Part V of the book deals with:
A dozen nudges - provides about 12 nudges of different varieties.
Objections - This chapter deals with arguments against nudges and the authors' defense. It is a very nice chapter with counter arguments. It helps us hear the other side of the story.
The Third Way - is just the conclusion of the book.
Thursday, September 3, 2009
Nudge - Chapters 13-15 - Freedom
Part IV of the book deals with the following subjects:
Improving school choices - talks about the complexity of choosing schools and this being a deterrent for many students to apply for colleges. It also cites an example of how high schoolers were nudged towards college by making the filling of the college form a requirement for completing high school.
Patients and the high cost of health - sheds light on how the "right to sue" a doctor or medical practitioner is built into the insurance premiums. The author argues that the "right to sue" should be a contract between the patient and the doctor. These may reduce the rising cost of health care and even improve the quality.
Privatizing Marriage - The author deals with a part of the separation of church and state by emphasizing that the state should not be a license granter for marriages. Marriages should be left to private agencies be they churches or other entities.
Improving school choices - talks about the complexity of choosing schools and this being a deterrent for many students to apply for colleges. It also cites an example of how high schoolers were nudged towards college by making the filling of the college form a requirement for completing high school.
Patients and the high cost of health - sheds light on how the "right to sue" a doctor or medical practitioner is built into the insurance premiums. The author argues that the "right to sue" should be a contract between the patient and the doctor. These may reduce the rising cost of health care and even improve the quality.
Privatizing Marriage - The author deals with a part of the separation of church and state by emphasizing that the state should not be a license granter for marriages. Marriages should be left to private agencies be they churches or other entities.
Nudge - Chapters 10-12 - Health
Part III of the book deals with health related issues.
Prescription Drugs - talks about the current design of the Medicare Part D plan of prescription drugs. It deals with the issues that make it complicated and still not beneficial. It deals with randomization of default options and its results. Then a few ideas for a better architecture like intelligent assignment is provided.
Increasing Organ donation - A more sensitive topic is touched upon in this chapter. The central theme of this chapter is that more lives could be saved if more organs can be obtained from donations. The current structure of mandated choice (choosing whether they want to donate or not) does not seem like a good idea. Strategies to handle this are given. What are the proper defaults and how the wishes of more people can be turned into reality is very nicely presented.
Saving the planet - deals with environment issues. What incentives should be provided so that pollution can be reduced. How can companies be nudged to adopt newer technologies to decrease pollution and improve environment. This issue is taken in a global sense - how can the various governments be involved to tackle the larger issue. It also shows how the heavy hand of government does not always produce the best outcomes. Examples like providing the MPG of cars when someone goes to buy one are cited as educational and helpful nudges to let people decide what's good for the environment.
Prescription Drugs - talks about the current design of the Medicare Part D plan of prescription drugs. It deals with the issues that make it complicated and still not beneficial. It deals with randomization of default options and its results. Then a few ideas for a better architecture like intelligent assignment is provided.
Increasing Organ donation - A more sensitive topic is touched upon in this chapter. The central theme of this chapter is that more lives could be saved if more organs can be obtained from donations. The current structure of mandated choice (choosing whether they want to donate or not) does not seem like a good idea. Strategies to handle this are given. What are the proper defaults and how the wishes of more people can be turned into reality is very nicely presented.
Saving the planet - deals with environment issues. What incentives should be provided so that pollution can be reduced. How can companies be nudged to adopt newer technologies to decrease pollution and improve environment. This issue is taken in a global sense - how can the various governments be involved to tackle the larger issue. It also shows how the heavy hand of government does not always produce the best outcomes. Examples like providing the MPG of cars when someone goes to buy one are cited as educational and helpful nudges to let people decide what's good for the environment.
Nudge - Chapters 6-9 - Money
Part I of the book provides examples and strategies for better designs of the following systems:
Save More Tomorrow - talks about how people can be nudged to save more for their retirements by their employers, through good automatic enrollment in 401K plans.
