Nudge by Richard H. Thaler PDF

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Nudge by Richard H. Thaler PDF

Download Nudge by Richard H. Thaler PDF book free online – From Nudge by Richard H. Thaler PDF: Every day we make choices—about what to buy or eat, about financial investments or our children’s health and education, even about the causes we champion or the planet itself. Unfortunately, we often choose poorly. Nudge is about how we make these choices and how we can make better ones. Buy From Amazon

Description of Nudge by Richard H. Thaler PDF

Using dozens of eye-opening examples and drawing on decades of behavioral science research, Nobel Prize winner Richard H. Thaler and Harvard Law School professor Cass R. Sunstein show that no choice is ever presented to us in a neutral way, and that we are all susceptible to biases that can lead us to make bad decisions. But by knowing how people think, we can use sensible “choice architecture” to nudge people toward the best decisions for ourselves, our families, and our society, without restricting our freedom of choice.

Editorial Reviews

Review of Nudge by Richard H. Thaler PDF

One of The Strategist’ s “13 Best Personal Finance Books, According to Money Experts”

“One of the few books . . . that fundamentally changes the way I think about the world.” —Steven D. Levitt, coauthor of Freakonomics

“Engaging and insightful . . . The conceptual argument is powerful, and most of the authors’ suggestions are common sense at its best. . . . For that we should all applaud loudly.” —The New York Times Book Review

“An essential read . . . The book isn’t only humorous, it’s loaded with good ideas that financial-service executives, policy makers, Wall Street mavens, and all savers can use.” —The Boston Globe

“This book is terrific. It will change the way you think, not only about the world around you and some of its bigger problems, but also about yourself.” —Michael Lewis, author of Moneyball and Liar’s Poker

“This gem of a book . . . is a must-read for anyone who wants to see both our minds and our society working better. It will improve your decisions and it will make the world a better place.” —Daniel Kahneman, Nobel Prize–winning author of Thinking, Fast and Slow

“Utterly brilliant . . . Nudge won’t nudge you—it will knock you off your feet.” —Daniel Gilbert, author of Stumbling on Happiness

Nudge is as important a book as any I’ve read in perhaps twenty years. It is a book that people interested in any aspect of public policy should read. It is a book that people interested in politics should read. It is a book that people interested in ideas about human freedom should read. It is a book that people interested in promoting human welfare should read. If you’re not interested in any of these topics, you can read something else.” —Barry Schwartz, The American Prospect

“Engaging, informative, and thoroughly delightful.” —Don Norman, author of The Design of Everyday Things and The Design of Future Things

“A wonderful book: more fun than any important book has a right to be—and yet it is truly both.” —Roger Lowenstein, author of When Genius Failed

“Save the planet, save yourself. Do-gooders, policymakers, this one’s for you.” —Newsweek

“Great fun to read . . . Sunstein and Thaler are very persuasive.” —Slate

Nudge helps us understand our weaknesses, and suggests savvy ways to counter them.” —The New York Observer

“Always stimulating . . . An entertaining book that also deeply informs.” —Barron’s

“Entertaining, engaging, and well written . . . Highly recommended.” —Choice

“This Poor Richard’s Almanack for the 21st century . . . shares both the sagacity and the witty and accessible style of its 18th-century predecessor.” —Law and Politics Book Review

“There are superb insights in Nudge.” —Financial Times

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This one took me longer to read that is reasonable for a book of its length or the clear style it is written in. I mean, such a simply written text of 250 pages ought to have finished in no time. The problem was that I don’t live in the US and so many of the examples made the book a struggle for me. All the same, there are ideas in this book that are important no matter where you live.

Don’t you just love the internet? I wanted to start this paragraph with that quote by Göring, “when I hear the word culture I reach for my luger”, but it turns out it is actually a quote from a play by Hanns Johst which is even better, “Whenever I hear of culture I release the safety on my Browning”. I have much the same reaction when I hear the word choice. There is a false equality set up between freedom and choice. It is as if the two terms are identical. Since I’ve had to read through dozens of American examples in this book of why this identity may not always apply, I would like to give an Australian example to explain some of the key concepts of this book.

