What’s on Richard Thaler’s mind these days, now that more than a dozen years have passed since he and Cass Sunstein published Nudge and forever altered how individuals and organizations approach the challenge of behavior change? We spoke with him to find out.
For Thaler and the field of applied behavioral science, the intervening years have been busy. Thaler, of course, won the Nobel Prize in economics in 2017 for his research on behavioral economics. More than 600 behavioral science units have been established in governments, businesses, nonprofits, and research centers around the world, each drawing inspiration from his research, with Nudge serving as a common language and touchpoint for those aiming to integrate a more realistic view of human behavior into their policies, products, and designs.
In the summer of 2020, Thaler and Sunstein began going over old copies of Nudge to see if, after all that’s happened and all that they and the field have learned, the book might benefit from an update. It would, they decided, and this summer they released a rewritten version, Nudge: The Final Edition (the subtitle a good-spirited commitment device to never attempt something like this again).
The release of new Nudge provided the occasion for our recent conversation, but our conversation went beyond the book. We corrected the record on organ donation, he revealed why he wished the original subtitle included the phrase “choice architecture,” his thoughts on replication in behavioral economics, and what advice he’d give organizations looking to apply behavioral science.
We hosted the conversation as a live, virtual event. Over 775 people attended, contributing thoughtful questions and comments. If you didn’t have the chance to tune in, or want to revisit the discussion, below I’ve detailed five parts of our conversation that stood out and kept me thinking after the event was over.
You can replay the event on YouTube or listen to it on SoundCloud. My recommendation: take a page out of Katy Milkman’s playbook and temptation bundle it with a walk or that chore you’ve been putting off for the last few weeks.
Setting the record straight on organ donation
“We have also rewritten the chapter on organ donation, because everyone thought we supported a policy we actually oppose,” Thaler and Sunstein write in the preface to the new edition. “In case this is as far as you get in the book, please take note: we do not support the policy called ‘presumed consent’ … We really do believe in freedom of choice.”
The organ donation example in the original was one of the most memorable, widely cited, and, apparently, misunderstood sections of the book. We kicked off our conversation with Thaler by giving him a chance to set the record straight on where he and Sunstein stand on the issue.
Thaler [8:22]: “When we started to write the book, we were aware of the famous chart by our friends, Eric Johnson and Dan Goldstein, showing that defaults had a huge effect on whether people chose, quote unquote, to be organ donors. The conclusion that many people reached from that is that defaults are the answer to this problem. Just make becoming a donor the default and your problems are over. And people concluded, without reading the chapter I assume, that that’s what we advocate.
“And, truthfully, when we started to write the book, we thought, okay, that’s going to be a natural chapter because we were aware of that graph. But once we decided to dig in and look at the research, we came to a different conclusion and advocated something that we call prompted choice, which means ask and keep asking and make it easy and make it as easy as possible to join.
“Now, why don’t we advocate presumed consent? There are two reasons. One is we don’t really think we should be presuming anyone’s consent about anything. A second is that we don’t think there’s much signal value to people failing to opt out, especially in circumstances where almost no one does.
“But the proof is in the pudding. And our reading of the literature is that presumed consent doesn’t work; that organs donated are on the order of magnitude of 25 percent higher in jurisdictions that have opt-in rather than opt-out.”
“We try very hard to straighten out the message here. And one of the themes in the Final Edition is, we have to be careful about the way we think about defaults. They’re not the answer to every question, and in particular, on this one.”
Climate change: “Nudge is part of the solution to almost any problem, but is not the solution to any problem.”
Climate change is one of the topics that received more attention in the New Nudge. I asked Thaler how nudges, an approach some have criticized for playing at the margins, might contribute to fighting climate change.
Thaler [12:57] : “Nudges help on climate change, but it’s too big of a problem. One of the things we say in various ways and repeat throughout the book is nudge is part of the solution to almost any problem, but is not the solution to any problem.
“I am with, I think, 100 percent of economists around the world in thinking that step one, if we want to deal with this crisis, must be to get the prices right. Economists are right about some things. If you make something free, people consume too much of it. We see that at all-you-can-eat restaurants or, even worse, open bars. Right now, emissions are free, and people are acting accordingly. So whether it’s a carbon tax or cap and trade, we’ve got to get the prices right (now, that’s easier to say than to do).
“Nudge is part of the solution to almost any problem, but is not the solution to any problem.”
“Then, nudges can and do work, and we have lots of examples. Going back to the famous O-Power study where you show people how much energy you’re using compared to your neighbors or especially your more efficient neighbors. That helps maybe two or three percent.
“Now, you can say, well, that’s a small effect size. But we quote President Obama in this context. In the White House, where Cass served in the Obama Administration, the president liked saying, “Better is good.” So every two or three percent matters. It’s wrong to sneer at things like that, that intervention costs essentially nothing, and if we can take advantage of free opportunities to reduce emissions by two or three percent, that’s going to add up into something meaningful.”
What counts as a nudge?
You don’t search the internet, you Google something. You don’t blow your nose in a hankie, you use a Kleenex. You don’t throw a plastic disc, you throw a Frisbee.
