Preface to the Final Edition

Richard Thaler and Cass Sunstein published the first edition in spring 2008 and began revising it in summer 2020, during the COVID-19 pandemic. They named it the “final edition” with a firm intention never to revise it again. (See Commitment strategy.)

New concepts added in the revised edition:

Smart Disclosure: The idea that governments should disclose important information in modern formats. Use the internet to make information easier to find and enable the development of online decision tools called “choice engines.”
Sludge: Whereas nudges help people make wise choices, sludge makes wise choices harder.

Additional elements of choice architecture:

Personalized defaults
Make it fun
Curation

Other changes:

Climate change and the environment: Nudges alone cannot solve the problem, but the authors suggest ways they can help.
Evaluating long-term policy effects: Analysis of nudges’ lasting effects through Sweden’s national retirement savings program, launched in 2000.
Organ donation: Corrects misunderstandings about “presumed consent.” (The authors clearly explain that presumed consent is wrong in almost all circumstances.)
Financial decisions: Ways to help consumers make better choices about credit card debt, mortgages, insurance, health plans, and more.

Introduction

The Cafeteria

An experiment tested whether the arrangement of food could influence students’ choices without changing the menu. Different schools placed desserts, French fries, carrots, and other foods in different locations. Simply changing the arrangement noticeably increased or decreased consumption of particular foods. An example of choice architecture.

Many people act as choice architects without realizing it: doctors explaining treatment alternatives, people creating employee benefit selection forms, ballot designers, and so on.

Libertarian Paternalism

If you think the cafeteria should be designed to encourage children to choose healthier food, you hold a libertarian paternalist position.

Libertarian: People should be free to do what they want, provided they do not harm others, and should be able to opt out of unwanted situations.
Paternalist: It is legitimate to steer people toward longer, healthier, better lives.

The authors’ goal is to help people make the choices they would have made with full attention, complete information, unlimited cognitive abilities, and complete self-control.

What is a nudge?

A nudge, as we will use the term, 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. Nudges are not taxes, fines, subsidies, bans, or mandates. Putting the fruit at eye level counts as a nudge. Banning junk food does not.

Econs and Humans: Why Nudges Can Help

The authors call classical economics’ “economic man” an Econ, distinguishing this figure from real humans with bounded rationality. High obesity rates and similar phenomena show that humans often choose against their own interests. Many studies demonstrate irrational choices. Econs respond only to incentives, while humans respond to both incentives and nudges. Arranging these appropriately can improve people’s lives and help solve major social problems while preserving freedom of choice.

A False Assumption and Two Misconceptions

Those opposing all intervention and advocating maximum freedom of choice falsely assume that “almost everyone almost always makes the choices that are best for them.”

Two misconceptions also cause problems.

That it is possible not to influence people’s choices: Every design influences choices, intentionally or otherwise. Governments, too, inevitably provide a starting point through policy.
That paternalism always involves coercion: The order of food in a cafeteria does not force anyone to follow a particular diet.

Chapter 5. Choice Architecture in Action

Consider “What would a thoughtful person choose if fully informed?” and make that the default.

Libertarian paternalists would like to set the default by asking what thoughtful and well-informed employees would actually want…. Choosers are human, so designers should make life as easy as possible. Send reminders (but not too many!) and then try to minimize the costs imposed on those who, despite your (and their) best efforts, space out.

A New Path

Libertarian paternalism is neither left nor right.

In short, libertarian paternalism is neither left nor right. For all their differences, we hope that people with very different political convictions might be willing to converge in support of gentle nudges.

Part 1. HUMANS AND ECONS

Chapter 1. Biases and Blunders

Rules of Thumb

Anchoring

Availability

Representativeness

Optimism and Overconfidence

Gains and Losses

Status Quo Bias

Framing

How We Think: Two Systems

So What?

Chapter 2. Resisting Temptation

Self-Control Strategies

Mental Accounting

Chapter 3. Following the Herd

Doing What Others Do

Cultural Change, Political Change, and Unpredictability

Identity: What People Like You Do

Pluralistic Ignorance

Social Norms as Nudges

Part 2. THE TOOLS OF THE CHOICE ARCHITECT

Chapter 4. When Do We Need a Nudge?

Fraught Choices

Spacing Out

Benefits Now, Costs Later

Degree of Difficulty

Frequency

Feedback

Knowing What You Like

Markets: A Mixed Verdict

Chapter 5. Choice Architecture

Defaults: Padding the Path of Least Resistance

Expect Error

Give Feedback

Understanding “Mappings”: From Choice to Welfare

Structure Complex Choices

Incentives

When to Take a Break

Chapter 6. But Wait, There’s More

Curation

Fun

Chapter 7. Smart Disclosure

Measurement

Chapter 7. Smart Disclosure

Make All Disclosures Machine Readable

You Should Own Your Usage Data

Chapter 8. Sludge

Private Sector Sludge: External Facing

The Unsubscribe Trap

Rebates

Shrouded Attributes as Sludge

Private Sector Red Tape

College Admissions

Governments

Chapter 8. Sludge at the Airport

Chapter 8. Sludge vs. Sludge: Online

Taxes

Reducing Sludge: One Step at a Time

Part 3. MONEY

Chapter 9. Save More Tomorrow

Are People Saving Enough?

Enrollment Decisions: Nudging People to Join

Increasing Savings Rates

Default Investment Options

But Where Does the Money Come From?

Best Practices

Chapter 10. Do Nudges Last Forever? Perhaps in Sweden

The Default Fund

Did Active Choosers Make Good Choices?

Advertising

How Long Do Nudges Last?

Lessons

Chapter 11. Borrow More Today: Mortgages and Credit Cards

Mortgages

Credit Cards

Chapter 12. Insurance: Don’t Sweat the Small Stuff

Extended Warranties

Deductible Aversion

Health Insurance: Choices Guaranteed to Be Bad

Part 4. SOCIETY

Chapter 13. Organ Donation: The Default Solution Illusion

Some Background

Routine Removal

Presumed Consent

Explicit Consent

Prompted Choice

Mandated Choice

Incentives

Lives Saved?

The Bottom Line

Chapter 14. Saving the Planet

A Perfect Storm

Creating Cooperation

Better Incentives

Green Taxes

Cap-and-Trade