Naive Investing - talks about how investment can be made a little simpler for Humans. The number of options for investing is enormous and complex. It is so complicated that even experts find it difficult to invest. An example in the book cites a financial economist and Nobel laureate who did not use his own methods to invest. What can a mere Human do? This chapter deals with allocation decision making process, where and how much to invest, etc.
Credit Markets - This chapter deals with topics of mortgages and their complexity in the current form, the huge number of options available but not enough education. How can such a system be designed for simplicity. This chapter also deals with credit cards and student loans.
Privatizing Social Security - This chapter cites the example of the Swedish Privatization Plan and points out the good points and flaws of the system. Then it provides ways in which the social security system of America can be modeled along those lines without falling into the pitfalls mentioned.
In all these chapters the important thing to remember are the 6 features of the choice architecture.
Save More Tomorrow - talks about how people can be nudged to save more for their retirements by their employers, through good automatic enrollment in 401K plans.
Naive Investing - talks about how investment can be made a little simpler for Humans. The number of options for investing is enormous and complex. It is so complicated that even experts find it difficult to invest. An example in the book cites a financial economist and Nobel laureate who did not use his own methods to invest. What can a mere Human do? This chapter deals with allocation decision making process, where and how much to invest, etc.
Credit Markets - This chapter deals with topics of mortgages and their complexity in the current form, the huge number of options available but not enough education. How can such a system be designed for simplicity. This chapter also deals with credit cards and student loans.
Privatizing Social Security - This chapter cites the example of the Swedish Privatization Plan and points out the good points and flaws of the system. Then it provides ways in which the social security system of America can be modeled along those lines without falling into the pitfalls mentioned.
In all these chapters the important thing to remember are the 6 features of the choice architecture.
Friday, July 31, 2009
Nudge - Chapter 5 - Choice Architecture
A psychological principle - stimulus response compatibility - The idea is that you want the signal you receive (the stimulus) to be consistent with the desired action. When there are inconsistencies, performance suffers and people blunder.
The intent of this chapter is to let the choice architects know to develop choices that are easy for Humans to understand taking their behavior into account. In essence, to ensure that the Automatic System doesn't get confused.
These are the 6 principles of good choice architecture.
Defaults - Path of least resistance - Default options are not only ubiquitous and powerful but also unavoidable for any node in a choice architecture system. It defines what happens when the decision maker does nothing. A few examples - automatic renewal of magazine subscriptions, default selection of type of installation of a software (custom or default), amount of idle time after which the screen saver comes up. The motives behind the defaults can be either self-serving or helpful.
The "mandated choice" or "required choice" is an important qualification to the claim that defaults are unavoidable. In some cases, it is important to force the decision maker to choose one of the options.
When choices are complex and difficult, people appreciate a sensible default. Simple yes-no decisions are easier to require than more complicated decisions.
Expect Error - We all make mistakes and a well-designed system expects its users to make mistakes and is as forgiving as possible. For instance, forgetting to remove an ATM card after taking the money, inserting or swiping a card in the right direction, forgetting to take medicines, etc.
Give feedback - As in the case of expecting errors, a well-designed system also provides feedback to help improve performance. Examples like a digital camera, laptop warning of low battery, etc.
Mapping choice to welfare - Choosing between the flavor of ice cream that one likes over the type of medical treatment are 2 very different types of choices. The welfare of one can be determined much more easily and quickly as the other. A good system of choice architecture helps people improve their ability to map and hence select options that will make them better off.
Structuring complex choices - have huge implications in choice architecture. As alternatives increase, choice architects are much more likely to influence since people use simplifying strategies to tackle multidimensional problems.
Incentives - Choice architects must think about the incentives when designing any system. Sensible architects will put right incentives on the right people. Even though free markets solve the some incentive problems, there are numerous examples of conflicts. These arise due to the different interests of the various parties involved in using a particular service or product. But incentives are no always visible. People's attention can be directed to incentives if incentives can be made salient (more visible). Good choice architects can do that. An example of this might be when energy consumption is required, it is better to design systems that tell people how much energy in terms of money is being used, by putting this information on the device.
