Book part 1:
Be able to explain and reflect on concepts such as:
The concept of a nudge
= Choice architecture aspects that alters people’s behavior in a predictable way without forbidding
any options or significantly changing their economic incentives.
à To count as a nudge, an intervention must be easy and cheap to avoid.
Nudges provide the key to predictably altering peoples’ behavior without forbidding any course of
action outright or significantly changing their incentive structures. Nudges are low-cost tools that
alert, remind, or mildly warn people by exploiting human psychology, thereby molding behavior in
powerful ways.
Libertarian Paternalism
People should be free to do what they want and opt out if they want. Make it easy for people to go
their own way but try to make choosers better off as judged by themselves.
Libertarian: choice-preserving & opting out is easy
Paternalism: guide/influence people choices in a way that will make them better off, as judged by
themselves. Effort to protect people against their own errors by guiding them to choices they would
make if they were fully informed and free from biases.
Assumptions and misconceptions on human decision making that are often found in policy makers
- Misconception 1 about nudges: it’s possible to avoid influencing people’s choices. Agents
must make a choice that will affect the behavior of some other people.
- Misconception 2: paternalism always involves coercion. No coercion is involved, so
paternalism should be acceptable even to those who most embrace freedom of choice.
- (Misconception 3: Governments steer citizens choices is manipulative because they use
scientific evidence for their own policy)
Choice architecture
Involves organizing any context in which people make decisions. Though no design can be perfect,
choice architects are always faced with tradeoffs and must make a decision of some sort. Thus, the
question is not whether to go about engaging in choice architecture, but how best to do so. You are a
choice architect if you indirectly influence the choices other people make.
Basic knowledge of dual systems
There are 2 systems:
1. Automatic system
a. Associated with oldest part of the brain
b. Gut feeling
, c. You can train the automatic system with lots of repetition
d. Doesn’t need access to capacity-limited central working memory resource --> you
can always engage in system 1 thinking
2. Reflective system
a. Conscious thought
b. Requires access to capacity-limited central working memory recourse --> can be
disrupted by concurrent working memory load (fatigue, alcohol, distraction)
The difference in these systems is mainly based on speed.
System 2 requires access to the working memory that has a limited capacity. This can be disrupted by
concurrent working memory (fatigue, alcohol, distraction).
System 1 is not per se less superior, it’s older revolutionary (the default), adaptive, and lets us make
quick decisions for survival. --> (Fits well with Herbert Simons idea of bounded reality; descriptive
rather than normative).
It’s descriptive, rather than normative.
System 2 is associated with language, reflective consciousness and the ability to think hypothetically
about the future.
System 2 is not designed to correct system 1.
Relying on system 1 can guide us in the wrong direction, but not always. It can be adaptive. You have
an intuitive understanding of complex cases because your reasoning is automatic.
System 2 nudges: they correct impulsive choices, empower people and lead to better decision
making
Basic knowledge of heuristic mechanisms and biases: anchoring, representativeness, availability,
overconfidence, optimism, framing effects
Anchoring heuristic: you start with an anchor and adjust in a direction you think is appropriate. The
adjustment is often insufficient. The more you ask, the more you tend to get. Nudge by giving a
starting point for your thought process. This results in bias when our adjustments are insufficient or
when obviously irrelevant anchors creep into the decision-making process.
, à For example: let people choose between a % of tips: 15%, 20%, 25%, 30% or 35%.
à For example: McDonalds menu: burger goes with fries and drink. It works through framing, starting
points, defaults
Representativeness heuristics: similarity/stereotype heuristic: we judge how likely it is that A
belongs to category B by thinking about how similar A is to our stereotype of B. Ignoring base rates.
--> For example: In a class, 20% play chess and 80% play soccer. Peter is in the class, has glasses and
reads books. How likely is it that Peter is in the chess group? Or chess is 80% and soccer is 20%?
