Thaler & Sunstein – Nudge
Part I: Humans and econs
Chapter 1: Biases and blunders
Our understanding of human behavior can be improved by appreciating how people
systematically go wrong. Knowing something about the cognitive system has allowed others
to discover systematic biases in the way we think. How can people be smart on the one hand
and so dumb on the other? Many psychologists and neuroscientists have been converging on a
description on the brain’s functioning that helps us make sense of these seeming
contradictions. The approach involves a distinction between two kinds of thinking, one that is
intuitive and automatic (Automatic System - 1), and another that is reflective and rational
(Reflective System - 2).
The automatic system is rapid and is or feels instinctive. It does not involve thinking. For
example: smile when you see a puppy, get nervous when there is turbulence in a plane.
Activities of the automatic system are associated with the oldest parts of the brain. The
reflective system is more deliberate and self-conscious. Most people are likely to use this
system when deciding which route to take for a trip and which school to go to.
People speak their native languages using their automatic system and tend to struggle to speak
another language using their reflective systems.
Automatic System Reflective System
Uncontrolled Controlled
Effortless Effortful
Associative Deductive
Fast Slow
Unconscious Self-aware
Skilled Rule-following
One way to think about all this is that the automatic system is your gut reaction and the
reflective is your conscious thought. Gut feelings can be quite accurate, but we often make
mistakes because we rely too much on our automatic system. The automatic system can be
trained with lots of repetition. Mr. Spock is an example of someone who always uses his
reflective system, where Homer Simpson uses his automatic.
When we have to make judgements, we use simple rules of thumb to help us. Most of the time
they are quick and useful, but their use can also lead to systematic biases. The work of
Tversky and Kahneman (1974) identified three heuristics (rules of thumb), anchoring,
availability and representativeness, and the biases associated with each. Psychologists have
come to understand that these heuristics and biases emerge from the interplay between the
automatic and reflective system.
Anchoring
Anchoring and adjusting: you start with some anchor, the number you know for example, and
adjust in the direction you think is appropriate. The bias occurs because the adjustments are
typically insufficient. Even obviously irrelevant anchors creep into the decision-making
process. Anchors can even influence how you think your life is going, they serve as nudges.
We can influence the figure you will choose in a particular situation by ever-so-subtly
suggesting a starting point for your thought process.
, Availability
The availability heuristic: people assess the likelihood of risks by asking how readily
examples come to mind. If people can easily think of relevant examples, they are far more
likely to be frightened and concerned than if they cannot. Accessibility and salience are
closely related to availability, and they are important as well. Recent events have a greater
impact on our behavior and on our fears, than earlier ones. The automatic system is keenly
aware of the risk, without having to resort to any tables of statistics. The availability heuristic
helps to explain much risk-related behavior.
Representativeness
Use of the representativeness heuristic can cause serious misperceptions of patterns in
everyday life. We often see patterns because we construct our informal tests only after
looking at the evidence.
We tend to be optimistic and to have overconfidence. Unrealistic optimism is a pervasive
feature of human life. Losing something makes you twice as miserable as gaining the same
thing makes you happy. When people have to give something up, they are hurt more than they
are pleased if they acquire the very same thing. Loss aversion operates as a kind of cognitive
nudge, pressing us not to make changes, even when changes are very much in our interests.
People have a more general tendency to stick with their current situation: the status quo bias.
One of the causes of status quo bias is a lack of attention. Those who are in charge of
circulation know that when renewal (for example for magazines) is automatic, and when
people have to make a phone call to cancel, the likelihood of renewal is much higher than it is
when people have to indicate that they actually want to continue to receive the magazine.
The idea of framing is that choices depend on the way in which problems are stated. People
tend to be somewhat mindless, passive decision makers. Their reflective system does not do
the work required to check and see whether reframing the questions would produce a different
answer. Frames are therefore powerful nudges.
People are nudge-able. Their choices, even important decisions, are influenced in ways that
would not be anticipated in a standard economic framework.
Chapter 2: Resisting temptation
Temptation is easier to recognize than to define. People’s state of arousal varies over time.
We call something ‘tempting’ if we consume more of it when in a hot state than in a cold
state. Self-control issues arise because we underestimate the effect of arousal. When in a cold
state, we do not appreciate how much our desires and our behavior will be altered when we
are under the influence of arousal. Self-control problems can be illuminated by thinking about
an individual as containing two semiautonomous selves: a planner (reflective – Mr. Spock)
and a doer (automatic – Homer Simpson). The planner is trying to promote your long-term
welfare, but must cope with the feelings, mischief and strong will of the doer, who is exposed
to the temptations that come with arousal. Some parts of the brain get tempted, and other parts
are prepared to enable us to resist temptation by assessing how we should react to the
temptation.
