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Why Nudge?: The Politics of Libertarian Paternalism by Cass R. Sunstein
Affordable Care Act / Obamacare, Andrei Shleifer, availability heuristic, Cass Sunstein, choice architecture, clean water, Daniel Kahneman / Amos Tversky, Edward Glaeser, endowment effect, energy security, framing effect, invisible hand, late fees, libertarian paternalism, loss aversion, nudge unit, randomized controlled trial, Richard Thaler
But the term has the virtue of spotlighting efforts, all over the world, to develop sensible, low-cost policies with close reference to how human beings actually think and behave. Choice Architecture Findings about human error raise a natural question, which is whether an improved understanding of thought and behavior opens greater space for paternalism. Perhaps that understanding supplements the standard economic accounts of “market failure” by providing justifications for government action even without harm to others or some kind of collective action problem.33 We do know that people are much affected by choice architecture, meaning the background against which choices are made.34 Such architecture is both pervasive and inevitable, and it greatly influences outcomes, whether or not we are even aware of it. In fact choice architecture can be decisive. It effectively makes countless decisions for us, and it influences numerous others, by pressing us in one direction or another.35 For example, do printers have single-sided or double-sided default settings?
As we shall see, this point raises serious problems for the Harm Principle, because influences on our choices are omnipresent, and we may not even see them. Choice architecture exists whenever we enter a cafeteria, a restaurant, a hospital, or a grocery store; when we select a mortgage, a car, a health care plan, or a credit card; when we turn on a tablet or a computer and visit our favorite websites (including government websites), which highlight some topics and downplay others; and when we apply for drivers’ licenses or building permits or social security benefits. The Daily Grill certainly offers a choice architecture, and its Simply 600 menu is a form of such architecture. No restaurant lacks choice architecture, and any menu contains one. (Menus matter, for food as well as for candidates for public office, among other things because people are more likely to choose what is first.)
As a result, students applied to many more places, and low-income students ended up attending more selective colleges, thus obtaining higher expected earnings over their lifetimes.38 For all of us, a key question is whether the choice architecture is helpful and simple, or harmful, complex, and exploitative. Any architecture will exercise power over the people who are subject to it. Since we cannot eliminate choice architecture, might violations of the Harm Principle turn out to be inevitable? Might Mill and his followers have missed the inevitable effects of that architecture? This question raises others. Should choice architects, including those in the public sphere, be authorized to move people’s decisions in their preferred directions? Would any such effort be unacceptably paternalistic? Who will monitor the choice architects, or create a choice architecture for them?39 Economists have an elaborate account of the “market failures” that can justify government intervention, including monopoly, an absence of information on the part of consumers, and the harmful effects on third parties, such as pollution, that can come from voluntary agreements (“externalities”).
Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard H. Thaler, Cass R. Sunstein
Al Roth, Albert Einstein, asset allocation, availability heuristic, call centre, Cass Sunstein, choice architecture, continuous integration, Daniel Kahneman / Amos Tversky, desegregation, diversification, diversified portfolio, endowment effect, equity premium, feminist movement, fixed income, framing effect, full employment, George Akerlof, index fund, invisible hand, late fees, libertarian paternalism, loss aversion, Mahatma Gandhi, Mason jar, medical malpractice, medical residency, mental accounting, meta analysis, meta-analysis, Milgram experiment, money market fund, pension reform, presumed consent, profit maximization, rent-seeking, Richard Thaler, Right to Buy, risk tolerance, Robert Shiller, Robert Shiller, Saturday Night Live, school choice, school vouchers, transaction costs, Vanguard fund, Zipcar
In domains as varied as savings, organ donations, marriage, and health care, we will offer speciﬁc suggestions in keeping with our general approach. And by insisting that choices remain unrestricted, we think that the risks of inept or even corrupt designs are reduced. Freedom to choose is the best safeguard against bad choice architecture. Choice Architecture in Action Choice architects can make major improvements to the lives of others by designing user-friendly environments. Many of the most successful companies have helped people, or succeeded in the marketplace, for exactly that reason. Sometimes the choice architecture is highly visible, and consumers and employers are much pleased by it. (The iPod and the iPhone are good examples because not only are they elegantly styled, but it is also easy for the user to get the devices to do what they want.) Sometimes the architecture is taken for granted and could beneﬁt from some careful attention.
They do less well in contexts in which they are inexperienced and poorly informed, and in which feedback is slow or infrequent—say, in choosing between fruit and ice cream (where the long-term effects are 9 10 INTRODUCTION slow and feedback is poor) or in choosing among medical treatments or investment options. If you are given ﬁfty prescription drug plans, with multiple and varying features, you might beneﬁt from a little help. So long as people are not choosing perfectly, some changes in the choice architecture could make their lives go better (as judged by their own preferences, not those of some bureaucrat). As we will try to show, it is not only possible to design choice architecture to make people better off; in many cases it is easy to do so. The ﬁrst misconception is that it is possible to avoid inﬂuencing people’s choices. In many situations, some organization or agent must make a choice that will affect the behavior of some other people. There is, in those situations, no way of avoiding nudging in some direction, and whether intended or not, these nudges will affect what people choose.
But if some of the consumers are Humans who sometimes make bad choices (as judged by themselves, of course), then all of us may have an interest in which set of ﬁrms wins the battle. Government can, of course, outlaw some kinds of activities, but as libertarian paternalists we prefer to nudge—and we are keenly aware that governments are populated by Humans. What can be done to help? In the next chapter we describe our primary tool: choice architecture. 5 CHOICE ARCHITECTURE Early in Thaler’s career, he was teaching a class on managerial decision making to business school students. Students would sometimes leave class early to go for job interviews (or a golf game) and would try to sneak out of the room as surreptitiously as possible. Unfortunately for them, the only way out of the room was through a large double door in the front, in full view of the entire class (though not directly in Thaler’s line of sight).
The World Beyond Your Head: On Becoming an Individual in an Age of Distraction by Matthew B. Crawford
airport security, Cass Sunstein, choice architecture, collateralized debt obligation, creative destruction, David Brooks, delayed gratification, dematerialisation, deskilling, digital Maoism, Google Glasses, hive mind, index card, informal economy, Jaron Lanier, large denomination, new economy, new new economy, Norman Mailer, online collectivism, Plutocrats, plutocrats, Richard Thaler, Rodney Brooks, self-driving car, Silicon Valley, Silicon Valley ideology, the built environment, the scientific method, The Wisdom of Crowds, theory of mind, Walter Mischel, winner-take-all economy
When the choosing will is hermetically sealed off from the fuzzy, hard-to-master contingencies of the empirical world, it becomes more “free” in a sense: free for the kind of neurotic dissociation from reality that opens the door wide for others to leap in on our behalf, and present options that are available to us without the world-disclosing effort of skillful engagement. For the Mouseke-doer, choosing (from a menu of ready-made solutions) replaces doing, and it follows that such a person should be more pliable to the choice architectures presented to us in mass culture. The absence of the real from Mickey Mouse Clubhouse—indeed, the dissociative or abstract quality of children’s television in general these days—makes it an ideal vehicle for psychological adjustment; for constructing and managing the kind of selves that society requires, without meddling interference from the nature of things. The particular adjustments to be carried out will have to be determined by a Disney script supervisor, or some other functionary of the modern self.
This gesture, emblematic of contemporary life, might be seen as a fulfillment of the thinned-out notion of human agency we have signed on to when we conceive action as the autonomous movements of an isolated person who is essentially disengaged from the world. Our current attentional environment is novel, but as we have already begun to investigate with our discussion of Kant, it was prepared by a long intellectual history. To repeat a formulation I used in the previous chapter, if choosing replaces doing for the mouse-clicking Mouseke-doer, it figures that such a disengaged self should be especially pliable to the “choice architectures” that get installed in public spaces. As we shall see, in the darker precincts of capitalism things are being designed to foster disengagement, to the point of inducing a kind of autism. 5 AUTISM AS A DESIGN PRINCIPLE: GAMBLING When my oldest daughter was a toddler, we had a Leap Frog Learning Table in the house. Each side of the square table presents some sort of electromechanical enticement.