A couple of decades ago Australian workers went without a national pay increase and rather had this money directed into superannuation. Superannuation is essentially forced saving for retirement. Over the years this required percentage of an employee’s wage dedicated to superannuation has increased so that today it stands at 9%. Everyone knows that if people are to retire on anything like their current salary they need to put aside around 15% of their lifetime earnings. The gap between 9% and 15% is one that will be, for most people, borne by reduced living standards at the end of their lives.

The previous Australian Government decided that it would be a good idea to introduce ‘choice’ into the superannuation system. So whereas previously most people were corralled into mostly industry superannuation funds that were ‘not for profit’ (meaning they had low fees and profits went back into the fund), the new system opened up the superannuation business to private operators. People would now be able to ‘choose’ which fund to invest their money in. (Where did I put that Luger?)

The industry funds obviously didn’t like this idea. But like choice, competition is always a good thing and can never be criticised, right? Well, it is not quite so easy. The problem is that the industry funds asked the previous government to structure the new system so that all funds would have to disclose all fees and charges associated with their products. This would clearly have favoured the industry funds – that often don’t charge fees at all. The government refused to include this disclosure of information as a proviso in the legislation.

Of course, this made ‘freedom of choice’ a bit of a joke. You can’t really have ‘freedom’ if your choice is also based on your being ‘free’ from vital information.

What made matters worse was that the ‘financial planning’ industry in Australia isn’t as well regulated as it might be. Financial planners generally receive commissions from the financial institutions whose products they sell (oh, sorry, encourage you to take up). So, rather than providing you with a plan that is unequivocally in your best interests, the financial planner you are seeing may have (actually, will have) a strong motivation to provide you with information that is in their best financial interests, rather than yours.

Economists would say that despite all of the obvious problems with this new system of choice it is still better as people ‘always act in their own best interests as rational economic agents’ and more choice (even if some of those choices might be biased against people) is always better.

The writers of this book define themselves as Libertarian Paternalists. Essentially, they also believe that choices are good things – however, they acknowledge that choice alone isn’t enough and that people aren’t always economically rational entities.

One of the ideas I found most useful in this book is the idea of ‘choice architecture’. They do not believe in taking choices away from people, but they recognise that being presented with a bewildering array of choices is often enough to stop people from making any choice at all. The book opens with a discussion of a school cafeteria and how you can affect the eating habits of kids simply by how you place the food on display. That is, putting healthier food at eye level, rather than fatty, sugary foods, will ‘nudge’ kids towards eating more healthy food. This is not a subtle change; this ‘nudge’ can drastically improve the eating choices made by the kids. The kids still have a choice to eat rubbish, but this simple change nudges them towards eating better.

The point is that you simply don’t have the option to display the food in a ‘non-nudge’ way. You have to make some choice about how you are going to display the food – so doesn’t it make sense to set up the display so that people are nudged towards eating well, rather than badly?

Choices don’t occur in a vacuum and one of the lessons of this book is that if we are going to provide ‘choices’ we need to think about the consequences of the choice architecture we put in place in which those ‘choices’ are going to be made.

Another of those pieces of ‘choice architecture’ is going to depend on what is the default choice. This is because, people being people, many of us are going to get bored early on in the decision making process and just go for the default. Therefore, the default should be the choice that is most likely to meet the needs of those required to make the choice. There is a very disturbing discussion of the ‘Part D’ prescription drug coverage process in the US in which people who do not make what is an incredibly difficult choice are ‘randomly’ assigned to a range of default plans that takes the principle of government non-intervention to absurd extremes.

The other idea that is very strongly pushed in this book is that people are very much ‘loss averse’. This is an idea that has been in virtually every book I’ve read lately, but this book does more than most to explain the consequences of this aversion. Going back to our superannuation example, one of the reasons why people don’t increase their superannuation contributions – despite knowing that it would be good for them in the long term – is that it involves them in a perceived loss now. The authors discuss a way of encouraging higher contributions which they call the ‘pay more later’ plan. Essentially people are encouraged to commit to increasing their contributions at the time of their next pay increase. This way the increase in contributions does not feel like a loss and the authors show that this way of increasing contributions leads to higher contributions than virtually any other method.

