Nudge: Influencing behavior – Summary
Samirah Bakker
Session 1 + readings:
Session 1: Introduction to Nudging
Traditional economics assumes humans are “optimal” decision making machines.
- They know what is in their best interest.
- They act on that knowledge.
- Reasoning capacity is infinite.
- Incentives can solve all problems.
- Markets are perfectly efficient.
- Every act is entirely selfish.
Normally the human mind works remarkably well. People sometimes get confused and even when we
do understand what is best, we often don't follow through. People do less well in contexts in which
they are inexperienced and poorly informed, and in which feedback is slow or infrequent.
Behavioral economics
Behavioral economists have more realistic assumptions about humans:
- Motivated by cognitive biases.
- Systematically and consistently irrational.
- Largely unaware.
Assumes humans predictably deviate from “optimality”.
For example:
- Heuristics → Shortcuts that sometimes backfire.
- Overreaction to losses → People detest losing.
- Status quo → Stick to what we have (inertia).
- Social norms → Other regarding preferences, fairness concerns, herd mentality.
- Impulsivity → We want rewards right now.
- Optimism and overconfidence → Help us maintain a positive self concept.
Two systems of thinking
System 1:
Fast, Unconscious, Parallel, Associative, Low energy, ‘Doer’.
- Intuitive.
- Fast.
- Reactionary.
System 2:
,Slow, Conscious, Serial, Analytic, Consumes a lot of energy, ‘Planner’.
- Higher-level reasoning.
- Cognitive.
- Slower.
- Resource dependent.
The two systems generally work well together, allowing us to act quickly and instinctively when
required, or allowing deep, powerful thought.
If people only decided based on their reflective, rational System 2, we wouldn’t need nudging because
people would simply consider what is best (utility preferences) in a given moment.
However, humans often decide with their intuitive fast System 1, especially when they are
tired, rushed, or not paying attention.
The automatic system is especially prone to bias, in fact it uses bias to speed up decision making.
While the reflective system can often back up or reinforce decisions made.
→ Nudging is especially helpful in these situations
Nudge → It is a gentle push, especially in order to gain attention or give signals.
Predictable problems:
- Separation of benefits and costs (should-want conflicts).
- Exercise, flossing, dieting (costs now, benefits later).
- Smoking, alcohol, chocolate (pleasure now, suffer later).
- Difficulty of problem.
- Mortgage.
- Frequency.
- Marriage, picking a college, buying a house.
- Feedback → Only on the options we accept, not on the ones we reject.
- Outcome of choice is difficult to predict.
Lecture + Nudge Chapter Introduction, 1 & 5
Nudge Chapter Introduction
Libertarian Paternalism
Libertarianism
- The state should have respect for all citizens as free equal human beings.
- The state should enable all citizens to develop and pursue their own conception of the good
life.
- Harm to others is the only basis for legitimate government intervention.
Paternalism
- The state should interfere with people’s liberties if this generates desirable outcomes.
- The state should promote the interests of all citizens in living secure, healthy, wealthy and
happy lives.
, - Paternalism goes further than the minimalist ‘no harm’ principle of libertarianism and argues
that people should also be protected against harming themselves.
Libertarian Paternalism
Libertarian paternalism or ‘nudging’ aims to improve people’s choices by being both:
- Libertarian: It does not block people’s choices and thus respects people’s liberty.
- Paternalistic: It makes people better off and thus improves their well-being (health, wealth
and happiness).
- The libertarian aspect of our strategies lies in the straightforward insistence that much of the
time, and so long as they are not harming others, people should be free to do what they like –
and to opt out of arrangements they deem undesirable if that is what they want to do.
- “free to choose”.
- When we use the term libertarian to modify the word paternalism, we simply mean
liberty-preserving.
- The paternalistic aspect lies in the claim that it’s legitimate for choice architects to try to
influence people’s behavior in order to make their lives longer, healthier, and better.
- Libertarian paternalists want to make it easy for people to go their own way; they don’t want
to burden those who want to exercise freedom.
Choice architecture
Choice architect → Has the responsibility for organizing the context in which people make decisions.
- A choice architect designs the choice environment so as to encourage the chooser to select a
preferred choice.
- Maintains the chooser’s freedom to select other choices.
- Makes desirable choice available, and EASIER.
- Makes undesirable choice less available, and HARDER.
- There are many parallels between choice architecture and more traditional forms of
architecture. A crucial parallel is that there is no such thing as a “neutral” design.
- Good architects realize that although they can’t build the perfect building, they can make
some design choices that will have beneficial effects.