I argued that all of this tends to sculpt a certain kind of contemporary self, a fragile one whose freedom and dignity depend on its being insulated from contingency, and who tends to view technology as magic for accomplishing this. For such a self, choosing from a menu of options replaces the kind of adult agency that grapples with things in an unfiltered way. Finally, I argued that such a choosy self is especially pliable to the “choice architectures” that get installed on our behalf by various functionaries of psychological adjustment. These features of our world are hard to criticize because, though they may be appalling once described in the way that I have, they are intimately connected to our defining virtues as modern Western people. I have already suggested that much of what I have described can be understood as a cultural working out of Kant’s ideal of autonomy.
The Googlization of Everything: by Siva Vaidhyanathan
1960s counterculture, activist fund / activist shareholder / activist investor, AltaVista, barriers to entry, Berlin Wall, borderless world, Burning Man, Cass Sunstein, choice architecture, cloud computing, computer age, corporate social responsibility, correlation does not imply causation, creative destruction, data acquisition, death of newspapers, don't be evil, Firefox, Francis Fukuyama: the end of history, full text search, global village, Google Earth, Howard Rheingold, informal economy, information retrieval, John Markoff, Joseph Schumpeter, Kevin Kelly, knowledge worker, libertarian paternalism, market fundamentalism, Marshall McLuhan, means of production, Mikhail Gorbachev, moral panic, Naomi Klein, Network effects, new economy, Nicholas Carr, PageRank, pirate software, Ray Kurzweil, Richard Thaler, Ronald Reagan, side project, Silicon Valley, Silicon Valley ideology, single-payer health, Skype, social web, Steven Levy, Stewart Brand, technoutopianism, The Nature of the Firm, The Structural Transformation of the Public Sphere, Thorstein Veblen, urban decay, web application, zero-sum game
The default setting of automatic enrollment, Thaler and Sunstein explain, helped employees overcome the “inertia” caused by business, distraction, and forgetfulness.9 That choice architecture could have such an important effect on so many human behaviors without overt coercion or even elaborate incentives convinced Thaler and Sunstein that taking advantage of it can accomplish many important public-policy goals without signiﬁcant cost to either the state or private ﬁrms. They call this approach “libertarian paternalism.” If a system is designed to privilege a particular choice, they observe, people will tend to choose that option more than the alternatives, even though they have an entirely free choice. “There is no such thing as a ‘neutral’ design.”10 It’s clear that Google understands the power of choice architecture. It’s in the company’s interest to set all user-preference defaults to collect the THE GOOGL I ZAT I ON OF US 89 greatest quantity of usable data in the most contexts.
There is no formula for assessing it: I can’t give Google three of my privacy points in exchange 88 TH E G OOGL IZATION OF US for 10 percent better service. More seriously, Mayer and Google fail to acknowledge the power of default settings in a regime ostensibly based on choice. T H E IRR EL EVANC E O F C H O I C E In their 2007 book Nudge: Improving Decisions about Health, Wealth, and Happiness, the economist Richard Thaler and law professor Cass Sunstein describe a concept they call “choice architecture.” Plainly put, the structure and order of the choices offered to us profoundly inﬂuence the decisions we make. So, for instance, the arrangement of foods in a school cafeteria can inﬂuence children to eat better. The positions of restrooms and break rooms can inﬂuence the creativity and communality of ofﬁce staff. And, in the best-known example of how defaults can inﬂuence an ostensibly free choice, studies have demonstrated that when employer-based retirement plans in the United States required employees to opt in to them, more than 40 percent of employees either failed to enroll or contributed too little to get matching contributions from their employers.
But meaningful freedom implies real control over the conditions of one’s life. Merely setting up a menu with switches does not serve the interests of any but the most adept, engaged, and well-informed. Setting the defaults to maximize the beneﬁts for the ﬁrm and hiding the switches beneath a series of pages are irresponsible, but we should not expect any ﬁrm to behave differently. If we want a different choice architecture in complex ecosystems such as the Web, we are going to have to rely on ﬁrms’ acceding collectively to pressure from consumer groups or ask the state to regulate such defaults. Google ofﬁcials also don’t acknowledge that completely opting out of Google’s data-collection practices signiﬁcantly degrades the user’s experience. For those few Google users who click through the three pages it takes to ﬁnd and adjust their privacy options, the cost of opting out becomes plain.
Mindware: Tools for Smart Thinking by Richard E. Nisbett
affirmative action, Albert Einstein, availability heuristic, big-box store, Cass Sunstein, choice architecture, cognitive dissonance, correlation coefficient, correlation does not imply causation, cosmological constant, Daniel Kahneman / Amos Tversky, dark matter, endowment effect, experimental subject, feminist movement, fixed income, fundamental attribution error, glass ceiling, Henri Poincaré, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, job satisfaction, lake wobegon effect, libertarian paternalism, loss aversion, low skilled workers, Menlo Park, meta analysis, meta-analysis, quantitative easing, Richard Thaler, Ronald Reagan, selection bias, Socratic dialogue, Steve Jobs, Steven Levy, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, William of Occam, Zipcar
Scores of thousands of people have died who would have lived if the United States had an opt-out policy. Choice architecture plays a vital role in determining what decisions people make. Some ways of structuring decisions result in better outcomes for individuals and for society than other ways of structuring decisions. No one is hurt by opt-out procedures for things like organ donation; no coercion is involved because people who wish not to have their organs harvested are free to decline. The deliberate design of decision frameworks that function for individual and collective good has been called “libertarian paternalism” by Thaler and Sunstein.8 The difference between choice architectures that foster the right choices and those that don’t can be subtle—at least to people who are unfamiliar with the power of loss aversion and consequent status quo bias.
One would think that virtually everyone would take advantage of the free money offered by employers who provide defined contribution plans. In fact, however, about 30 percent of employees fail to sign up for such plans.9 A study in Britain of twenty-five corporations that offered defined contribution plans—and paid 100 percent of the cost—found that barely half of employees signed up for the plan!10 This is like burning up a portion of your salary. A sensible choice architecture for savings plans would not require people to opt in, which after all takes little more effort than checking a box, but would have an opt-out default, which requires even less energy than that. You are enrolled in the plan unless you ask not to be. In one plan, the opt-in approach resulted in scarcely more than 20 percent enrollment three months after starting the job and only 65 percent after three years on the job.
Finally, some powerful pragmatic reasoning schemas don’t constitute abstract blueprints for reasoning but are merely empirical principles that facilitate correct solutions to a broad range of everyday problems. These include the fundamental attribution error, the generalization that actors and observers tend to explain behavior differently, loss aversion, the status quo bias, the principle that some choice architectures are generally superior to others in the quality of choices they encourage, and the principle that incentives aren’t necessarily the best way to get people to change their behavior—among dozens of others in this book. Abstract pragmatic schemas are tremendously useful, but purely logical schemas are of limited value. I believe this is the case because there’s a very high civilization, namely Confucian Chinese, that never developed purely logical formalisms.
banking crisis, bioinformatics, Cass Sunstein, choice architecture, cognitive bias, delayed gratification, game design, impulse control, lifelogging, loss aversion, meta analysis, meta-analysis, phenotype, Richard Thaler, Wall-E, Walter Mischel
Rather than hope that we as a nation develop more willpower in order to meet our biggest challenges, our best bet might be to take self-control out of the equation whenever possible—or at least reduce the self-control demands of doing the right thing. Behavioral economist Richard Thaler and legal scholar Cass Sunstein have argued persuasively for “choice architecture,” systems that make it easier for people to make good decisions consistent with their values and goals. For example, asking people to become organ donors when they renew a driver’s license or register to vote. Or having health insurance companies automatically schedule annual check-ups for their members. These are things most people mean to do, but put off because they are distracted by so many other more pressing demands. Retailers already use choice architecture to influence what you buy, although usually not for any noble purpose but to make a profit. If there were sufficient incentive, stores might more prominently feature healthy or environmentally friendly products.