The intent of this chapter is to let the choice architects know to develop choices that are easy for Humans to understand taking their behavior into account. In essence, to ensure that the Automatic System doesn't get confused.
These are the 6 principles of good choice architecture.
Defaults - Path of least resistance - Default options are not only ubiquitous and powerful but also unavoidable for any node in a choice architecture system. It defines what happens when the decision maker does nothing. A few examples - automatic renewal of magazine subscriptions, default selection of type of installation of a software (custom or default), amount of idle time after which the screen saver comes up. The motives behind the defaults can be either self-serving or helpful.
The "mandated choice" or "required choice" is an important qualification to the claim that defaults are unavoidable. In some cases, it is important to force the decision maker to choose one of the options.
When choices are complex and difficult, people appreciate a sensible default. Simple yes-no decisions are easier to require than more complicated decisions.
Expect Error - We all make mistakes and a well-designed system expects its users to make mistakes and is as forgiving as possible. For instance, forgetting to remove an ATM card after taking the money, inserting or swiping a card in the right direction, forgetting to take medicines, etc.
Give feedback - As in the case of expecting errors, a well-designed system also provides feedback to help improve performance. Examples like a digital camera, laptop warning of low battery, etc.
Mapping choice to welfare - Choosing between the flavor of ice cream that one likes over the type of medical treatment are 2 very different types of choices. The welfare of one can be determined much more easily and quickly as the other. A good system of choice architecture helps people improve their ability to map and hence select options that will make them better off.
Structuring complex choices - have huge implications in choice architecture. As alternatives increase, choice architects are much more likely to influence since people use simplifying strategies to tackle multidimensional problems.
Incentives - Choice architects must think about the incentives when designing any system. Sensible architects will put right incentives on the right people. Even though free markets solve the some incentive problems, there are numerous examples of conflicts. These arise due to the different interests of the various parties involved in using a particular service or product. But incentives are no always visible. People's attention can be directed to incentives if incentives can be made salient (more visible). Good choice architects can do that. An example of this might be when energy consumption is required, it is better to design systems that tell people how much energy in terms of money is being used, by putting this information on the device.
Thursday, July 30, 2009
Nudge - Chapter 4 - When do we need a nudge
Asymmetric paternalism - defined as taking steps to help the least sophisticated people while imposing minimal harm on everyone else.
Benefits Now - Cost Later - Self-control issues are most likely to arise when choices and their consequences are separated in time.
Investment goods - exercise, flossing, dieting. Costs are borne immediately, but benefits are delayed.
Sinful goods - smoking, alcohol. We get pleasure now and suffer consequences later.
Degree of Difficulty - We need help as the problems in front of us become more difficult like picking the right mortgage compared to a loaf of bread.
Frequency - If the frequency with which we face the problems is very low. We face some problems regularly and learn to cope with them through trial and error. Problems for which there are not too many opportunities, may need nudging.
Feedback - Situations and choices that do not provide or are not structured to provide feedback, are good candidates for receiving a nudge.
Knowing what you like - It is hard for people to make good decisions when they have trouble translating the choices they face into the experiences they will have. When people have a hard time predicting how their choices will end up affecting their lives they have less to gain by numerous options. A nudge might help.
[Commentary]
The authors cite an interesting poem "Smart" by "Shel Silverstein". Please read it by searching on google. The authors go on to argue that with all its virtues, the markets may still not be the best place for everything for all people.
In particular, if consumers have a less than fully rational belief, firms often have more incentive to cater to that belief than to eradicate it.
Benefits Now - Cost Later - Self-control issues are most likely to arise when choices and their consequences are separated in time.
Investment goods - exercise, flossing, dieting. Costs are borne immediately, but benefits are delayed.
Sinful goods - smoking, alcohol. We get pleasure now and suffer consequences later.
Degree of Difficulty - We need help as the problems in front of us become more difficult like picking the right mortgage compared to a loaf of bread.
Frequency - If the frequency with which we face the problems is very low. We face some problems regularly and learn to cope with them through trial and error. Problems for which there are not too many opportunities, may need nudging.