People give the same answer in likability. You use cues other than numbers. You neglect the base
rate and think of a typical chess player. you use stereotypes, and you neglect base rates.
Neglect of base rates
‘global=local’ -> 50% of babies are boys, three of my friends had boys, the next one must be a
girl.
Availability heuristic: people assess the likelihood of risks by asking how readily examples come to
mind. Accessibility (recent events) & salience (vivid and easily imagined causes) are closely related to
availability. This can lead us to overestimate the probability of recent or dramatic harms and to
underestimate the probability of subtle or unfamiliar harms. This heuristic explains risk-related
behavior. A nudge can be by reminding people of the true probabilities.
à For example: If you experienced a flood, you’re more likely to believe a flood is likely to happen. Or
whether people buy insurance for natural disasters is affected by recent experiences. This is a
problem: governments allocate resources in a way that fits people’s fears rather than in response to
the most likely danger. Travel insurance: availability -> affect heuristic (substituting fear): people are
more willing to pay for a more fearful situation.
à In casino’s, they make the memories of winning clearer in our minds (due to sounds and
everything) and so you remember these more easily and think that you will win next time as well.
Then you will want to play again.
If something is recent, familiar, personal and important, it makes it easier (salient) to
remember and retrieve.
Overconfidence: Regardless of whether the stakes are high or low, people tend to have self-serving
biases through which they focus on their strengths while overlooking or rejecting their faults.
à An example of this is where people overestimate how quickly they can do work and underestimate
how long it takes them to get things done. Especially for complicated tasks, business people
constantly underestimate how long a project will take to complete. (eigen krachten overschatten en
negatieve dingen onderschatten)
Optimism: People are unrealistically optimistic, which explains risk-taking.
à For example: ‘above average effect’ among drivers à this is statistically impossible.
à Not adding money to an emergency fund because you overestimate your job security. (buiten
jezelf)
Framing effects: People are somewhat mindless and passive decision makers. Because the reflective
system doesn’t check if reframing is different à passive.
Be able to explain and reflect on concepts such as:
The concept of a nudge
= Choice architecture aspects that alters people’s behavior in a predictable way without forbidding
any options or significantly changing their economic incentives.
à To count as a nudge, an intervention must be easy and cheap to avoid.
Nudges provide the key to predictably altering peoples’ behavior without forbidding any course of
action outright or significantly changing their incentive structures. Nudges are low-cost tools that
alert, remind, or mildly warn people by exploiting human psychology, thereby molding behavior in
powerful ways.
Libertarian Paternalism
People should be free to do what they want and opt out if they want. Make it easy for people to go
their own way but try to make choosers better off as judged by themselves.
Libertarian: choice-preserving & opting out is easy
Paternalism: guide/influence people choices in a way that will make them better off, as judged by
themselves. Effort to protect people against their own errors by guiding them to choices they would
make if they were fully informed and free from biases.
Assumptions and misconceptions on human decision making that are often found in policy makers
- Misconception 1 about nudges: it’s possible to avoid influencing people’s choices. Agents
must make a choice that will affect the behavior of some other people.
- Misconception 2: paternalism always involves coercion. No coercion is involved, so
paternalism should be acceptable even to those who most embrace freedom of choice.
- (Misconception 3: Governments steer citizens choices is manipulative because they use
scientific evidence for their own policy)
Choice architecture
Involves organizing any context in which people make decisions. Though no design can be perfect,
choice architects are always faced with tradeoffs and must make a decision of some sort. Thus, the
question is not whether to go about engaging in choice architecture, but how best to do so. You are a
choice architect if you indirectly influence the choices other people make.
Basic knowledge of dual systems
There are 2 systems:
1. Automatic system
a. Associated with oldest part of the brain
b. Gut feeling
, c. You can train the automatic system with lots of repetition
d. Doesn’t need access to capacity-limited central working memory resource --> you
can always engage in system 1 thinking
2. Reflective system
a. Conscious thought
b. Requires access to capacity-limited central working memory recourse --> can be
disrupted by concurrent working memory load (fatigue, alcohol, distraction)
The difference in these systems is mainly based on speed.