If there were sufficient incentive, stores might more prominently feature healthy or environmentally friendly products. Instead of lining the checkout area with indulgent impulse purchases like candy and gossip magazines, stores could use that real estate to make it easier for people to pick up dental floss, condoms, or fresh fruit. This kind of simple product placement has been shown to dramatically increase healthy purchases. Choice architecture designed to manipulate people’s decisions is a controversial proposition. Some see it as restricting individual freedom or ignoring personal responsibility. And yet, people who are free to choose anything most often choose against their long-term interests. Research on the limits of self-control suggests that this is not because we are innately irrational, or because we are making deliberate decisions to enjoy today and screw tomorrow.
Presented at the 2008 World Meeting of the International Association for Research in Economic Psychology and the Society for Advancement of Behavioral Economics, Rome. Page 77—For a dramatic telling of the Easter Island tragedy, see Diamond, J. Collapse: How Societies Choose to Fail or Succeed. New York: Viking, 2004. For an economic model, see Bologna, M., and J. C. Flores. “A Simple Mathematical Model of Society Collapse Applied to Easter Island.” EPL (Europhysics Letters) 81 (2008): 480–86. Page 78—“Choice architecture”: Thaler, R. H., and C. R. Sunstein. Nudge: Improving Decisions About Health, Wealth, and Happiness. New York: Knopf, 2008. Page 79—Placement increases purchases: Just, D. R., and B. Wansink. “Smarter Lunchrooms: Using Behavioral Economics to Improve Meal Selection.” Choices 24 (2009). Chapter 4. License to Sin: Why Being Good Gives Us Permission to Be Bad Pages 82–83—Sexist survey and moral licensing: Monin, B., and D.
Albert Einstein, asset allocation, assortative mating, Atul Gawande, Bernie Madoff, business process, Cass Sunstein, choice architecture, clean water, creative destruction, Daniel Kahneman / Amos Tversky, David Brooks, delayed gratification, deliberate practice, disintermediation, Donald Trump, Douglas Hofstadter, Emanuel Derman, en.wikipedia.org, fear of failure, financial deregulation, financial independence, Flynn Effect, George Akerlof, Henri Poincaré, hiring and firing, impulse control, invisible hand, Joseph Schumpeter, labor-force participation, loss aversion, medical residency, meta analysis, meta-analysis, Monroe Doctrine, Paul Samuelson, Richard Thaler, risk tolerance, Robert Shiller, Robert Shiller, school vouchers, six sigma, Steve Jobs, Steven Pinker, the scientific method, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, Walter Mischel, young professional
If she had to adopt some of their mind-set in order to get them to listen to her, so be it. Erica decided she would build her consulting business not on cultural segmentation, which the market wasn’t ready for, but on behavioral economics, which was hot and in demand. Heuristics Erica read the major behavioral economists. Behind every choice, they said, there is a choice architecture, an unconscious set of structures that helps frame the decision. This choice architecture often comes in the forms of heuristics. The mind stores certain “if … then …” rules of thumb, which get activated by context and can be trotted out and applied in appropriate or near-appropriate circumstances. First, for example, there is priming. One perception cues a string of downstream thoughts that alters subsequent behavior. If you ask test subjects to read a series of words that vaguely relate to being elderly (“bingo,” “Florida,” “ancient”), when they leave the room they will walk more slowly than when they came in.
Title. HQ801.B76 2011 305.5′130973—dc22 2010045785 www.atrandom.com v3.1 Contents Cover Other Books by This Author Title Page Copyright INTRODUCTION CHAPTER 1 DECISION MAKING CHAPTER 2 THE MAP MELD CHAPTER 3 MINDSIGHT CHAPTER 4 MAPMAKING CHAPTER 5 ATTACHMENT CHAPTER 6 LEARNING CHAPTER 7 NORMS CHAPTER 8 SELF-CONTROL CHAPTER 9 CULTURE CHAPTER 10 INTELLIGENCE CHAPTER 11 CHOICE ARCHITECTURE CHAPTER 12 FREEDOM AND COMMITMENT CHAPTER 13 LIMERENCE CHAPTER 14 THE GRAND NARRATIVE CHAPTER 15 MÉTIS CHAPTER 16 THE INSURGENCY CHAPTER 17 GETTING OLDER CHAPTER 18 MORALITY CHAPTER 19 THE LEADER CHAPTER 20 THE SOFT SIDE CHAPTER 21 THE OTHER EDUCATION CHAPTER 22 MEANING ACKNOWLEDGMENTS NOTES About the Author INTRODUCTION THIS IS THE HAPPIEST STORY YOU’VE EVER READ. IT’S ABOUT two people who led wonderfully fulfilling lives.
She would sit down and remind herself that she needed to find one narrow niche, but she couldn’t help herself—the flood of scattershot ideas just kept coming. She felt liberated not having to follow the guardrails of some other person’s thinking. She was going to create a consulting firm that would be unlike any other. It would be humanist in the deepest sense. It would treat people not as data points, but as the fully formed idiosyncratic creatures they are. She was utterly convinced she would succeed. CHAPTER 11 CHOICE ARCHITECTURE SOMETIME BACK IN THE PHARAOHS’ DAY, A SHOPKEEPER DISCOVERED he could manipulate the unconscious thoughts of his customers simply by manipulating the environment in his store. Merchandisers have been following his lead ever since. For example, shoppers in grocery stores usually confront the fruit-and-vegetable section first. Grocers know that shoppers who buy the healthy stuff first will feel so uplifted they will buy more junk food later in their trip.
Hooked: How to Build Habit-Forming Products by Nir Eyal
Airbnb, AltaVista, Cass Sunstein, choice architecture, cognitive bias, cognitive dissonance, en.wikipedia.org, framing effect, game design, Google Glasses, Inbox Zero, invention of the telephone, iterative process, Jeff Bezos, Lean Startup, Mahatma Gandhi, Mark Zuckerberg, meta analysis, meta-analysis, Oculus Rift, Paul Buchheit, Paul Graham, Peter Thiel, QWERTY keyboard, Silicon Valley, Silicon Valley startup, Snapchat, TaskRabbit, telemarketer, the new new thing, Toyota Production System, Y Combinator
But why are zombies suddenly so fascinating? Perhaps technology’s unstoppable progress — ever more pervasive and persuasive — has grabbed us in a fearful malaise at the thought of being involuntarily controlled. Although the fear is palpable, we are like the heroes in every zombie film — threatened but ultimately more powerful. I have come to learn that habit-forming products can do far more good than harm. “Choice architecture,” as described by famed scholars Thaler, Sunstein, and Balz, offers techniques to influence people’s decisions and affect behavioral outcomes. Ultimately though, the practice should be, “used to help nudge people to make better choices (as judged by themselves).” [xv] Accordingly, this book teaches innovators how to build products to help people do the things they already want to do but, for lack of a solution, don’t do.
Socioaffective Neuroscience & Psychology 3, no. 0 (September 26, 2013). doi:10.3402/snp.v3i0.21592. [xiii] “The Acceleration of Addictiveness,” Paul Graham. Accessed November 12, 2013. http://www.paulgraham.com/addiction.html. [xiv] “Night of the Living Dead.” Wikipedia, the Free Encyclopedia, December 18, 2013. http://en.wikipedia.org/w/index.php?title=Night_of_the_Living_Dead&oldid=586570022. [xv] Thaler, Richard H., Cass R. Sunstein, and John P. Balz. Choice Architecture. SSRN Scholarly Paper. Rochester, NY: Social Science Research Network, April 2, 2010. http://papers.ssrn.com/abstract=1583509. [xvi] For a memorable acronym of the Hook Model, think “ATARI”, as in the 1980s video gaming console. “A hook has four parts: Trigger, Action, Reward, and Investment. Chapter 1: The Habit Zone [xvii] Wood, Wendy, Jeffrey M Quinn, and Deborah A Kashy. “Habits in Everyday Life: Thought, Emotion, and Action.”
[cxii] “Pinterest Does Another Massive Funding — $225 Million at $3.8 Billion Valuation (Confirmed).” AllThingsD. Accessed November 13, 2013. http://allthingsd.com/20131023/pinterest-does-another-massive-funding-225-million-at-3-8-billion-valuation/. Chapter 6: What Are You Going to Do with This? [cxiii] For further thoughts on the morality of designing behavior, see: Thaler, Richard H., Cass R. Sunstein, and John P. Balz. Choice Architecture. SSRN Scholarly Paper. Rochester, NY: Social Science Research Network, April 2, 2010. http://papers.ssrn.com/abstract=1583509. [cxiv] White, Charlie. “Survey: Cellphones Vs. Sex – Which Wins? [INFOGRAPHIC].” Mashable, August 3, 2011. http://mashable.com/2011/08/03/telenav-cellphone-infographic/. [cxv] Bogost, Ian. “The Cigarette of This Century.” The Atlantic, June 6, 2012. http://www.theatlantic.com/technology/archive/2012/06/the-cigarette-of-this-century/258092/.
