Max Mednik

I recently finished listening to the audio version of Nudge by Richard Thaler and Cass Sunstein. It was an enjoyable book, though it did have a majority of its background sections in common with other psychology books I've recently read having to do with natural biases and irrational decision-making. What I did like about this book was how it applied some basic principles to various areas of life, including managing money, saving for retirement, reaching health goals, and societal issues likes social security and organ donation. I think some of the suggestions in the book have a lot of weight, and I hope we implement them in the future.

I also liked their philosophy of libertarian paternalism, as it gels with some of my own personal thoughts on how choices and systems should be designed: giving people the right to choose but helping to "nudge" them in the right direction.

Intro: The cafeteria

• Location of foods influence kids' choices
  
• "Choice architect" organizes choices for others
  
• Examples: people writing forms, doctors explaining treatments, salespeople
  
• No such thing as neutral design
  
• Their philosophy: libertarian paternalism
  
• People should be free to do what they like
  
• Liberty-preserving
  
• Paternalistic to steer people to improve their lives
  
• Nudge doesn't forbid options
  
• People do not decide rationally
  

Part 1: Humans and Econs

Ch. 1: Biases

• 2 tabletops optical illusion
  
• How we think: 2 systems
  
• Automatic and rational systems (Systems 1 and 2)
  
• Anchoring, availability, representativeness biases
  
• Optimism
  
• Overconfidence
  
• Loss aversion
  
• Status quo bias
  
• Framing effects
  

Ch. 2: Resisting temptation

• Influence of arousal on choices underestimated
  
• Mindless choices: eating, driving, stale popcorn study
  
• Large plates and packages nudge us to eat more
  
• Ways to counteract: Clocky, informal bets against what you want
  
• Mental accounting of different non-fungible money accounts (even though all fungible)
  

Ch. 3: Social influence

• Social influences: information and peer pressure
  
• Music popularity in different simulated worlds based on initial conditions of what most downloaded (not inherent quality of music)
  
• Obesity contagious; eat more when eating with more people
  

Ch. 4: When we need a nudge

• Golden rule: when we can help and minimally hurt
  
• Market competition protects irrational consumers
  

Ch. 5: Choice architecture

• Stimulus response compatibility: pull bars on push doors incompatible
  
• Defaults: padding the path of least resistance
  
• Expect error and be forgiving
  
• Example: Netflix collaborative filtering
  

Part 2: Money

Ch. 6: Save more tomorrow

• Negative savings rates in US
  
• Ways to solve this: automatic enrollment in 401k plans
  
• Save More Tomorrow Plans: commit now to saving a certain % in the future (eases shock by not doing it yet but does commit)

Ch. 7: Naive investing

• Attitude towards risk affected by frequency of checking investment performance
  
• Market timing poor by people
  
• Problem: naive 1/n asset allocation
  
• Problem: not enough rebalancing
  
• Problem: concentration in single employer company stock
  
• Solutions: defaults should be well-diversified, passive portfolios

Ch. 8: Credit markets

• Mortgages
  
• Student loans
  
• Credit cards
  
• Not enough transparency; too much documentation; overcomplication
• Insuficient fee disclosures, comparisons across service providers
  
• Solution: standardized recap statements of fees in human- and machine-readable format; 3rd party sites can allow apples-for-apples comparison shopping
  
• Solution: reduce the types of loans and number of options to only the ones that are appropriate for people

Ch. 9: Privatizing social security

• Inspired by Sweden (but theirs is too laissez-faire)
  
• Sweden: too many choices, allowed mutual fund advertising
  
• More choices provided means need to give more help
  
• Provide one default great choice but allow those who want to customize to be able to do so

Part 3: Health

Ch. 10: Prescription drugs

• Medicare: way too many and too confusing plans
  
• Even official website impossible to use and gives non-reproducible results for plan choice algorithm
  
• Plan D Medicare impossible to understand (disagreement even among experts)
  
• Problem: random assignment of dual eligibles
• Solution: Simplify system, switch dual eligibles to intelligent assignment
  

Ch. 11: Increase organ donations

• Presumed consent in Austria
  
• Mandated choice in Iowa
  
• 80% of people just accept the default

Ch. 12: Saving the planet

• Externalities in pollution
  
• Fix incentives and provide feedback
  
• Cap and trade rights systems good
  
• More information disclosures on polluters
  
• Continuous feedback on energy use; Watson device to share energy use publicly; orb showing energy use to public; t-shirt you wear that projects your energy use to your friends (use peer pressure)
  

Part 4: Freedom

Ch. 13: Improving education

• Give more choices
  
• Introduce competition
  
• Simple recap fact sheets to help parents choose better schools
  

Ch. 14: Should patients be forced to buy lottery tickets?