System 2 requires access to the working memory that has a limited capacity. This can be disrupted by
concurrent working memory (fatigue, alcohol, distraction).
System 1 is not per se less superior, it’s older revolutionary (the default), adaptive, and lets us make
quick decisions for survival. --> (Fits well with Herbert Simons idea of bounded reality; descriptive
rather than normative).
It’s descriptive, rather than normative.
System 2 is associated with language, reflective consciousness and the ability to think hypothetically
about the future.
System 2 is not designed to correct system 1.
Relying on system 1 can guide us in the wrong direction, but not always. It can be adaptive. You have
an intuitive understanding of complex cases because your reasoning is automatic.
System 2 nudges: they correct impulsive choices, empower people and lead to better decision
making
Basic knowledge of heuristic mechanisms and biases: anchoring, representativeness, availability,
overconfidence, optimism, framing effects
Anchoring heuristic: you start with an anchor and adjust in a direction you think is appropriate. The
adjustment is often insufficient. The more you ask, the more you tend to get. Nudge by giving a
starting point for your thought process. This results in bias when our adjustments are insufficient or
when obviously irrelevant anchors creep into the decision-making process.
, à For example: let people choose between a % of tips: 15%, 20%, 25%, 30% or 35%.
à For example: McDonalds menu: burger goes with fries and drink. It works through framing, starting
points, defaults
Representativeness heuristics: similarity/stereotype heuristic: we judge how likely it is that A
belongs to category B by thinking about how similar A is to our stereotype of B. Ignoring base rates.
--> For example: In a class, 20% play chess and 80% play soccer. Peter is in the class, has glasses and
reads books. How likely is it that Peter is in the chess group? Or chess is 80% and soccer is 20%?
People give the same answer in likability. You use cues other than numbers. You neglect the base
rate and think of a typical chess player. you use stereotypes, and you neglect base rates.
Neglect of base rates
‘global=local’ -> 50% of babies are boys, three of my friends had boys, the next one must be a
girl.
Availability heuristic: people assess the likelihood of risks by asking how readily examples come to
mind. Accessibility (recent events) & salience (vivid and easily imagined causes) are closely related to
availability. This can lead us to overestimate the probability of recent or dramatic harms and to
underestimate the probability of subtle or unfamiliar harms. This heuristic explains risk-related
behavior. A nudge can be by reminding people of the true probabilities.
à For example: If you experienced a flood, you’re more likely to believe a flood is likely to happen. Or
whether people buy insurance for natural disasters is affected by recent experiences. This is a
problem: governments allocate resources in a way that fits people’s fears rather than in response to
the most likely danger. Travel insurance: availability -> affect heuristic (substituting fear): people are
more willing to pay for a more fearful situation.
à In casino’s, they make the memories of winning clearer in our minds (due to sounds and
everything) and so you remember these more easily and think that you will win next time as well.
Then you will want to play again.
If something is recent, familiar, personal and important, it makes it easier (salient) to
remember and retrieve.
Overconfidence: Regardless of whether the stakes are high or low, people tend to have self-serving
biases through which they focus on their strengths while overlooking or rejecting their faults.
à An example of this is where people overestimate how quickly they can do work and underestimate
how long it takes them to get things done. Especially for complicated tasks, business people
constantly underestimate how long a project will take to complete. (eigen krachten overschatten en
negatieve dingen onderschatten)
Optimism: People are unrealistically optimistic, which explains risk-taking.
à For example: ‘above average effect’ among drivers à this is statistically impossible.
à Not adding money to an emergency fund because you overestimate your job security. (buiten
jezelf)
Framing effects: People are somewhat mindless and passive decision makers. Because the reflective
system doesn’t check if reframing is different à passive.