In many situations people put themselves into an automatic pilot mode, in which they are not
actively paying attention to the task at hand. Eating turns out to be one of the most mindless
activities we do. Large plates and large packages mean more eating; they are a form of choice
architecture, and they work as major nudges. Since people are at least partly aware of their
Part I: Humans and econs
Chapter 1: Biases and blunders
Our understanding of human behavior can be improved by appreciating how people
systematically go wrong. Knowing something about the cognitive system has allowed others
to discover systematic biases in the way we think. How can people be smart on the one hand
and so dumb on the other? Many psychologists and neuroscientists have been converging on a
description on the brain’s functioning that helps us make sense of these seeming
contradictions. The approach involves a distinction between two kinds of thinking, one that is
intuitive and automatic (Automatic System - 1), and another that is reflective and rational
(Reflective System - 2).
The automatic system is rapid and is or feels instinctive. It does not involve thinking. For
example: smile when you see a puppy, get nervous when there is turbulence in a plane.
Activities of the automatic system are associated with the oldest parts of the brain. The
reflective system is more deliberate and self-conscious. Most people are likely to use this
system when deciding which route to take for a trip and which school to go to.
People speak their native languages using their automatic system and tend to struggle to speak
another language using their reflective systems.
Automatic System Reflective System
Uncontrolled Controlled
Effortless Effortful
Associative Deductive
Fast Slow
Unconscious Self-aware
Skilled Rule-following
One way to think about all this is that the automatic system is your gut reaction and the
reflective is your conscious thought. Gut feelings can be quite accurate, but we often make
mistakes because we rely too much on our automatic system. The automatic system can be
trained with lots of repetition. Mr. Spock is an example of someone who always uses his
reflective system, where Homer Simpson uses his automatic.
When we have to make judgements, we use simple rules of thumb to help us. Most of the time
they are quick and useful, but their use can also lead to systematic biases. The work of
Tversky and Kahneman (1974) identified three heuristics (rules of thumb), anchoring,
availability and representativeness, and the biases associated with each. Psychologists have
come to understand that these heuristics and biases emerge from the interplay between the
automatic and reflective system.
Anchoring
Anchoring and adjusting: you start with some anchor, the number you know for example, and
adjust in the direction you think is appropriate. The bias occurs because the adjustments are
typically insufficient. Even obviously irrelevant anchors creep into the decision-making
process. Anchors can even influence how you think your life is going, they serve as nudges.
We can influence the figure you will choose in a particular situation by ever-so-subtly
suggesting a starting point for your thought process.
, Availability
The availability heuristic: people assess the likelihood of risks by asking how readily
examples come to mind. If people can easily think of relevant examples, they are far more
likely to be frightened and concerned than if they cannot. Accessibility and salience are
closely related to availability, and they are important as well. Recent events have a greater
impact on our behavior and on our fears, than earlier ones. The automatic system is keenly
aware of the risk, without having to resort to any tables of statistics. The availability heuristic
helps to explain much risk-related behavior.
Representativeness
Use of the representativeness heuristic can cause serious misperceptions of patterns in
everyday life. We often see patterns because we construct our informal tests only after
looking at the evidence.
We tend to be optimistic and to have overconfidence. Unrealistic optimism is a pervasive
feature of human life. Losing something makes you twice as miserable as gaining the same
thing makes you happy. When people have to give something up, they are hurt more than they
are pleased if they acquire the very same thing. Loss aversion operates as a kind of cognitive
nudge, pressing us not to make changes, even when changes are very much in our interests.
People have a more general tendency to stick with their current situation: the status quo bias.
One of the causes of status quo bias is a lack of attention. Those who are in charge of
circulation know that when renewal (for example for magazines) is automatic, and when
people have to make a phone call to cancel, the likelihood of renewal is much higher than it is
when people have to indicate that they actually want to continue to receive the magazine.
The idea of framing is that choices depend on the way in which problems are stated. People
tend to be somewhat mindless, passive decision makers. Their reflective system does not do
the work required to check and see whether reframing the questions would produce a different
answer. Frames are therefore powerful nudges.
People are nudge-able. Their choices, even important decisions, are influenced in ways that
would not be anticipated in a standard economic framework.
Chapter 2: Resisting temptation
Temptation is easier to recognize than to define. People’s state of arousal varies over time.
We call something ‘tempting’ if we consume more of it when in a hot state than in a cold
state. Self-control issues arise because we underestimate the effect of arousal. When in a cold
state, we do not appreciate how much our desires and our behavior will be altered when we
are under the influence of arousal. Self-control problems can be illuminated by thinking about
an individual as containing two semiautonomous selves: a planner (reflective – Mr. Spock)
and a doer (automatic – Homer Simpson). The planner is trying to promote your long-term
welfare, but must cope with the feelings, mischief and strong will of the doer, who is exposed
to the temptations that come with arousal. Some parts of the brain get tempted, and other parts
are prepared to enable us to resist temptation by assessing how we should react to the
temptation.
In many situations people put themselves into an automatic pilot mode, in which they are not
actively paying attention to the task at hand. Eating turns out to be one of the most mindless
activities we do. Large plates and large packages mean more eating; they are a form of choice
architecture, and they work as major nudges. Since people are at least partly aware of their
