Improving decisions about health, wealth and happiness
Richard H. Thaler & Cass R. Sunstein
Friends sometimes call me an uninteresting person when I either opt for the same dishes every time I visit a restaurant or follow whatever my companion order. I would instead call myself a simple person who has quite a weird view about food consumption. Usually, I don’t associate food with joy, so picking a dish from a long colorful list is an exhausting task. I opt for the shortcut!
This action of mine is within my control, and I feel happy even though sometimes it is my friends who choose food for me. How about the idea that someone else, like the government or private companies, choose something for you? Most people are sick of the view that someone else is stealing away their freedom of choice. This is precisely what Nobel laureate Richard H. Thaler and behavioral economist Cass R. Sunstein suggest in theory called Nudge.
Two economists highlight a common false assumption that people make a choice in their best interest most of the time, or at least better than choices made by someone else. Initially, this might sound outright wrong, but when it comes to rare and complex decisions, a nudge is proved to be at a great value.
I want you to ignore my simple action of choosing food above because the book mentions a range of much complex activities such as selecting a pension plan, diversifying an investment portfolio mixed of stocks and bonds, and privatizing marriage. To make it understandable, now please recall the most recent time when you just follow all default options when contracting with a Internet provider or a defined-contribution pension manager. In the context of the nudge theory, default option is a nudge pushing us to the beneficial end without imposing intrusive options. We as people of freedom, of course, can opt out an default option; however, the default option, in fact, direct us to the beneficial end because... well...most of us don’t even bother to make an effort to understand what we are doing. Signing a contract is easy but thoroughly understanding it is crazily complex.
You will be surprised at how much our life is already architected by government or private institutions. Most of them are for a good cause, and I believe that by understanding the topic, we can also be aware of the choice architect and actively spot fraudulent wrongdoings.
May 23, 2020, 3:00:00 PM
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