Yes, there is such a thing as common sense ”” and thank goodness for that.
At least that’s this reader’s reaction to Richard Thaler and Cass Sunstein’s “Nudge,” an engaging and insightful tour through the evidence that most human beings don’t make decisions in the way often characterized (some would say caricatured) in elementary economics textbooks, along with a rich array of suggestions for enabling many of us to make better choices, both for ourselves and for society.
Few people will be surprised to learn that the setting in which individuals make decisions often influences the choices they make. How much we eat depends on what’s served on our plate, what foods we pick from the cafeteria line depends on whether the salads or the desserts are placed at eye level, and what magazines we buy depends on which ones are on display at the supermarket checkout line. But the same tendency also affects decisions with more significant consequences: how much families save and how they invest; what kind of mortgage they take out; which medical insurance they choose; what cars they drive. Behavioral economics, a new area of research combining economics and psychology, has repeatedly documented how our apparently free choices are affected by the way options are presented to us.
The main insight from which Thaler and Sunstein proceed is that no decision setting is “neutral.” Whether it’s a restaurant laying out food or a business offering its employees a list of mutual funds in its 401(k) plan or the government presenting different Medicare options, whoever presents choices must frame them in some way. And the framing will affect the decisions. Even “small and apparently insignificant details can have major impacts on people’s behavior,” the authors write. Some ways of presenting the choices may give a gentler “nudge” than others, and we may think some settings are neutral only because we’re so used to them. But whoever is presenting the choices will inevitably bias decisions, in one direction or another.
As a result, Thaler and Sunstein argue, many of the familiar arguments for why people should simply be left to make choices on their own, and especially for why government should stay strictly out of the way, have little practical force. In many important areas of choice that matter both to the individual and to the rest of us (for example, when overuse of medical care drives up our insurance premiums and our taxes), the operative question is not whether to bias people’s decisions, but in which direction.