adjust our choice architecture to help people resist being improperly swayed by the crowd. One way to do this is to show that when people think "everyone is doing it" the real proportions are quite different. Knowing that a number of others go their own way - even if only a minority - gives courage to those who want to follow their instincts or values, but don't want to be too deviant. And showing the true proportions of anything in a whole population is beyond what anyone can know from just looking around. For true proportions you need sociology.

Tuesday, May 25, 2010

Choice Architecture

Thaler and Sunstein make the case for libertarian paternalism, as I noted yesterday.

Some might object that nudging is not libertarian, but statism disguising itself as liberty.

Thaler and Sunstein have a good answer for that. Any situation that requires choice has an implicit "choice architecture." Doing nothing is also a choice.

A big finding of the psychological research and behavioral economics that lies behind the book Nudge, though, is that many times most people don't get around to making a choice, or implementing the choice they made in their minds, or find too many choices paralyzing. None of these conditions are the same as reflectively choosing not to act. The implicit choice architecture of many choices we face tends to produce thoughtless inertia.

What a thoughtful choice architect would do about that situation, therefore, is try to structure the choices such that it is easier to assess the choices, and put our choice into effect. Moreover, there are many situations in which we can know what most people are likely to want to choose. Straight-up paternalism (whether exercised by the state or any other institution) would lead the choice architect to make that choice for other people. What libertarian paternalism does instead is to make it easy to take the most likely choice as a default, but allow an easy and clear opt-out if the chooser wishes too.

Choice architecture is inevitable - it is implicit in any array of choices. Nudging people to choose, and choose wisely, is a social good without social force.

Monday, May 24, 2010

Libertarian Paternalism

This week I will be blogging Richard Thaler and Cass Sunstein's Nudge: Improving Decisions about Health, Wealth, and Happiness.

Libertarian Paternalism is the wonderful name that Thaler and Sunstein give to their approach to social organization.

Their approach is paternalistic, in that it helps people make choices that will improve their lives - as the people themselves see it. Sometimes, though, we make choices automatically or in the heat of the moment that we would not make if we thought about it. Thus, the paternalism is in setting up our choices to get us to pick what our reflective selves would want - even when we are not being reflective.

Their approach is libertarian, though, in that you can opt out of choosing what the system urges you to choose. You are free to have a different opinion. You are free to make foolish choices. You are free to reject what you know is good for you out of sheer cussedness.

Thaler and Sunstein don't force you to choose what it good for you. But they do nudge.

Libertarian Paternalism, by its seeming union of opposites, ends up centrist.

Sunday, May 23, 2010

Commencement 2010: You are Not Special

Centre College held Commencement today.

The unexpected element of the address by Wayne Meisel, head of the Bonner Foundation, was "you are not special." Evidently he had been running across some young people who had been told they were special so often that they didn't think they had to work hard, pay their dues, or pitch in unasked.

His illustration was "wash the dishes in the office sink without an attitude."

Sage advice. Unusual in a commencement address. A corollary, I think, of the Protestant work ethic, from a self-described preacher's kid.