Social Theory

Nudge: Improving Decisions About Health, Wealth, and Happiness

Amazon Best of the Month, April 2008: Debit or credit? Paper or plastic? Lease or buy? Public or private school? Have you made the right choices? Probably not, according to the important new research on the science of choice. In clear and entertaining style, Nudge: Improving Decisions About Health, Wealth, and Happiness provides a crash course on how and why humans are prone to make bad choices, and what we can do about it. Through dozens of eye-opening examples, authors Richard Thaler and Cass Sunstein demonstrate how "choice architecture"--a fancy term for the particular scenario or context in which we are asked to make a decision--can actually nudge us toward making better decisions. More importantly, the authors show that by putting the right "nudges" in place, choice architects (who range from cafeteria managers to divorce lawyers) can substantially improve just about everything important to us, from our retirement savings to the health of our planet, without removing our range of options. Recommended for fans and foes of Freakonomics and Predictably Irrational. --Lauren Nemroff

Who Needs to Nudge?
Just what are "nudges"? And who needs to know about them? Learn more in this special excerpt.

Ready for More?
Read a sample chapter to see which dozen nudges the authors would most recommend for improving everyday life.

Thaler and Sunstein: By a nudge we mean anything that influences our choices. A school cafeteria might try to nudge kids toward good diets by putting the healthiest foods at front. We think that it's time for institutions, including government, to become much more user-friendly by enlisting the science of choice to make life easier for people and by gentling nudging them in directions that will make their lives better.

Amazon.com: What are some of the situations where nudges can make a difference?

Thaler and Sunstein: Well, to name just a few: better investments for everyone, more savings for retirement, less obesity, more charitable giving, a cleaner planet, and an improved educational system. We could easily make people both wealthier and healthier by devising friendlier choice environments, or architectures.

Amazon.com: Can you describe a nudge that is now being used successfully?

Thaler and Sunstein: One example is 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 the employee gets a raise. This plan has more than tripled saving rates in some firms, and is now offered by thousands of employers.

Amazon.com: What is "choice architecture" and how does it affect the average person's daily life?

Thaler and Sunstein: Choice architecture is the context in which you make your choice. Suppose you go into a cafeteria. What do you see first, the salad bar or the burger and fries stand? Where's the chocolate cake? Where's the fruit? These features influence what you will choose to eat, so the person who decides how to display the food is the choice architect of the cafeteria. All of our choices are similarly influenced by choice architects. The architecture includes rules deciding what happens if you do nothing; what's said and what isn't said; what you see and what you don't. Doctors, employers, credit card companies, banks, and even parents are choice architects.

We show that by carefully designing the choice architecture, we can make dramatic improvements in the decisions people make, without forcing anyone to do anything. For example, we can help people save more and invest better in their retirement plans, make better choices when picking a mortgage, save on their utility bills, and improve the environment simultaneously. Good choice architecture can even improve the process of getting a divorce--or (a happier thought) getting married in the first place!

Amazon.com: You are very adamant about allowing people to have choice, even though they may make bad ones. But if we know what's best for people, why just nudge? Why not push and shove?

Thaler and Sunstein: Those who are in position to shape our decisions can overreach or make mistakes, and freedom of choice is a safeguard to that. One of our goals in writing this book is to show that it is possible to help people make better choices and retain or even expand freedom. If people have their own ideas about what to eat and drink, and how to invest their money, they should be allowed to do so.

Amazon.com: You point out that most people spend more time picking out a new TV or audio device than they do choosing their health plan or retirement investment strategy? Why do most people go into what you describe as "auto-pilot mode" even when it comes to making important long-term decisions?

Thaler and Sunstein: There are three factors at work. First, people procrastinate, especially when a decision is hard. And having too many choices can create an information overload. Research shows that in many situations people will just delay making a choice altogether if they can (say by not joining their 401(k) plan), or will just take the easy way out by selecting the default option, or the one that is being suggested by a pushy salesman.

Second, our world has gotten a lot more complicated. Thirty years ago most mortgages were of the 30-year fixed-rate variety making them easy to compare. Now mortgages come in dozens of varieties, and even finance professors can have trouble figuring out which one is best. Since the cost of figuring out which one is best is so hard, an unscrupulous mortgage broker can easily push unsophisticated borrowers into taking a bad deal.

Third, although one might think that high stakes would make people pay more attention, instead it can just make people tense. In such situations some people react by curling into a ball and thinking, well, err, I'll do something else instead, like stare at the television or think about baseball. So, much of our lives is lived on auto-pilot, just because weighing complicated decisions is not so easy, and sometimes not so fun. Nudges can help ensure that even when we're on auto-pilot, or unwilling to make a hard choice, the deck is stacked in our favor.

Amazon.com: Are we humans just poorly adapted for making sound judgments in an increasingly fast-paced and complex world? What can we do to position ourselves better?