• Problem: having right to sue for malpractice increases cost of healthcare and people not legally allowed to waive
  
• Better to allow freedom to contract for informed patients
  

Ch. 15: Privatizing marriage

• Solution: Marriage removed from all laws
  
• Separate religious organizations choose own rules for what to allow
  
• Civil unions give legal benefits to anyone who wants
• Tax benefits
  
• Entitlements
  
• Inheritance benefits
  
• Ownership benefits
  
• Surrogate decision making
  
• Evidentiary privileges
  
• Remove requirement for state licenses for marriages; up to private institutions, not government
  

Part 5: Extensions

Ch. 16: Ideas

• More ideas from authors and community
• Give More Tomorrow Plan (like Save More Tomorrow): for charity, commit to give small amount later
  
• Charity Debit Card: to quickly get itemized statements of contributions for tax purposes
  
• Automatic tax return: prefilled to reduce costs for default cases
  
• Stickk.com: financial commitments for goal-setting
  
• Quit smoking without a patch
  
• Motorcycle helmets: if want to ride without one, sign up showing proof of insurance, status as organ donor, and having passed special test
  
• Gambling self-bans: add yourself to list of people banned from casinos
  
• Destiny Health Plan: earn vitality bucks from living healthy
  
• Dollar a Day: pay teen girls $1/day to not be pregnant
  
• Changing filters in AC: little red light that tells you when
  
• No Bite Nail Polish: bitter taste if you bite it
  
• Civility Check: checks for mean emails and warns you before sending
  

Ch. 17: Objections to nudges

• Slippery slope (actual policies are beneficial)
  
• Evil nudgers and bad nudges (they'll always be there)
  
• Subliminal messaging (this is not; must have transparency)
  
• Nudging best when choice complex
  
• Asymmetric paternalism: help those most in need without harming others too much (example: mandatory cooling off periods after big purchase)
  

Bonus chapter: 20 more nudges

• iPed: jewelry changing color based on energy use/carbon footprint
  
• Smart meters: energy tracking
  
• Energy use and neighborhood comparison
  
• Affordable home energy meter (Watson); glows color based on use
  
• Fight global warming through driver feedback report and dashboard. Ecopedal to stop speeding.
  
• Power aware cord: intensity and age of electric current changes color
  
• Carbon labels: label carbon footprint
  
• Make believe speedbumps: painted triangles
  
• Eliminate dividing lines: lowers driving speeds, show vehicle speed
  
• Calorie count posting
  
• Eliminate cafeteria trays: less waste of food and napkins
  
• Japanese cultural norms/nudge against obesity
  
• Prescription drug nudges: to deal with patient noncompliance, give pill box with matrix of days, software updating doctor when taking or missing dose
  
• Procrastinators clock: up to 15 minutes fast but randomly
  
• Put a stop to people who blabber on: say, "please interrupt me if I speak longer than x minutes"
  
• Transparent airline seat pockets: helps people avoid forgetting belongings, also deters leaving trash
  
• Parking meters instead of panhandlers: homeless meters to raise money for city
  
• Limos for drunk drivers: road crew giving rides
  
• Social influences in recycling
  
• Urinals around the world: fly stickers
  

Postscript 11/08

• Obama
  
• Financial crisis
  
• Bounded rationality: hard to compare mortgages and understand subprime, especially for investors in MBS
  
• Limited self-control: easy to refinance and hard to resist, great returns on mortgage securities 
  
• Social influences: social contagion, unrealistic expectations
  
• Nudges: show mortgage terms in machine-readable format for comparison shopping, reduce complexity and types of mortgages available