Nudging: How to Get People to Do the Right Thing

"Nudge," a book by cognitive psychologist Richard Thaler and legal scholar Cass Sunstein that came out last year, puts forward a simple thesis. Because people often behave unthinkingly, it's better in some cases to lure (or nudge) them into making the right choice rather than trying to convince them of its rightness and/or imposing legal sanctions against the wrong choices.

To achieve this end, common psychological foibles can be used, as well as appropriate "choice architectures" and default options.

The urinals at Schiphol airport in Amsterdam provide an odd introductory example of this. In an effort to reduce the amount of spillage on the floor, small depictions of houseflies were embossed on the porcelain at the base of the urinals. These "fly targets," which have since been adopted all over the world, reduced spillage by 80 percent without the necessity of written notices, larger basins or other expensive interventions.

A similarly non-directive nudge results from taping a picture of human eyes over an unattended receptacle meant to collect money on the honor system from the sale of, let's say, doughnuts or coffee.

Yet another is the placement of food in a school cafeteria line. If healthful foods are placed first, they're more likely to be chosen than if desserts or fried foods are at the beginning of the line.

Inducing Action by Tapping Psychological Biases

Other cognitive lapses also give rise to nudges. "Save to Win," a savings program devised by Harvard Business School professor Peter Tufano, is a more recent instance. It relies on people's exaggerated estimation of their likelihood of winning a lottery.

A response to Americans' perennially low savings rate, the program induces the members of eight credit unions in Michigan to buy certificates of deposit by automatically enrolling purchasers in a lottery. The monthly drawings pay out $400 and the annual one $100,000. Bigger organizations would no doubt have bigger jackpots. The CD pays a slightly lower rate of interest than do standard CDs, presumably to pay for the lottery.

Appealing to Public's Sense of Compassion With People, Not Numbers

A more common example of exploiting people's innate propensities is the practice of activists who focus on individuals with whom the public can identify rather than on numbers that can give a better sense of the scope of the problem. If the goal is to nudge people into donating money or time, much recent research indicates that the individual-based approach leads to larger contributions and greater commitment to action than does mention of the numbers.

Thus, if the issue is the trafficking of people across national borders, it's more effective to focus on a single young woman and her incarceration in a foreign brothel or on a single young man and his entrapment on a foreign farm or construction site than it is to cite a bunch of numbers. In fact, including the dreaded and impersonal numbers often lessens interest.

Investing, Health Care, Lies and War

Investment decisions might also benefit from what Thaler and Sunstein call "libertarian paternalism." People confronted with too many choices -- say, for their 401(k) plans -- often choose unwisely. They don't diversify, don't consider the tax consequences of their holdings, don't consider low-cost index funds and so on.

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