Misbehaving: The Making of Behavioral Economics by Richard H. Thaler
3Com Palm IPO, Albert Einstein, Alvin Roth, Amazon Mechanical Turk, Andrei Shleifer, Apple's 1984 Super Bowl advert, Atul Gawande, Berlin Wall, Bernie Madoff, Black-Scholes formula, capital asset pricing model, Cass Sunstein, Checklist Manifesto, choice architecture, clean water, cognitive dissonance, conceptual framework, constrained optimization, Daniel Kahneman / Amos Tversky, delayed gratification, diversification, diversified portfolio, Edward Glaeser, endowment effect, equity premium, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, George Akerlof, hindsight bias, Home mortgage interest deduction, impulse control, index fund, information asymmetry, invisible hand, Jean Tirole, John Nash: game theory, John von Neumann, Kenneth Arrow, late fees, law of one price, libertarian paternalism, Long Term Capital Management, loss aversion, market clearing, Mason jar, mental accounting, meta analysis, meta-analysis, money market fund, More Guns, Less Crime, mortgage debt, Myron Scholes, Nash equilibrium, Nate Silver, New Journalism, nudge unit, Paul Samuelson, payday loans, Ponzi scheme, presumed consent, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, random walk, randomized controlled trial, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Silicon Valley, South Sea Bubble, statistical model, Steve Jobs, technology bubble, The Chicago School, The Myth of the Rational Market, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, transaction costs, ultimatum game, Vilfredo Pareto, Walter Mischel, zero-sum game
After rereading Norman’s book, I realized we could apply many of his principles to the problems we were studying. I had recently bought my first iPhone, a device so easy to use that it didn’t need an instruction manual. What if we could design policies that were equally easy to create “user-centered” choice environments? At some point we adopted the term “choice architecture” to describe what we were trying to do. In curious ways, simply having that phrase to organize our thoughts helped us create a checklist of principles for good choice architecture, with many of the ideas borrowed from the human design literature. Designing good public policies has a lot in common with designing any consumer product. Now that we had our new set of tools, one big choice we had to make was which policy issues to try to address with them. Some topics that we had already written about were easy, but others required us to dig into the literature and see whether we could come up with anything useful or interesting.
These economists simply do solid empirical work and let the chips fall where they may. I already mentioned two such papers earlier in the book: Justine Hastings and Jesse Shapiro’s paper on the mental accounting of gasoline, and the paper by Raj Chetty and his team analyzing Danish data on pension saving. Recall that the Chetty team finds that the economic incentive for saving via tax breaks has virtually no effect on behavior. Instead, 99% of the work is done by the choice architecture of the plans, such as the default saving rate—in other words, SIFs. This paper is just one of many in which Chetty and his team of collaborators have found behavioral insights can improve our understanding of public policy. When all economists are equally open-minded and are willing to incorporate important variables in their work, even if the rational model says those variables are supposedly irrelevant, the field of behavioral economics will disappear.
See also World Bank (2015). 353 repeatedly and rigorously tested: See Post et al. (2008) and van den Assem, van Dolder, and Thaler (2012) on game shows, Pope and Schweitzer (2011) on golf, Barberis and Thaler (2003) and Kliger, van den Assem, and Zwinkels (2014) for reviews of behavioral finance, and Camerer (2000) and DellaVigna (2009) for surveys of empirical applications of behavioral economics more generally. 353 intriguing finding by Roland Fryer: Fryer (2010). 354 The team of Fryer, John List, Steven Levitt, and Sally Sadoff: Fryer et al. (2013). 354 a recent randomized control trial: Kraft and Rogers (2014). 355 Field experiments are perhaps the most powerful tool we have: Gneezy and List (2013). 356 “If you don’t write it down, it doesn’t exist”: Ginzel (2014). 356 his recent book The Checklist Manifesto: Gawande (2010), pp. 176–77. 356 Into Thin Air: Krakauer (1997). 357 99% of the work is done by the choice architecture: Another example is Alexandre Mas who (sometimes collaborating with Alan Krueger) has shown that after labor disputes that go badly for workers, the quality of work declines. See Mas (2004) on the value of construction equipment after a dispute, Mas and Krueger (2004) on defects in tires after a strike, and Mas (2006) on police work after arbitration. One other example of mainstream economists doing research with a behavioral economics bent would be Edward Glaeser (2013) on speculation in real estate. 358 improve our understanding of public policy: See Chetty’s (2015) Ely lecture delivered at the American Economic Association Meeting that I organized in January 2015.
Inside the Nudge Unit: How Small Changes Can Make a Big Difference by David Halpern
Affordable Care Act / Obamacare, availability heuristic, carbon footprint, Cass Sunstein, centre right, choice architecture, cognitive dissonance, collaborative consumption, correlation does not imply causation, Daniel Kahneman / Amos Tversky, endowment effect, happiness index / gross national happiness, hindsight bias, illegal immigration, job satisfaction, Kickstarter, libertarian paternalism, light touch regulation, market design, meta analysis, meta-analysis, Milgram experiment, nudge unit, peer-to-peer lending, pension reform, presumed consent, QR code, quantitative easing, randomized controlled trial, Richard Feynman, Richard Thaler, Right to Buy, Ronald Reagan, Rory Sutherland, Simon Kuznets, skunkworks, the built environment, theory of mind, traffic fines, World Values Survey
But Thaler and Sunstein gave the ideas a major extra push in at least three ways. First, as non-psychologists they helped to break the ideas out of psychology, and applied them in an accessible form to problems that faced economists and lawmakers. Second, they blended into these existing literatures new ideas from ‘behavioural economics’, including a more formal recognition of the widespread power of defaults and ‘choice architecture’ – or the way in which choices are presented to people.1 Third, they engaged directly in policy, not least through an old Chicago friend and colleague, Barak Obama. Obama and Sunstein: ‘nudge’ comes to Washington In a move that attracted widespread attention, the new President Obama appointed the co-author of Nudge, Cass Sunstein, to be his ‘regulatory tsar’ in his government in 2008.
For example, changing the default on a pension scheme from one that is an opt-in scheme for employees to an opt-out does not eliminate the choice. Employees are still free to opt out if they wish to do so. It is transparent what the choice is, and employees are informed by law about it. In contrast, in some western countries you are obliged to save – though you may have some choice about your pension provider. There’s no neutral choice Nudgers often talk about ‘choice architecture’ – the way that options are presented. The everyday example that is often discussed is the order in which food is presented in a cafeteria. Which do you see first: the salad or the chips? It turns out that the order matters. When you walk in hungry, whichever option you see first is very likely to end up on your tray. As Brian Wansink has shown, conference-goers fill up 68 per cent of their plates with the first three items they come across, regardless of whether the items are healthy fruit or a rich cooked breakfast.2 In fact, we now know that almost every aspect of the cafeteria affects what and how much you eat, from the menu, to the plate size, to the size of the serving implements, to whether or not there are trays.
Even with personalised defaults, there remain tricky questions about who sets these defaults, and we’ll return to this question presently. Effective communication versus propaganda A lot of what BIT does, along with other similar units emerging across the world, concerns communication, at least in a broader sense. A lot of the issues we are asked to work on are about informing, encouraging and persuading. In this sense, the choice architecture is left unchanged, but the focus is on making one action feel more, or less, attractive than another. Indeed, occasionally overseas visitors look at what we do and say, ‘Isn’t this just comms?’ Some of it is clearly about ‘comms’, though we’d like to think that we’re a bit more scientific and rigorous about it than your average ad agency. To recall the phrase from that master of persuasion Robert Cialdini, from the session he did in the State Dining Room at No. 10 in 2006: ‘It’s about effective communication.’
