Sunday, December 21, 2008


An interesting book of 2008 is Nudge by behavioral economist Richard Thaler and legal scholar Cass Sunstein. Based on behavioral studies they discuss incentives structures for many different topics. Thaler and Sunstein introduce the term choice architecture to refer to carefully designed incentive structure that gently push the people into desired chosen. From empirical studies we know that people often follow default options, chose more the first option in a list of options, are sensitive to the decisions others are making, etc. In making decisions on insurances or retirement options, the way the information is provided can improve the decisions participants make (more relevant to their individual situation). Even when we like to address a global challenge like climate change, nudging is possible. For example, by technical options that make energy use more visible (daily energy use on your website) or automatically turn of devices when people do not use it. Selling cars with a "low-carbon" or traditional version will not take of is one can not show clearly one use the "low-carbon" option. Hence the success of the Prius which is only availble as a hybrid. Thaler and Sunstein were colleagues of President-elect Obama and act as informal advisors. So there is hope that we will experience more nudging in the future.
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