Feedback - Situations and choices that do not provide or are not structured to provide feedback, are good candidates for receiving a nudge.
Knowing what you like - It is hard for people to make good decisions when they have trouble translating the choices they face into the experiences they will have. When people have a hard time predicting how their choices will end up affecting their lives they have less to gain by numerous options. A nudge might help.
[Commentary]
The authors cite an interesting poem "Smart" by "Shel Silverstein". Please read it by searching on google. The authors go on to argue that with all its virtues, the markets may still not be the best place for everything for all people.
In particular, if consumers have a less than fully rational belief, firms often have more incentive to cater to that belief than to eradicate it.
Nudge - Chapter 3 - Followng the herd
This chapter tries to understand how and why social influences work. Some nudging may help if social influences have caused people to have false or biased beliefs. And social influence is also one of the most effective ways to nudge.
2 categories of social influence:
1. Information - If many people do something or think something, their actions and thoughts convey information about what might be best for you to do and think.
2. Peer pressure - If you care about what other people might think about you (in the mistaken belief that they are paying attention to what you are doing), then you might go along with the crowd to avoid their wrath or get their favor.
Humans are easily nudged by other humans. One reason is that we like to conform.
Doing what others do
---------------------
A series of experiments indicated in the book leads to this:
Collective conservatism - the tendency of groups to stick to established patterns even as new needs arise. Examples, traditions, social and religious practices.
Pluralistic ignorance - ignorance on the part of all or most, about what other people think. We may follow a tradition not because we like but simply because we think others like it.
Social pressures nudge people to accept some pretty odd conclusions and those conclusions might well affect their behavior.
The spotlight effect
-------------------
One reason why people expend so much effort conforming to social norms and fashions is that they think that others are closely paying attention to what they are doing. This is a myth and the book provides experiments conducted to prove this.
Social nudges as choice architecture - If choice architects want to shift behavior and do so with a nudge, they might simply inform people about what other people are doing. Advertisers understand this and use terms like "most people prefer" or "growing numbers or people", etc.
Priming
--------
Priming refers to the somewhat mysterious workings of the Automatic System of the brain. Research shows that subtle influences can increase the ease with which certain information comes to mind. The "mere-measurement effect" refers to the finding that when people are asked what they intend to do, they become more likely to act in accordance with their answers. This can easily be seen in questions of food, diet or exercise. Social scientists have found that they can "prime" people into certain forms of behavior by offering simple and apparently irrelevant cues.
2 categories of social influence:
1. Information - If many people do something or think something, their actions and thoughts convey information about what might be best for you to do and think.
2. Peer pressure - If you care about what other people might think about you (in the mistaken belief that they are paying attention to what you are doing), then you might go along with the crowd to avoid their wrath or get their favor.
Humans are easily nudged by other humans. One reason is that we like to conform.
Doing what others do
---------------------
A series of experiments indicated in the book leads to this:
Collective conservatism - the tendency of groups to stick to established patterns even as new needs arise. Examples, traditions, social and religious practices.
Pluralistic ignorance - ignorance on the part of all or most, about what other people think. We may follow a tradition not because we like but simply because we think others like it.
Social pressures nudge people to accept some pretty odd conclusions and those conclusions might well affect their behavior.
The spotlight effect
-------------------
One reason why people expend so much effort conforming to social norms and fashions is that they think that others are closely paying attention to what they are doing. This is a myth and the book provides experiments conducted to prove this.
Social nudges as choice architecture - If choice architects want to shift behavior and do so with a nudge, they might simply inform people about what other people are doing. Advertisers understand this and use terms like "most people prefer" or "growing numbers or people", etc.
Priming
--------
Priming refers to the somewhat mysterious workings of the Automatic System of the brain. Research shows that subtle influences can increase the ease with which certain information comes to mind. The "mere-measurement effect" refers to the finding that when people are asked what they intend to do, they become more likely to act in accordance with their answers. This can easily be seen in questions of food, diet or exercise. Social scientists have found that they can "prime" people into certain forms of behavior by offering simple and apparently irrelevant cues.
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