The Undoing Project: A Friendship That Changed Our Minds by Michael Lewis
Albert Einstein, availability heuristic, Cass Sunstein, choice architecture, complexity theory, Daniel Kahneman / Amos Tversky, Donald Trump, Douglas Hofstadter, endowment effect, feminist movement, framing effect, hindsight bias, John von Neumann, Kenneth Arrow, loss aversion, medical residency, Menlo Park, Murray Gell-Mann, Nate Silver, New Journalism, Paul Samuelson, Richard Thaler, Saturday Night Live, statistical model, the new new thing, Thomas Bayes, Walter Mischel, Yom Kippur War
Sunstein was particularly interested in what was now being called “choice architecture.” The decisions people made were driven by the way they were presented. People didn’t simply know what they wanted; they took cues from their environment. They constructed their preferences. And they followed paths of least resistance, even when they paid a heavy price for it. Millions of U.S. corporate and government employees had woken up one day during the 2000s and found they no longer needed to enroll themselves in retirement plans but instead were automatically enrolled. They probably never noticed the change. But that alone caused the participation in retirement plans to rise by roughly 30 percentage points. Such was the power of choice architecture. One tweak to the society’s choice architecture made by Sunstein, once he’d gone to work in the U.S. government, was to smooth the path between homeless children and free school meals.
The Unbanking of America: How the New Middle Class Survives by Lisa Servon
Affordable Care Act / Obamacare, Airbnb, basic income, Build a better mousetrap, Cass Sunstein, choice architecture, creative destruction, Credit Default Swap, employer provided health coverage, financial exclusion, financial independence, financial innovation, gender pay gap, George Akerlof, gig economy, income inequality, informal economy, Jane Jacobs, Joseph Schumpeter, late fees, Lyft, M-Pesa, medical bankruptcy, microcredit, Occupy movement, payday loans, peer-to-peer lending, precariat, Ralph Nader, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, sharing economy, too big to fail, transaction costs, unbanked and underbanked, underbanked, universal basic income, Unsafe at Any Speed, We are the 99%, white flight, working poor, Zipcar
The situation she found herself in—choosing between taking out payday loans or losing her job—overrode her knowledge; as she told me, “I know it’s bad.” The upside of this finding is that the effect of context on decision making is predictable. We can find ways to protect people at vulnerable moments. The way choices are presented—what the economists Richard Thaler and Cass Sunstein call “choice architecture”—is also critical to making a good decision. Employee enrollment in retirement plans provides a good illustration. When a worker is lucky enough to get a job that includes a retirement plan, she must usually make several decisions—whether to participate, how much to contribute, how to allocate contributions across different investments. Most plans require workers to “opt in”—in other words, you have to choose to participate.
., “2013 National Survey of Unbanked and Underbanked Households” (Washington, DC: FDIC, October 2014). https://www.fdic.gov/householdsurvey/2013report.pdf 57 percent of Americans: For more on this idea and why it is so critical, particularly in the wake of welfare reform, see Kathryn J. Edin and H. Luke Shaefer, $2.00 a Day: Living on Almost Nothing in America (New York: Houghton Mifflin Harcourt, 2015). 167 a strong safety net: Michael S. Barr, Sendhil Mullainathan, and Eldar Shafir, “Behaviorally Informed Regulation,” in No Slack: The Financial Lives of Low-Income Americans, edited by Michael S. Barr (Washington, DC: Brookings Institution Press, 2012). 169 “choice architecture”: Richard H. Thaler and Cass R. Sunstein, Nudge: Improving Decisions About Health, Wealth, and Happiness (New Haven, CT: Yale University Press, 2008). simply changing the default option: John Beshears et al., “The Importance of Default Options for Retirement Savings Outcomes: Evidence from the United States,” NBER Working Paper No. 12009 (Cambridge, MA: National Bureau of Economic Research, February 2006).
Andrei Shleifer, asset-backed security, bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, capital controls, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, choice architecture, cloud computing, collective bargaining, conceptual framework, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, debt deflation, decarbonisation, Deng Xiaoping, discovery of DNA, discovery of the americas, discrete time, diversification, double helix, Edward Glaeser, financial deregulation, financial innovation, financial intermediation, first-past-the-post, floating exchange rates, Francis Fukuyama: the end of history, Frank Levy and Richard Murnane: The New Division of Labor, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, Hyman Minsky, I think there is a world market for maybe five computers, income inequality, inflation targeting, interest rate swap, invisible hand, Isaac Newton, James Dyson, James Watt: steam engine, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, liberal capitalism, light touch regulation, Long Term Capital Management, Louis Pasteur, low-wage service sector, mandelbrot fractal, margin call, market fundamentalism, Martin Wolf, mass immigration, means of production, Mikhail Gorbachev, millennium bug, money market fund, moral hazard, moral panic, mortgage debt, Myron Scholes, Neil Kinnock, new economy, Northern Rock, offshore financial centre, open economy, Plutocrats, plutocrats, price discrimination, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, railway mania, random walk, rent-seeking, reserve currency, Richard Thaler, Right to Buy, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, Rory Sutherland, Satyajit Das, shareholder value, short selling, Silicon Valley, Skype, South Sea Bubble, Steve Jobs, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, unpaid internship, value at risk, Vilfredo Pareto, Washington Consensus, wealth creators, working poor, zero-sum game, éminence grise
In any case more feedback about our decision is so opaque that pinning down precisely what went wrong is like finding a needle in a haystack.16 This severely weakens the theorems that suggest that markets are naturally self-organising with an embedded tendency to reach optimal outcomes. But it opens up a more realistic world of imperfect decision-making that can be improved by smart interventions if we choose. The task becomes creation – usually by the government – of a ‘choice architecture’ that respects choice but guides individuals to exercise it rationally. The answer to individuals being myopic about saving, for example, is to set up schemes into which they are automatically contracted but from which they are free to exit, if they so choose. Nor is it just a question of providing information to buyers and sellers; it must be provided in a digestible, assimilable and understandable way.
There is a need to distinguish between biases insofar as the policy responses to the underlying explanations for behaviour point in very different directions. 16 John Sterman (2000) Business Dynamics: Systems Thinking and Modeling for a Complex World, Irwin McGraw-Hill. 17 Richard Thaler and Cass Sunstein (2008) Nudge: Improving Decisions about Health, Wealth and Happiness, Yale University Press, esp. Part V. See also Jack Fuller (2009) ‘Heads, You Die: Bad Decisions, Choice Architecture, and How to Mitigate Predictable Irrationality’, Per Capita, at http://www.percapita.org.au/01_cms/details.asp?ID=215. 18 Friedrich Hayek (1945) ‘The Use of Knowledge in Society’, American Economic Review 34 (4): 519–30, at http://www.econlib.org/library/Essays/ hykKnw1.html. 19 Herbert Hart (1997) The Concept of Law, Oxford University Press. 20 HM Treasury (2007) ‘The Race to the Top: A Review of Government’s Science and Innovation Policies’, HMSO. 21 Yannis Pierrakis and Stian Westlake (2009) ‘Reshaping the UK Economy: The Role of Public Investment in Financing Growth’, report, Nesta. 22 Ibid. 23 John R.