Thaler and Sunstein: The human brain is amazing, but it evolved for specific purposes, such as avoiding predators and finding food. Those purposes do not include choosing good credit card plans, reducing harmful pollution, avoiding fatty foods, and planning for a decade or so from now. Fortunately, a few nudges can help a lot. A few small hints: Sign up for automatic payment plans so you don't pay late fees. Stop using your credit cards until you can pay them off on time every month. Make sure you're enrolled in a 401(k) plan. A final hint: Read Nudge.

The Wisdom of Crowds

In this fascinating book, New Yorker business columnist James Surowiecki explores a deceptively simple idea: Large groups of people are smarter than an elite few, no matter how brilliant–better at solving problems, fostering innovation, coming to wise decisions, even predicting the future.

With boundless erudition and in delightfully clear prose, Surowiecki ranges across fields as diverse as popular culture, psychology, ant biology, behavioral economics, artificial intelligence, military history, and politics to show how this simple idea offers important lessons for how we live our lives, select our leaders, run our companies, and think about our world.

The Wisdom of Crowds


I


If, years hence, people remember anything about the TV game show Who Wants to Be a Millionaire?, they will probably remember the contestants' panicked phone calls to friends and relatives. Or they may have a faint memory of that short-lived moment when Regis Philbin became a fashion icon for his willingness to wear a dark blue tie with a dark blue shirt. What people probably won't remember is that every week Who Wants to Be a Millionaire? pitted group intelligence against individual intelligence, and that every week, group intelligence won.

Who Wants to Be a Millionaire? was a simple show in terms of structure: a contestant was asked multiple-choice questions, which got successively more difficult, and if she answered fifteen questions in a row correctly, she walked away with $1 million. The show's gimmick was that if a contestant got stumped by a question, she could pursue three avenues of assistance. First, she could have two of the four multiple-choice answers removed (so she'd have at least a fifty-fifty shot at the right response). Second, she could place a call to a friend or relative, a person whom, before the show, she had singled out as one of the smartest people she knew, and ask him or her for the answer. And third, she could poll the studio audience, which would immediately cast its votes by computer. Everything we think we know about intelligence suggests that the smart individual would offer the most help. And, in fact, the "experts" did okay, offering the right answer--under pressure--almost 65 percent of the time. But they paled in comparison to the audiences. Those random crowds of people with nothing better to do on a weekday afternoon than sit in a TV studio picked the right answer 91 percent of the time.

Now, the results of Who Wants to Be a Millionaire? would never stand up to scientific scrutiny. We don't know how smart the experts were, so we don't know how impressive outperforming them was. And since the experts and the audiences didn't always answer the same questions, it's possible, though not likely, that the audiences were asked easier questions. Even so, it's hard to resist the thought that the success of the Millionaire audience was a modern example of the same phenomenon that Francis Galton caught a glimpse of a century ago.

As it happens, the possibilities of group intelligence, at least when it came to judging questions of fact, were demonstrated by a host of experiments conducted by American sociologists and psychologists between 1920 and the mid-1950s, the heyday of research into group dynamics. Although in general, as we'll see, the bigger the crowd the better, the groups in most of these early

experiments--which for some reason remained relatively unknown outside of academia--were relatively small. Yet they nonetheless performed very well. The Columbia sociologist Hazel Knight kicked things off with a series of studies in the early 1920s, the first of which had the virtue of simplicity. In that study Knight asked the students in her class to estimate the room's temperature, and then took a simple average of the estimates. The group guessed 72.4 degrees, while the actual temperature was 72 degrees. This was not, to be sure, the most auspicious beginning, since classroom temperatures are so stable that it's hard to imagine a class's estimate being too far off base. But in the years that followed, far more convincing evidence emerged, as students and soldiers across America were subjected to a barrage of puzzles, intelligence tests, and word games. The sociologist Kate H. Gordon asked two hundred students to rank items by weight, and found that the group's "estimate" was 94 percent accurate, which was better than all but five of the individual guesses. In another experiment students were asked to look at ten piles of buckshot--each a slightly different size than the

Pedagogy of the Oppressed

The Servant: A Simple Story About the True Essence of Leadership

In this absorbing tale, you watch the timeless principles of servant leadership unfold through the story of John Daily, a businessman whose outwardly successful life is spiraling out of control. He is failing miserably in each of his leadership roles as boss, husband, father, and coach. To get his life back on track, he reluctantly attends a weeklong leadership retreat at a remote Benedictine monastery.
To John's surprise, the monk leading the seminar is a former business executive and Wall Street legend. Taking John under his wing, the monk guides him to a realization that is simple yet profound: The true foundation of leadership is not power, but authority, which is built upon relationships, love, service, and sacrifice.
Along with John, you will learn that the principles in this book are neither new nor complex. They don't demand special talents; they are simply based on strengthening the bonds of respect, responsibility, and caring with the people around you. Perhaps this is why The Servant has touched readers from all walks of life—because its message can be applied by anyone, anywhere—at home or at work.
If you are tired of books that lecture instead of teach; if you are searching for ways to improve your leadership skills; if you want to understand the timeless virtues that lead to lasting and meaningful success, then this book is one you cannot afford to miss.

