Nudge for me was a "1 year" long reading experience. And it took sometime to absorb it's facts. Therefore it was a tough read. So it was worth it.
The authors of this book are Richard H. Thaler and Carl R. Sunstein.
Richard H. Thaler is Ralph and Dorothy Keller distinguished service professor of behavioral science and economics and director of the center for decision research, graduate school of business, university of Chicago. He is also a research associate at the National Bureau of Economic Research.
Carl R. Sunstein is Karl N. Llewellyn distinguished service professor of jurisprudence, University of Chicago Law school and department of political science.
Definition of Nudge theory is as follows,
Nudge theory (or nudge) is a concept in behavioural science, political theory and economics which proposes positive reinforcement and indirect suggestions to try to achieve non-forced compliance to influence the motives, incentives and decision making of groups and individuals.
The book's contents can be structured as follows.
Part 01 - Humans and Econs
Part 02 - Money
Part 03 - Society
Part 04 - Extensions and objections
Part 05 - Postscript : The financial crisis of 2008
This is a book about how to influence people into decision making.
Nudge the book for me as an amateur Sri Lankan reader was tough endeavour due
to it's academic literature.
A nudge can be defined as below,
A nudge is any aspect of the choice architecture that alters people's behaviour in a predictable way without forbidding any options or significantly changing their economic incentives.
Choice architects can be defined as follows,
Choice architects can make major improvements to the lives of others by designing user-friendly environments.
This is a book about
libertarian paternalism.
It is a complete capitalistic concept.
This is a must read book for any academic researcher and also a great part reading experience which provides a very interesting writing style.
The writer's manage to expand on nudges and psychological aspects.
In dividing humans and econs the writers reflects on the thought process of each and every person on how they decide on decision making.
The more rational you are the higher tendency to the person to be a more "econ".
The writer's discusses the decision making basics of humans.
He says people use
"Rules of Thumb" [Based on experience] in their decision making.
There are basically 3 aspects to be discussed in these areas.
(01) Anchoring
(02) Availability
(03) Representatives
These aspects are considered as a very easy to make decisions and that's why people use these criterias in their day to day lives.
There are some theoretical aspects that the writer's discusses on which blindfolds the decision making properly.
They are,
(01) Optimism and overconfidence
(02) Perspective on gains and losses.
(03) Status quo biases
(04) Framing
The concept of libertarian paternalism is a behaviour by an organization or state that limits same person or group's liberty or autonomy for what is presumed to be that person's or group's own good. The freedom of choice is provided but all the best decisions only. The word "Libertarian" is a collection of political philosophies that uphold liberty. Maximize autonomy and freedom of choice.
The writer's reflect of people's temptation in to mindless choosing and he tries to implement self-control strategies and also mental accounting as tools of better choice selection for personal and individual development.
After personalised aspects of decision making the writer discusses using of nudging to improve social development. The writers analyses aspects like,
(01) Conformity and tax compliance
(02) Preserving petrified wood
(03) Socializing non drinking
The writer's also discusses deeply on how to plan the implementation of a relevant public policy or a marketing campaign using
choice architecture. Many of examples used by the writers are from
United States of America.
In the last chapters of the book writer's discusses on practical implementation of famous policy changes, marketing campaigns of United States and how each and every relevant decision making was successful or failed to achieve full potential.
Aspects like making people
save more money, investments in stocks (Capital Markets), Investments in bonds (debt markets), selecting credit cards, American social security and related investment selection, use of prescription drugs, making people donate organs, nudging people into proper environment conservation and even
marriage.
The postscript of the financial crisis of 2008 is very valuable. Since it reflects on how bad nudges impacted on the crash of economy and its suggestion on avoiding such errors are also valuable.
This book in its introductory stage discusses
all the relevant theoretical framework and background of choice architecture and nudging.
And then they practically discusses on how to apply these theories.
Though this book focuses on the American economy and social context the readers can use it to there social and economical context as well.
For me the best extraction is it's guidance to individuals to make good decisions.
Basically it's the more rational your decisions are better.
A highly recommended additional reading.
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