., 64, 65 Rowthorn, Robert, 292, 363 Royal Bank of Scotland (RBS), 25, 150, 152, 157, 173, 181, 199, 251, 259; collapse of, 7, 137, 150, 158, 175–6, 202, 203, 204; Sir Fred Goodwin and, 7, 150, 176, 340 Rubin, Robert, 174, 177, 183 rule of law, x, 4, 220, 235 Russell, Bertrand, 189 Russia, 127, 134–5, 169, 201, 354–5, 385; fall of communism, 135, 140; oligarchs, 30, 65, 135 Rwandan genocide, 71 Ryanair, 233 sailing ships, three-masted, 108 Sandbrook, Dominic, 22 Sands, Peter (CEO of Standard Chartered Bank), 26 Sarkozy, Nicolas, 51, 377 Sassoon, Sir James, 178 Scholes, Myron, 169, 191, 193 Schumpeter, Joseph, 62, 67, 111 science and technology: capitalist dynamism and, 27–8, 31, 112–13; digitalisation, 34, 231, 320, 349, 350; the Enlightenment and, 31, 108–9, 112–13, 116–17, 121, 126–7; general-purpose technologies (GPTs), 107–11, 112, 117, 126–7, 134, 228–9, 256, 261, 384; increased pace of advance, 228–9, 253, 297; nanotechnology, 232; New Labour improvements, 21; new opportunities and, 33–4, 228–9, 231–3; new technologies, 232, 233, 240; universities and, 261–5 Scotland, devolving of power to, 15, 334 Scott, James, 114–15 Scott Bader, 93 Scott Trust, 327 Second World War, 134, 313 Securities and Exchanges Commission, 151, 167–8 securitisation, 32, 147, 165, 169, 171, 186, 187, 196 self-determination, 85–6 self-employment, 86 self-interest, 59, 60, 78 Sen, Amartya, 51, 232, 275 service sector, 8, 291, 341, 355 shadow banking system, 148, 153, 157–8, 170, 171, 172, 187 Shakespeare, William, 39, 274, 351 shareholders, 156, 197, 216–17, 240–4, 250 Sher, George, 46, 50, 51 Sherman Act (USA, 1890), 133 Sherraden, Michael, 301 Shiller, Robert, 43, 298, 299 Shimer, Robert, 299 Shleifer, Andrei, 62, 63, 92 short selling, 103 Sicilian mafia, 101, 105 Simon, Herbert, 222 Simpson, George, 142–3 single mothers, 17, 53, 287 sixth form education, 306 Sky (broadcasting company), 30, 318, 330, 389 Skype, 253 Slim, Carlos, 30 Sloan School of Management, 195 Slumdog Millionaire, 283 Smith, Adam, 55, 84, 104, 112, 121, 122, 126, 145–6 Smith, John, 148 Snoddy, Ray, 322 Snow, John, 177 social capital, 88–9, 92 social class, 78, 130, 230, 304, 343, 388; childcare and, 278, 288–90; continued importance of, 271, 283–96; decline of class-based politics, 341; education and, 13, 17, 223, 264–5, 272–3, 274, 276, 292–5, 304, 308; historical development of, 56–8, 109, 115–16, 122, 123–5, 127–8, 199; New Labour and, 271, 277–9; working-class opinion, 16, 143 social investment, 10, 19, 20–1, 279, 280–1 social polarisation, 9–16, 34–5, 223, 271–4, 282–5, 286–97, 342; Conservative reforms (1979-97) and, 275–6; New Labour and, 277–9; private education and, 13, 223, 264–5, 272–3, 276, 283–4, 293–5, 304; required reforms for reduction of, 297–309 social security benefits, 277, 278, 299–301, 328; contributory, 63, 81, 283; flexicurity social system, 299–301, 304, 374; to immigrants, 81–2, 282, 283, 284; job seeker’s allowance, 81, 281, 298, 301; New Labour and ‘undeserving’ claimants, 143, 277–8; non-contributory, 63, 79, 81, 82; targeting of/two-tier system, 277, 281 socialism, 22, 32, 38, 75, 138, 144, 145, 394 Soham murder case, 10, 339 Solomon Brothers, 173 Sony, 254–5 Soros, George, 166 Sorrell, Martin, 349 Soskice, David, 342–3 South Korea, 168, 358–9 South Sea Bubble, 125–6 Spain, 123–4, 207, 358–9, 371, 377 Spamann, Holger, 198 special purpose vehicles, 181 Spitzer, Matthew, 60 sport, cheating in, 23 stakeholder capitalism, x, 148–9 Standard Oil, 130–1, 132 state, British: anti-statism, 20, 22, 233–4, 235, 311; big finance’s penetration of, 176, 178–80; ‘choice architecture’ and, 238, 252; desired level of involvement, 234–5; domination of by media, 14, 16, 221, 338, 339, 343; facilitation of fairness, ix–x, 391–2, 394–5; investment in knowledge, 28, 31, 40, 220, 235, 261, 265; need for government as employer of last resort, 300; need for hybrid financial system, 244, 249–52; need for intervention in markets, 219–22, 229–30, 235–9, 252, 392; need for reshaping of, 34; pluralism, x, 35, 99, 113, 233, 331, 350, 394; public ownership, 32, 240; target-setting in, 91–2; threats to civil liberty and, 340 steam engine, 110, 126 Steinmueller, W.
The Impulse Society: America in the Age of Instant Gratification by Paul Roberts
2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, American Society of Civil Engineers: Report Card, asset allocation, business process, Cass Sunstein, centre right, choice architecture, collateralized debt obligation, collective bargaining, computerized trading, corporate governance, corporate raider, corporate social responsibility, creative destruction, crony capitalism, David Brooks, delayed gratification, double helix, factory automation, financial deregulation, financial innovation, fixed income, full employment, game design, greed is good, If something cannot go on forever, it will stop - Herbert Stein's Law, impulse control, income inequality, inflation targeting, invisible hand, job automation, John Markoff, Joseph Schumpeter, knowledge worker, late fees, Long Term Capital Management, loss aversion, low skilled workers, mass immigration, new economy, Nicholas Carr, obamacare, Occupy movement, oil shale / tar sands, performance metric, postindustrial economy, profit maximization, Report Card for America’s Infrastructure, reshoring, Richard Thaler, rising living standards, Robert Shiller, Robert Shiller, Rodney Brooks, Ronald Reagan, shareholder value, Silicon Valley, speech recognition, Steve Jobs, technoutopianism, the built environment, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, Walter Mischel, winner-take-all economy
Walter Mischel, the researcher behind the famous “marshmallow study” from the 1970s, has developed effective strategies to train impatient children to be patient—an important success, given that impatient children have a high likelihood of growing up to be impatient adults.14 There are other potentially fruitful ventures, such as what Richard Thaler (of the two-self model) and coauthor Cass Sunstein call “choice architecture.” The term refers to carefully designed technologies, infrastructure, and other pieces of the built environment that subtly “nudge” us to act with more patience and long-term thought. An example: smartphone apps that automatically track our daily expenses and warn us when we’re exceeding our budget. But such efforts are swimming upstream against a current of world-historic proportions. Consider our political culture, which more and more encourages a rapid, visceral response to policy or events.
(As Yippie activist Jerry Rubin boasted in 1970, “Whenever we see a rule we must break it. Only by breaking rules do we discover who we are.”15) Or consider the growing research showing that myopia and short-termism actually increase when we’re uncertain about the future—something our new economic model seems to have made more likely. Further, some of the most troubling myopia occurs not at the consumer level, where “choice architecture” or nudges might have some positive effect, but at the institutional level, in government and especially in business. In many industries, today’s senior managers wield an increasingly impressive set of tools, technologies, and other capabilities that can deliver ever-faster returns. Yet not only do these managers face the same inclination to discount future costs, but they also operate in a corporate culture that itself is increasingly limbic and shortsighted.
#Republic: Divided Democracy in the Age of Social Media by Cass R. Sunstein
A Declaration of the Independence of Cyberspace, affirmative action, Affordable Care Act / Obamacare, Bernie Sanders, Cass Sunstein, choice architecture, Donald Trump, drone strike, Erik Brynjolfsson, Filter Bubble, friendly fire, global village, illegal immigration, immigration reform, income inequality, Jane Jacobs, loss aversion, Mark Zuckerberg, obamacare, prediction markets, road to serfdom, Ronald Reagan, Silicon Valley, Skype, Snapchat, stem cell, The Chicago School, The Death and Life of Great American Cities, The Wisdom of Crowds
They are important to ensure against fragmentation, polarization, and extremism, which are predictable outcomes of any situation in which like-minded people speak only with themselves. In any case, truth matters. I do not suggest that government should force people to see things that they wish to avoid. But I do contend that in a democracy deserving the name, lives—including digital ones—should be structured so that people frequently come across views and topics that they have not specifically selected. That kind of structuring is, in fact, a form of choice architecture from which individuals and groups greatly benefit. Here, then, is my plea for serendipity. Second, many or most citizens should have a wide range of common experiences. Without shared experiences, a heterogeneous society will have a much more difficult time addressing social problems. People may even find it hard to understand one another. Common experiences, emphatically including the common experiences made possible by social media, provide a form of social glue.
