Sunday Book Review: Nudge by Richard Thaler

Nudge: Improving Decisions About Health, Wealth, and HappinessNudge: Improving Decisions About Health, Wealth, and Happiness by Richard H. Thaler

My rating: 4 of 5 stars

Thaler and Sunstein give an ample dose of psychology and behavioral economics to define the process of “choice architects”. Coining a new view (libertarian paternalism) on when and we shouldn’t nudge peoples behavior through influence.

When it comes to human behavior they classify human nature into two groups: homo economicus (the rational ideal) and everyone else (humans). We all tend to think of ourselves as the rational ideal, that which is laid out by economists. However, we rarely fall close to that tree.

Like Dan Arielly and other behavioral economists have show us, we tend to be Predictably Irrational. Whether it be logical fallacy or influence from others, we just aren’t the ideal.

Ultimately they lay out two systems of thinking. The “Reflective” and the “Automatic” systems. The Automatic system is that which is instinctive. Why do you duck when someone throws something at you? The Reflective system is deliberate and self-conscious. How did you decide what to wear this morning?

Because of these differences and conflicts between these systems, people are often subject to making mistakes that are the result of widely occurring biases, heuristics, and fallacies. Including anchoring, availability heuristic, representativeness heuristic, status quo bias and herd mentality.

The pair goes on to quite about how libertarian paternalism and choice architecture could be used to influence policy for better outcomes. At this point if you are a “political” person you will likely be highly turned off because they are not shy about the logic that should exist in policy. Many politicos are far more emotional than logical in ideology. You have been warned.

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