Getting the nudge

Dear colleagues,

How do you encourage people to make good decisions - good for them - while still allowing them plenty of choices?

Consider a cafeteria. You're running it and want customers to pick healthy options. The answer: put the healthy options in prominent locations, as evaluated by food researchers. Customers have free choice, but they are subtly steered in healthier directions.

This approach is advocated as a form of public policy by Richard Thaler and Cass Sunstein in their influential book Nudge. They introduce a few terms. The person or group that designs the decision-making context is called a "choice architect". Thaler and Sunstein define a nudge as choice architecture that influences behaviour predictably even though people still have a full range of choices with the same payoffs.

Thaler and Sunstein call the philosophy of nudging "libertarian paternalism". It is libertarian in that individuals have choice - they aren't forced to make particular choices. It is paternalistic in that someone, usually government, designs the choice architecture to foster desired outcomes.

Nudge is filled with examples of how nudges can assist people to make better choices, for themselves and society, concerning savings plans, education, energy use, organ donations and many other areas. A key facet of choice architecture is the default option, namely what happens when you don't bother making an explicit choice. In Australia, the default option for organ donations is that you haven't granted consent: you have to take the initiative to sign up on the donor register. If the default option was to allow organ donations, far more people would be on the register, because initiative would be needed to be removed.

In designing choices, some features of human psychology can be used. One is inertia - most people will continue with the status quo, even though choices abound. So the default option, in savings plans or organ donations, becomes their choice.

Another psychological feature is social proof - most people prefer to do what they think everyone else is doing. So if they think their neighbours are saving electricity, most people will cut back on their own electricity use. All the company needs to do is supply figures on average usage, with a smiley face next to a customer's figure if it's below the average. Thaler and Sunstein report on fascinating research into how such initiatives can nudge consumers.

Nudge is oriented to US readers; there are very few foreign examples. But it is pretty easy to think of applications closer to home.

Students in the Arts Faculty are faced with a bewildering array of subjects, which may partly explain the chopping and changing at the beginning of sessions. An alternative would be to automatically enrol students in a standard sequence of subjects, according to their expressed preferences (for example in an online questionnaire about degree and career choices) and then let them change if they want to. Alternatively, students could opt into a online automated choice planner to give recommended subject sequences.

Thaler and Sunstein have a chapter about student loans, but do not mention the Australian government system of offering zero-interest loans, which seems to work far better than the options canvassed in Nudge. Likewise, the Australian superannuation system seems remarkably enlightened after reading about US savings plans.

In research, nudges are important too. Wollongong researchers have the option of putting their publication on Research Online, the online repository. However, only a minority of researchers do this - it's an opt-in system, so most people follow the default option of doing nothing. The only universities with high rates repository uptakes have a different default option: researchers are required to post their publications, but can opt out by making a request.

Thaler and Sunstein repeatedly claim that nudges are not politically partisan, neither conservative nor liberal (in the US sense), neither Republican nor Democrat. But their approach is not politically neutral, because they assume that nudges mainly come from government or large organisations. The values involved in Nudge can be illustrated by their initial example of a cafeteria.

The cafeteria director realises she can influence what kids eat. How will she do this? Thaler and Sunstein give five options.

"1. Arrange the food to make the students best off, all things considered.

2. Choose the food order at random.

3. Try to arrange the food to get the kids to pick the same foods they would choose on their own.

4. Maximize the sales of the items from the suppliers that are willing to offer the largest bribes.

5. Maximize profits, period." (p. 2)

There's one option missing here: ask interested kids to help design the food choices. This might be called participatory paternalism: encourage people to contribute to the choice architecture, namely to help decide how they will be nudged. Thaler and Sunstein give plenty of evidence that this is likely to result in beneficial outcomes.

Nudges are around us whether we realise it or not. The challenge is to use nudges in a beneficial way.

29 January 2010


Richard H Thaler and Cass R Sunstein, Nudge: improving decisions about health, wealth, and happiness (London: Penguin, 2009)


Thanks to Kate Bowles for recommending Nudge to me and to Nicola Marks and Andrew Whelan for helpful comments on a draft.

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