Nickel and Dimed: On (Not) Getting By in America

Essayist and cultural critic Barbara Ehrenreich has always specialized in turning received wisdom on its head with intelligence, clarity, and verve. With some 12 million women being pushed into the labor market by welfare reform, she decided to do some good old-fashioned journalism and find out just how they were going to survive on the wages of the unskilled--at $6 to $7 an hour, only half of what is considered a living wage. So she did what millions of Americans do, she looked for a job and a place to live, worked that job, and tried to make ends meet.

As a waitress in Florida, where her name is suddenly transposed to "girl," trailer trash becomes a demographic category to aspire to with rent at $675 per month. In Maine, where she ends up working as both a cleaning woman and a nursing home assistant, she must first fill out endless pre-employment tests with trick questions such as "Some people work better when they're a little bit high." In Minnesota, she works at Wal-Mart under the repressive surveillance of men and women whose job it is to monitor her behavior for signs of sloth, theft, drug abuse, or worse. She even gets to experience the humiliation of the urine test.

So, do the poor have survival strategies unknown to the middle class? And did Ehrenreich feel the "bracing psychological effects of getting out of the house, as promised by the wonks who brought us welfare reform?" Nah. Even in her best-case scenario, with all the advantages of education, health, a car, and money for first month's rent, she has to work two jobs, seven days a week, and still almost winds up in a shelter. As Ehrenreich points out with her potent combination of humor and outrage, the laws of supply and demand have been reversed. Rental prices skyrocket, but wages never rise. Rather, jobs are so cheap as measured by the pay that workers are encouraged to take as many as they can. Behind those trademark Wal-Mart vests, it turns out, are the borderline homeless. With her characteristic wry wit and her unabashedly liberal bent, Ehrenreich brings the invisible poor out of hiding and, in the process, the world they inhabit--where civil liberties are often ignored and hard work fails to live up to its reputation as the ticket out of poverty. --Lesley Reed

Rules for Radicals

This primers tells the "have-nots" how they can organize to achieve real political power for the practice of true democracy.

Servant Leadership: A Journey into the Nature of Legitimate Power and Greatness 25th Anniversary Edition

Twenty-five years ago Robert Greenleaf published these prophetic essays on what he coined servant leadership, a practical philosophy that replaces traditional autocratic leadership with a holistic, ethical approach. This highly influential book has been embraced by cutting edge management everywhere. Yet in these days of Enron and what VISA CEO Dee Hock calls our "era of massive institutional failure," Greenleaf's seminal work must reach the mainstream now more than ever. Servant Leadership helps leaders find their true power and moral authority to lead. It helps those served become healthier, wiser, freer, and more autonomous. This book encourages collaboration, trust, listening, and empowerment. It offers long-lasting change, not a temporary fix and extends beyond business for leaders of all types of groups.

Leadership Without Easy Answers

The economy uncertain, education in decline, cities under siege, crime and poverty spiraling upward, international relations roiling: we look to leaders for solutions, and when they don't deliver, we simply add their failure to our list of woes. In doing do, we do them and ourselves a grave disservice. We are indeed facing an unprecedented crisis of leadership, Ronald Heifetz avows, but it stems as much from our demands and expectations as from any leader's inability to meet them. His book gets at both of these problems, offering a practical approach to leadership for those who lead as well as those who look to them for answers. Fitting the theory and practice of leadership to our extraordinary times, the book promotes a new social contract, a revitalization of our civic life just when we most need it. Drawing on a dozen years of research among managers, officers, and politicians in the public realm and the private sector, among the nonprofits, and in teaching, Heifetz presents clear, concrete prescriptions for anyone who needs to take the lead in almost any situation, under almost any organizational conditions, no matter who is in charge, His strategy applies not only to people at the top but also to those who must lead without authority--activists as well as presidents, managers as well as workers on the front line.

The Blank Slate: The Modern Denial of Human Nature

In The Blank Slate, Steven Pinker, one of the world's leading experts on language and the mind, explores the idea of human nature and its moral, emotional, and political colorings. With characteristic wit, lucidity, and insight, Pinker argues that the dogma that the mind has no innate traits-a doctrine held by many intellectuals during the past century-denies our common humanity and our individual preferences, replaces objective analyses of social problems with feel-good slogans, and distorts our understanding of politics, violence, parenting, and the arts. Injecting calm and rationality into debates that are notorious for ax-grinding and mud-slinging, Pinker shows the importance of an honest acknowledgment of human nature based on science and common sense.

Looking Out, Looking In

Used by more than a million students, LOOKING OUT, LOOKING IN, Twelfth Edition, continues its outstanding tradition of combining current information with a fun, reader-friendly voice that links course topics to your everyday life. You'll discover the reasons to improve your interpersonal skills and sharpen your critical understanding of the communication process through diverse and compelling examples that illustrate how communication skills can affect both the world around us and our own lives. Improve your relationships and your future career success, with the only text that offers the tools that have been proven to build better communication skills for almost 30 years!