A nudge is any aspect of the choice architecture that alters people’s behavior in a predictable way
without forbidding any options or significantly changing their economic incentives.
- To count as a mere nudge, the intervention must be easy and cheap to avoid.
There is no such thing as a neutral design, everything matters.
Great architects design experiences that understand and build on stimulus-response compatibility.
As a choice architect you need to know or be able to predict what people want, need and how they
react and behave.
Principles of nudges
- Cheap and easy way of building and changing behaviors.
- They are often small solutions to big problems.
- Any aspect of the “choice architecture” that alters people’s behavior in a predictable way
without forbidding options or dramatically changing economic incentives.
, - They preserve freedom of choice: No force or prohibition.
- They are not mandates.
- They are transparent and must be easy to avoid.
Nudge Chapter 1
To deal with life, we use rules of thumb (Heuristics). They can be very helpful, but their use can also
lead to systematic biases.
Three common rules of thumb:
- Anchoring → You start with some anchor, a number you know, and adjust in the direction you
think is appropriate.
- The bias occurs because the adjustments are typically insufficient.
- Availability → How readily examples come to mind. There are situations in which people
assess the frequency of a class or the probability of an event by the ease with which instances
or occurrences can be brought to mind.
- Accessibility
- Salience
- Ease of recall
- Ease of retrieval
- Representativeness → The tendency to judge an event as likely if it “represents” the typical
features of its category. (individual is similar to the prototype) Probabilities are evaluated by
the degree to which A is representative of B, that is, by the degree to which A resembles B.
Other heuristics:
- Optimism and overconfidence → People are unrealistically optimistic even when the stakes
are high.
- Gains and losses
- Loss aversion → → The disutility (displeasure/pain) associated with a loss of a given
amount is larger than the utility associated with a gain of the same (or similar)
magnitude.
- Status Quo bias
- We want to keep things the way they are. Even if we didn’t originally choose it.
- We want to avoid potential losses generated by change.
- Losses loom larger than gains.
- Framing → The idea is that choices depend, in part, on the way in which problems are
described.
- Evidence that variations in the framing of options (in the description) yield
systematically different preferences.
Reactance → When people feel ordered around, they might get mad and do the opposite of what’s
being ordered/suggested.
Nudge Chapter 5
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 (Think about the bad designed door handles).
Samirah Bakker
Session 1 + readings:
Session 1: Introduction to Nudging
Traditional economics assumes humans are “optimal” decision making machines.
- They know what is in their best interest.
- They act on that knowledge.
- Reasoning capacity is infinite.
- Incentives can solve all problems.
- Markets are perfectly efficient.
- Every act is entirely selfish.
Normally the human mind works remarkably well. People sometimes get confused and even when we
do understand what is best, we often don't follow through. People do less well in contexts in which
they are inexperienced and poorly informed, and in which feedback is slow or infrequent.
Behavioral economics
Behavioral economists have more realistic assumptions about humans:
- Motivated by cognitive biases.
- Systematically and consistently irrational.
- Largely unaware.
Assumes humans predictably deviate from “optimality”.
For example:
- Heuristics → Shortcuts that sometimes backfire.
- Overreaction to losses → People detest losing.
- Status quo → Stick to what we have (inertia).
- Social norms → Other regarding preferences, fairness concerns, herd mentality.
- Impulsivity → We want rewards right now.
- Optimism and overconfidence → Help us maintain a positive self concept.
Two systems of thinking
System 1:
Fast, Unconscious, Parallel, Associative, Low energy, ‘Doer’.
- Intuitive.
- Fast.
- Reactionary.
System 2:
,Slow, Conscious, Serial, Analytic, Consumes a lot of energy, ‘Planner’.
- Higher-level reasoning.
- Cognitive.
- Slower.
- Resource dependent.
The two systems generally work well together, allowing us to act quickly and instinctively when
required, or allowing deep, powerful thought.
If people only decided based on their reflective, rational System 2, we wouldn’t need nudging because
people would simply consider what is best (utility preferences) in a given moment.
However, humans often decide with their intuitive fast System 1, especially when they are
tired, rushed, or not paying attention.
The automatic system is especially prone to bias, in fact it uses bias to speed up decision making.
While the reflective system can often back up or reinforce decisions made.
→ Nudging is especially helpful in these situations
Nudge → It is a gentle push, especially in order to gain attention or give signals.
Predictable problems:
- Separation of benefits and costs (should-want conflicts).
- Exercise, flossing, dieting (costs now, benefits later).
- Smoking, alcohol, chocolate (pleasure now, suffer later).
