What is... | November 5, 2013

What is a nudge?

Have you ever ordered a certain dish in a cafeteria – even when you had every intention of eating something else?

This may be an example of a nudge that steers us towards particular decisions – often when we don’t even know it. And as you’ll see, nudges are everywhere. Why people choose what to eat simply because of where it is displayed is one of the many scenarios explored in Nudge, the influential book by Cass Sunstein and Richard Thaler.

Their philosophy of helpfully directing people towards the best choices is part of a field known as “choice architecture” – which can influence smarter decisions in areas such as health, personal finance and charitable giving.

Nudges push into mainstream thinking
The field is becoming wildly popular. Sunstein joined Barack Obama’s White House and Thaler has advised policymakers in several countries. More and more governments (such as the UK’s “Nudge Unit”), organisations and companies use nudges to gently prod us into taking positive steps. Sunstein’s 2013 book Simpler details the extraordinary power of low-cost nudges and future government policy. We still have choice, but are nudged towards decisions which are usually in our best interests.

A nudge in the right direction
Nudges are especially valuable in areas such as saving for retirement. Research shows that when employees are automatically enrolled (a nudge) onto a retirement plan – with the option to withdraw – far more people sign up for the plan than would have done so if they had to enrol themselves. Consider warning bleeps in cars when seat belts are not buckled, when fuel is running low or a door is not closed properly. Nudge co-author Thaler describes his Save More Tomorrow retirement idea as his most memorable research experience in an interview with InDecision blog, a simple idea to encourage retirement saving in the future that has changed the savings habits of millions.

…and nudges in the wrong direction
While the positioning of foods in restaurants or supermarkets may or may not be an ethical nudge (depending on your preference for chocolate covered nuts) we should be aware of unscrupulous nudges. Think about mortgage brokers or appliance vendors who guide us towards expensive protection options. Do we really need an extended warranty for a cheap camera that might be replaced within a few years?

Nudges which could serve you well
This guide shows some useful examples of nudging in the right direction. Although often thought of as part of something governments or companies do, individuals can design their own nudges to help them meet specific goals. Setting up a commitment device to help us achieve goals may also nudge us to overcome the effects of procrastination. And these five tips to “nudge” towards better savings habits offer helpful ways to save more and reduce our spending.


eZonomics team
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