You don’t change behavior, you nudge behavior.
Nudge has become a catchall term for behavior change. What does Thaler think about how the term nudge is used?
Thaler [17:40]: “When we define nudge in the original book, and we haven’t changed it, we say strictly speaking, a nudge is something that affects our behavior without requiring anyone to do anything and without changing economic incentives. One way to think about it is nudges work on Humans, but wouldn’t work on Econs—our term for homo economicus, the fictional creature that exists only in economics journals and textbooks.
“Of course, monetary incentives are part of the choice architecture. And I should say, the idea for calling the book Nudge is an idea we owe to one of the many publishers who turned us down. He said … ‘It makes me think of the word “nudge,” which is kind of a fun word. And maybe that would be a good title.’ And I’m sure that it helped; certainly better than Libertarian Paternalism Is Not an Oxymoron. Tens of copies might have been sold with that title.
“I fought originally and this time for a subtitle using the phrase “choice architecture.” The original subtitle, back in 2008, was Nudge: The Gentle Power of Choice Architecture.
“The reason I worry about that is people think of the book and the enterprise as tweaks. It’s like the O-power thing, or like the famous tax study where you talk about the messaging to people who owe money. Yes, that’s in the repertoire. But the reason I’m passionate about the organ donation thing is that we need to have a bigger picture of the choice architecture. And the same with climate change.
“We need to have a bigger picture of the choice architecture … I don’t really mind if people use a more general version of nudge in their vocabulary, I don’t own the word … But let’s keep in mind that it’s really a book about choice architecture.”
“I don’t really mind if people use a more general version of nudge in their vocabulary, I don’t own the word. (There’s now a dog food called Nudges that Cass buys for his two Labradors, and for which we get no money, thanks to my lawyer coauthor who failed to take out trademarks and so forth. So we don’t control the word.)
“But let’s keep in mind that it’s really a book about choice architecture. And practitioners and people in the business world and governments need to be thinking from that perspective.”
Advice for organizations hoping to get started applying behavioral science?
I asked Thaler to imagine he was advising a firm looking to apply behavioral science. He focused on sludge. Here’s what he had to say about private sector sludge and how he might advise companies around building trust.
Thaler [34:35]: “There’s a lot of private sector sludge. People who follow me on Twitter know that I’m always ranting about the difficulty of unsubscribing. I had an op-ed in The Washington Post about this. I published it there, because they are the major news outlet that does not require you to call or sing a jingle in order to unsubscribe from their newspaper.
“In the class that I teach about managerial decision-making, the advice I give to companies is that you shouldn’t do anything that you wouldn’t want to appear on the front page of a newspaper. That’s not original to me, people have been saying that for a long time … There’s a reason all these publications are using this “Hotel California” subscription method that makes it easy to join and hard to leave, and that is it makes money.
“I think you can make money by being trustworthy, advertising: ‘It’s safe to subscribe, because you can unsubscribe with one click.’”
“I think you can make money by being trustworthy, advertising: ‘It’s safe to subscribe, because you can unsubscribe with one click.’ I wish more people would try it. I spent some time with a major Australian bank talking about this recently, and said that the only way to succeed at being a good bank is for people to trust you. And you have to earn that. I wish more companies in the private sector would take that as their mantra.”
Behavioral economics is not dead
In the audience Q&A, a viewer asked what Thaler thought of the recent fraudulent data debacle, a recent op-ed criticizing behavioral economics as “oversold,” and a blog post titled “Behavioral Economics Is Dead” that was making the rounds. Thaler mentioned that he’s in the process of revising an earlier book, The Winner’s Curse, which is based on columns he wrote in the 1980s for The Journal of Economic Perspectives. In the process of revisiting the book, he said that “what we’ve found is there’s nothing that fails to replicate.”
Thaler [39:11]: “Self-control problems have not gone away. Loss aversion is very real. Preference reversals exist. The ultimatum game, you play it anywhere in the world, if you offer 1 percent of the pie, you’re going to get turned down. I won’t go through all of them, but they all replicate and the effect sizes are all huge. That’s why I picked them to write about 30 years ago, and nothing has changed.
“Now there are questions in the level of psychology about what causes that behavior. That’s a question for psychologists. To an economist, I’m done. Buying and selling prices are different. That, I’m calling loss aversion.
“As for [the fraudulent] study, we tried to replicate this sign-at-the-top [strategy], at the BIT in London eight years ago. It didn’t replicate. I wanted to believe that result, but it didn’t seem to work. But notice, that’s essentially a priming effect. And priming effects are pretty subtle and small and don’t replicate. The fact that the experiments in that paper failed to replicate was not a shock to me.”
Watch or listen to the full conversation
In our conversation, we also covered why he’d like to see choice architecture units in addition to nudge units, the potential for the unethical application of behavioral science, the trickiness of notifying people when they’re being nudged, and what he’d do to help us get through the vaccination final mile. Watch the full conversation, or take a listen to the audio version.
Disclosure: Richard Thaler is a member of the Behavioral Scientist‘s Advisory Board.