- Difficulty of problem.
- Mortgage.
- Frequency.
- Marriage, picking a college, buying a house.
- Feedback → Only on the options we accept, not on the ones we reject.
- Outcome of choice is difficult to predict.
Lecture + Nudge Chapter Introduction, 1 & 5
Nudge Chapter Introduction
Libertarian Paternalism
Libertarianism
- The state should have respect for all citizens as free equal human beings.
- The state should enable all citizens to develop and pursue their own conception of the good
life.
- Harm to others is the only basis for legitimate government intervention.
Paternalism
- The state should interfere with people’s liberties if this generates desirable outcomes.
- The state should promote the interests of all citizens in living secure, healthy, wealthy and
happy lives.
, - Paternalism goes further than the minimalist ‘no harm’ principle of libertarianism and argues
that people should also be protected against harming themselves.
Libertarian Paternalism
Libertarian paternalism or ‘nudging’ aims to improve people’s choices by being both:
- Libertarian: It does not block people’s choices and thus respects people’s liberty.
- Paternalistic: It makes people better off and thus improves their well-being (health, wealth
and happiness).
- The libertarian aspect of our strategies lies in the straightforward insistence that much of the
time, and so long as they are not harming others, people should be free to do what they like –
and to opt out of arrangements they deem undesirable if that is what they want to do.
- “free to choose”.
- When we use the term libertarian to modify the word paternalism, we simply mean
liberty-preserving.
- The paternalistic aspect lies in the claim that it’s legitimate for choice architects to try to
influence people’s behavior in order to make their lives longer, healthier, and better.
- Libertarian paternalists want to make it easy for people to go their own way; they don’t want
to burden those who want to exercise freedom.
Choice architecture
Choice architect → Has the responsibility for organizing the context in which people make decisions.
- A choice architect designs the choice environment so as to encourage the chooser to select a
preferred choice.
- Maintains the chooser’s freedom to select other choices.
- Makes desirable choice available, and EASIER.
- Makes undesirable choice less available, and HARDER.
- There are many parallels between choice architecture and more traditional forms of
architecture. A crucial parallel is that there is no such thing as a “neutral” design.
- Good architects realize that although they can’t build the perfect building, they can make
some design choices that will have beneficial effects.
A nudge is any aspect of the choice architecture that alters people’s behavior in a predictable way
without forbidding any options or significantly changing their economic incentives.
- To count as a mere nudge, the intervention must be easy and cheap to avoid.
There is no such thing as a neutral design, everything matters.
Great architects design experiences that understand and build on stimulus-response compatibility.
As a choice architect you need to know or be able to predict what people want, need and how they
react and behave.
Principles of nudges
- Cheap and easy way of building and changing behaviors.
- They are often small solutions to big problems.
- Any aspect of the “choice architecture” that alters people’s behavior in a predictable way
without forbidding options or dramatically changing economic incentives.
, - They preserve freedom of choice: No force or prohibition.
- They are not mandates.
- They are transparent and must be easy to avoid.
Nudge Chapter 1
To deal with life, we use rules of thumb (Heuristics). They can be very helpful, but their use can also
lead to systematic biases.
Three common rules of thumb:
- Anchoring → You start with some anchor, a number you know, and adjust in the direction you
think is appropriate.
- The bias occurs because the adjustments are typically insufficient.
- Availability → How readily examples come to mind. There are situations in which people
assess the frequency of a class or the probability of an event by the ease with which instances
or occurrences can be brought to mind.
- Accessibility
- Salience
- Ease of recall
- Ease of retrieval
- Representativeness → The tendency to judge an event as likely if it “represents” the typical
features of its category. (individual is similar to the prototype) Probabilities are evaluated by
the degree to which A is representative of B, that is, by the degree to which A resembles B.
Other heuristics:
- Optimism and overconfidence → People are unrealistically optimistic even when the stakes
are high.
- Gains and losses
- Loss aversion → → The disutility (displeasure/pain) associated with a loss of a given
amount is larger than the utility associated with a gain of the same (or similar)
magnitude.
- Status Quo bias
- We want to keep things the way they are. Even if we didn’t originally choose it.
- We want to avoid potential losses generated by change.
- Losses loom larger than gains.
- Framing → The idea is that choices depend, in part, on the way in which problems are
described.
- Evidence that variations in the framing of options (in the description) yield
systematically different preferences.
Reactance → When people feel ordered around, they might get mad and do the opposite of what’s
being ordered/suggested.
Nudge Chapter 5
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 (Think about the bad designed door handles).