., 93–94, 104 campaign finance, 193–94 Carnegie, Dale, 160 CBS, 19, 152, 179–81, 185, 197–98, 228 censorship: authoritarianism and, 11; China and, 160–62; citizens and, 160–61, 164; regulation and, 6, 11, 34, 160–61, 164, 200, 208, 246, 248, 256, 261 CERN (European Organization for Nuclear Research), 183 chance encounters, 7–8, 19, 24, 32 Chechnya, 239 checks and balances, 11, 46–47, 51 Chicago school of economics, 151 child-support issues, 133 China, ix, 63, 107, 137, 139, 159–62 choice architecture, 7 Christians, 185 citizens: behavior and, 160–62, 167–68; bias and, 169; Bill of Rights and, 50–52; Colorado experiment and, 68–70, 77; communications and, 157–60, 163–64, 166, 168–70, 175; conservatives and, 162; constitutional doctrine and, 157; consumers and, 25, 115–16, 157–62, 166–75, 223, 231, 256–59; crime and, 172; deliberative democracy and, 169; discrimination and, 167, 175; echo chambers and, 163; education and, 167, 170; Facebook and, 163; filtering and, 157; freedom of speech and, 159, 164; general-interest intermediaries and, 166; Internet and, 158, 160, 164, 169, 171–74; judgment and, 167, 169–70; limited options and, 164–67, 174; majority rule and, 169–70; must-carry rules and, 215, 226–29; preferences and, 157–60, 162–70, 174–75; producers and, 171; public forums and, 13, 34–44, 58, 84, 88, 142, 156, 166, 204–5, 226–27, 256–57, 267; radio and, 165–66; shared experiences and, 158; social media and, 157, 160–65, 168; television and, 158, 165–66, 169, 173; terrorism and, 163; Twitter and, 162, 166; unanimity and, 169–70 Citizens United case, 193–94 civic virtue, 5, 23, 46, 260 civility, 217–18 climate change: cybercascades and, 97, 107, 127–31; environmental issues and, 1, 3–4, 7, 9, 11, 35, 42, 57, 67, 74, 96–97, 99, 107, 127–31, 217; global warming and, 68–69, 88, 217; greenhouse gases and, 9, 127, 130–32, 218 Clinton, Bill, 104, 109 Clinton, Hillary, 15, 59, 75, 117 CNN, 62, 64–65, 115, 126, 228–29 Cole, Benjamin, 237 Cole, Jon, 237 Colorado experiment, 68–70, 77 commercial speech, 193, 205, 207 common experiences, 7, 34, 140–41, 144–45, 147, 214, 254 communications: advertising and, 28 (see also advertising); baseline for, 23–24: citizens and, 157–60, 163–64, 166, 168–70, 175; consumer sovereignty and, 260; curation and, 1; cybercascades and, 119, 134–35; deliberative democracy and, 228; disclosure policies and, 215, 218–23; diversity and, 18, 23, 214; evaluating market of, 53–54; fairness doctrine and, 84–85, 207, 221, 227; FCC and, 84, 179, 198, 219–20, 227; fewer shared experiences and, 144–46; filtering and, 6, 28 (see also filtering); forms of neutrality and, 207–10; fragmentation and, 5, 7, 11, 13, 16, 23, 51, 57, 64, 77, 83–86, 98, 140–41, 146, 149, 151–55, 213, 221, 230, 253, 259, 266n14; freedom of speech and, 193–98, 204, 207, 209; free society and, 18; future of, 261; gated, 8; improving, 214–15, 219–20, 223, 226–28; Internet and, 19 (see also Internet); Jacobs on, 12–13; legal issues and, 177–79, 220, 227; manipulation and, 17, 28–29, 95, 164; mass media and, 19 (see also mass media); must-carry rules and, 226–29; net neutrality and, 29; opposing viewpoints and, 71, 84, 207, 215, 231–33, 255; overload and, 63–68; personalized market for, 1, 155–56, 257, 259; plethora of options in, 5; polarization and, 25, 60, 63–64, 70, 75, 84–86, 89–92; politics and, 54; President’s Advisory Committee on the Public Interest Obligations of Digital Television Broadcasters and, 196–98; producers and, 28, 215; public forums and, 13, 34–44, 58, 84, 88, 142, 156, 166, 204–5, 226–27, 256–57, 267; Putnam on, 267n2; Red Lion Broadcasting v.
To Save Everything, Click Here: The Folly of Technological Solutionism by Evgeny Morozov
3D printing, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, augmented reality, Automated Insights, Berlin Wall, big data - Walmart - Pop Tarts, Buckminster Fuller, call centre, carbon footprint, Cass Sunstein, choice architecture, citizen journalism, cloud computing, cognitive bias, creative destruction, crowdsourcing, data acquisition, Dava Sobel, disintermediation, East Village, en.wikipedia.org, Fall of the Berlin Wall, Filter Bubble, Firefox, Francis Fukuyama: the end of history, frictionless, future of journalism, game design, Gary Taubes, Google Glasses, illegal immigration, income inequality, invention of the printing press, Jane Jacobs, Jean Tirole, Jeff Bezos, jimmy wales, Julian Assange, Kevin Kelly, Kickstarter, license plate recognition, lifelogging, lone genius, Louis Pasteur, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, moral panic, Narrative Science, Nicholas Carr, packet switching, PageRank, Parag Khanna, Paul Graham, peer-to-peer, Peter Singer: altruism, Peter Thiel, pets.com, placebo effect, pre–internet, Ray Kurzweil, recommendation engine, Richard Thaler, Ronald Coase, Rosa Parks, self-driving car, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Skype, Slavoj Žižek, smart meter, social graph, social web, stakhanovite, Steve Jobs, Steven Levy, Stuxnet, technoutopianism, the built environment, The Chicago School, The Death and Life of Great American Cities, the medium is the message, The Nature of the Firm, the scientific method, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, transaction costs, urban decay, urban planning, urban sprawl, Vannevar Bush, WikiLeaks
This last set of assumptions accounts for the proliferation of what Cass Sunstein and Richard Thaler call “nudges”: clever manipulations of default settings—what the authors call “choice architecture”—to get you to eat healthy foods or save money for retirement. Nudging is to manipulation what public relations is to advertising: it gets things done while making all the background tinkering implicit and invisible. The most effective nudges give agents a semblance of agency without giving them much choice. Brownsword sees two problems with nudges. They appear to belong firmly in the prudential register; by tinkering with our “choice architecture,” regulators try to appeal to our self-interest. But in a truly democratic society, the choice of the appropriate register, as well as shifts across them, should be subject to public debate and scrutiny as well.
To Sell Is Human: The Surprising Truth About Moving Others by Daniel H. Pink
always be closing, Atul Gawande, barriers to entry, call centre, Cass Sunstein, Checklist Manifesto, choice architecture, complexity theory, Credit Default Swap, Daniel Kahneman / Amos Tversky, disintermediation, future of work, George Akerlof, information asymmetry, Jeff Bezos, Kickstarter, Marc Andreessen, Menlo Park, out of africa, Richard Thaler, rolodex, Ronald Reagan, Steve Jobs, The Market for Lemons, Upton Sinclair, Wall-E, zero-sum game
The opposite of clarity is murkiness. And murkiness’s close cousin is mindlessness—the state of being unaware. Wansink shows how mindlessness allows us to fall prey to hidden persuaders that make us overeat without even knowing it. Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard H. Thaler and Cass R. Sunstein. Two professors harvest the field of behavioral economics to reveal how altering “choice architecture” can nudge people to make better decisions about their lives. Ask the Five Whys. Those of you with toddlers in the house are familiar with, and perhaps annoyed by, the constant why-why-why. But there’s a reason the little people are constantly asking that question. They’re trying to figure out how things work in the crazy world we live in. The folks at IDEO, the award-winning innovation and design firm, have taken a lesson from the under-five set in one of the methods they use to find design problems.