I particularly liked their solution to the ‘gay marriage’ issue that is producing so much heat and so little light in society lately. Their answer is for the government to get out of the marriage business altogether. That the government should enable people to have their relationships recognised on the basis of it being a ‘civil union’ and that this be open to all couples, irrespective of their sex or the sex of their partner. This civil union would be the legal and social recognition of a couple’s partnership. Marriage then would be left up to religious bodies to worry about. If a particular church refuses to marry you because you want to marry someone they don’t think you should – well, find yourself another church – or even better yet, avoid churches altogether.

The last part of this book is a defence of the idea of nudges against radical free market types; the sorts of people who, like our previous government, think that choice is always good and ill-informed choice is even better. The idea that people might be nudged towards donating their organs after they’ve finished with them, nudged to eat better food or to get better health care cover or to slow down when approaching a dangerous intersection all just seem obviously good to me, so this part of the book was preaching to the converted.

But then, like Hegel, I don’t equate freedom with choice, but with needs and how we understand those needs. I think freedom has less to do with getting to choose and more to do with getting adequate information on the consequences of that choice. This book doesn’t go as far as I might along this path – but at least it recognises that we are human and that we often need help in making decisions that are in our own best interests.

…If it was up to me there would not only be no freedom of choice in superannuation, but superannuation would be a tax and would be run by the Australian Tax Office. But don’t get me started…

This would be an even more interesting book if you live in America, given the nature of the examples, but either way, this is still worth a look.

About the Author

Richard H. Thaler was awarded the 2017 Nobel Prize in Economics. He is the Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago’s Booth School of Business, where he is the director of the Center for Decision Research. He is also the co-director (with Robert Shiller) of the Behavioral Economics Project at the National Bureau of Economic Research and in 2015 was the president of the American Economic Association. He has been published in several prominent journals and is the author of a number of books, including Misbehaving: The Making of Behavioral Economics.

Cass R. Sunstein is the Robert Walmsley University Professor at Harvard Law School, where he is the founder and director of the Program on Behavioral Economics and Public Policy. He is by far the most cited law professor in the United States. From 2009 to 2012 he served in the Obama administration as Administrator of the White House Office of Information and Regulatory Affairs. He has testified before congressional committees, appeared on national television and radio shows, been involved in constitution-making and law reform activities in a number of nations, and written many articles and books, including Simpler: The Future of Government, Wiser: Getting Beyond Groupthink to Make Groups Smarter, The World According to Star Wars, and Impeachment: A Citizen’s Guide. He is the recipient of the 2018 Holberg Prize, awarded annually to a scholar who has made outstanding contributions to research in the arts, humanities, the social sciences, law, or theology.

Excerpt of Nudge by Richard H. Thaler PDF

Common “Nudges”

  1. The design of menus gets you to eat (and spend) more. For example, lining up all prices on either side of the menu leads many consumers to simply pick the cheapest item. On the other hand, discretely listing prices at the end of food descriptions lets people read about the appetizing options first…; and then see prices.
  2. “Flies” in urinals improve, well, aim. When Amsterdam’s Schiphol Airport was faced with the not uncommon issue of dirty urinals, they chose a unique solution: by painting “flies” in the (center of) commodes, men obligingly aimed at the insects, reducing spillage by 80 percent.
  3. Credit card minimum payments affect repayment schedules. Among those who only partially pay off credit card balances each month, the repayment level is correlated with the card’s minimum payment — in other words, the lower the minimum payment, the longer it takes a consumer to pay off the card balance.
  4. Automatic savings programs increase savings rate. All over the country, companies are adopting the Save More Tomorrow program: firms offer employees who are not saving very much the option of joining a program in which their saving rates are automatically increased whenever they get a raise. This plan has more than tripled saving rates in some firms, and is now offered by thousands of employers.
  5. “Defaults” can improve rates of organ donation. In the United States, about one–third of citizens have signed organ donor cards. Compare this to Austria, where 99 percent of people are potential organ donors. One obvious difference? Americans must explicitly consent to become organ donors (by signing forms, for example) while Austrians must opt out if they do not want to be organ donors.

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