Amazon Mechanical Turk, Black Swan, brain emulation, Brownian motion, Cass Sunstein, choice architecture, complexity theory, computer age, computer vision, computerized trading, cosmological constant, crowdsourcing, dark matter, David Brooks, David Ricardo: comparative advantage, deliberate practice, Drosophila, en.wikipedia.org, endowment effect, epigenetics, Erik Brynjolfsson, eurozone crisis, experimental economics, Flynn Effect, Freestyle chess, full employment, future of work, game design, income inequality, industrial robot, informal economy, Isaac Newton, John Markoff, Khan Academy, labor-force participation, Loebner Prize, low skilled workers, manufacturing employment, Mark Zuckerberg, meta analysis, meta-analysis, microcredit, Myron Scholes, Narrative Science, Netflix Prize, Nicholas Carr, pattern recognition, Peter Thiel, randomized controlled trial, Ray Kurzweil, reshoring, Richard Florida, Richard Thaler, Ronald Reagan, Silicon Valley, Skype, statistical model, stem cell, Steve Jobs, Turing test, Tyler Cowen: Great Stagnation, upwardly mobile, Yogi Berra
Haven’t thousands of articles from psychology and behavioral economics outlined major weaknesses in human perception and decision-making abilities? There are the works of Daniel Kahneman, Dan Ariely, and many others. Haven’t we all heard about “nudge,” the concept so eloquently outlined by Cass Sunstein and Richard Thaler? In that worldview, experts know the biases of other decision makers and design the choice architecture to manipulate better human choices, such as changing the default options for which pension plan you will enroll in. Yes, but the chess result differs. Computer chess is pointing out some imperfections in the world’s experts, or you might say it is pointing out imperfections in those who, in other contexts, might be nudgers themselves. Human intuitions can misfire even when we study the world’s best players, who’ve each been trained for decades to think rationally and compete for high stakes while drawing upon centuries of human experience with the game.
Thinking, Fast and Slow by Daniel Kahneman
Albert Einstein, Atul Gawande, availability heuristic, Bayesian statistics, Black Swan, Cass Sunstein, Checklist Manifesto, choice architecture, cognitive bias, complexity theory, correlation coefficient, correlation does not imply causation, Daniel Kahneman / Amos Tversky, delayed gratification, demand response, endowment effect, experimental economics, experimental subject, Exxon Valdez, feminist movement, framing effect, hindsight bias, index card, information asymmetry, job satisfaction, John von Neumann, Kenneth Arrow, libertarian paternalism, loss aversion, medical residency, mental accounting, meta analysis, meta-analysis, nudge unit, pattern recognition, Paul Samuelson, pre–internet, price anchoring, quantitative trading / quantitative ﬁnance, random walk, Richard Thaler, risk tolerance, Robert Metcalfe, Ronald Reagan, The Chicago School, The Wisdom of Crowds, Thomas Bayes, transaction costs, union organizing, Walter Mischel, Yom Kippur War
Thaler and Sunstein advocate a position of libertarian paternalism, in which the state and other institutions are allowed to nudge people to make decisions that serve their own long-term interests. The designation of joining a pension plan as the default option is an example of a nudge. It is difficult to argue that anyone’s freedom is diminished by being automatically enrolled in the plan, when they merely have to check a box to opt out. As we saw earlier, the framing of the individual’s decision—Thaler and Sunstein call it choice architecture—has a huge effect on the outcome. The nudge is based on sound psychology, which I described earlier. The default option is naturally perceived as the normal choice. Deviating from the normal choice is an act of commission, which requires more effortful deliberation, takes on more responsibility, and is more likely to evoke regret than doing nothing. These are powerful forces that may guide the decision of someone who is otherwise unsure of what to do.
business and leadership practices; at Google business pundits Cabanac, Michel cab driver problem cabdrivers, New York City Californians Camerer, Colin cancer; surgery vs. radiation for Cantril Self-Anchoring Striving Scale Carroll, Lewis cars and driving; brakes in; driving tests; fuel economy and; pleasure from cash box categories causal base rates causal interpretations; correlation and; regression effects and causal situations causal stereotypes causes, and statistics CEOs; optimistic certainty effect CFOs Chabris, Christopher chance and randomness; misconceptions of changing one’s mind Checklist Manifesto, A (Gawande) chess children: caring for; depressed; time spent with China Choice and Consequence (Schelling) choice architecture choices: from description; from experience; see also decisions, decision making; risk assessment “Choices, Values, and Frames” (Kahneman and Tversky) CIA Clark, Andrew climate Clinical vs. Statistical Prediction: A Theoretical Analysis and a Review of the Evidence (Meehl) Clinton, Bill Coelho, Marta coffee mug experiments cognitive busyness cognitive ease; in basic assessments; and illusions of remembering; and illusions of truth; mood and; and writing persuasive messages; WYSIATI (what you see is all there is) and cognitive illusions; confusing experiences with memories; of pundits; of remembering; of skill; of stock-picking skill; of truth; of understanding; of validity Cognitive Reflection Test (CRT) cognitive strain Cohen, David coherence; see also associative coherence Cohn, Beruria coincidence coin-on-the-machine experiment cold-hand experiment Collins, Jim colonoscopies colostomy patients competence, judging of competition neglect complex vs. simple language concentration cogndiv height="0%"> “Conditions for Intuitive Expertise: A Failure to Disagree” (Kahneman and Klein) confidence; bias of, over doubt; overconfidence; WYSIATI (what you see is all there is) and confirmation bias conjunction fallacy conjunctive events, evaluation of “Consequences of Erudite Vernacular Utilized Irrespective of Necessity: Problems with Using Long Words Needlessly” (Oppenheimer) contiguity in time and place control cookie experiment correlation; causation and; illusory; regression and; shared factors and correlation coefficient cost-benefit correlation costs creativity; associative memory and credibility Csikszentmihalyi, Mihaly curriculum team Damasio, Antonio dating question Dawes, Robyn Day Reconstruction Method (DRM) death: causes of; life stories and; organ donation and; reminders of Deaton, Angus decisions, decision making; broad framing in; and choice from description; and choice from experience; emotions and vividness in; expectation principle in; in gambles, see gambles; global impressions and; hindsight bias and; narrow framing in; optimistic bias in; planning fallacy and; poverty and; premortem and; reference points in; regret and; risk and, see risk assessment decision utility decision weights; overweighting; unlikely events and; in utility theory vs. prospect theory; vivid outcomes and; vivid probabilities and decorrelated errors default options denominator neglect depression Detroit/Michigan problem Diener, Ed die roll problem dinnerware problem disclosures disease threats disgust disjunctive events, evaluation of disposition effect DNA evidence dolphins Dosi, Giovanni doubt; bias of confidence over; premortem and; suppression of Duke University Duluth, Minn., bridge in duration neglect duration weighting earthquakes eating eBay Econometrica economics; behavioral; Chicago school of; neuroeconomics; preference reversals and; rational-agent model in economic transactions, fairness in Econs and Humans Edge Edgeworth, Francis education effectiveness of search sets effort; least, law of; in self-control ego depletion electricity electric shocks emotional coherence, see halo effect emotional learning emotions and mood: activities and; affect heuristic; availability biases and; in basic assessments; cognitive ease and; in decision making; in framing; mood heuristic for happiness; negative, measuring; and outcomes produced by action vs. inaction; paraplegics and; perception of; substitution of question on; in vivid outcomes; in vivid probabilities; weather and; work and employers, fairness rules and endangered species endowment effect; and thinking like a trader energy, mental engagement Enquiry Concerning Human Understanding, An (Hume) entrepreneurs; competition neglect by Epley, Nick Epstein, Seymour equal-weighting schemes Erev, Ido evaluability hypothesis evaluations: joint; joint vs. single; single evidence: one-sided; of witnesses executive control expectation principle expectations expected utility theory, see utility theory experienced utility experience sampling experiencing self; well-being of; see also well-being expert intuition; evaluating; illusions of validity of; overconfidence and; as recognition; risk assessment and; vs. statistical predictions; trust in expertise, see skill Expert Political Judgment: How Good Is It?
Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist by Kate Raworth
3D printing, Asian financial crisis, bank run, basic income, battle of ideas, Berlin Wall, bitcoin, blockchain, Branko Milanovic, Bretton Woods, Buckminster Fuller, call centre, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, choice architecture, clean water, cognitive bias, collapse of Lehman Brothers, complexity theory, creative destruction, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, dematerialisation, Douglas Engelbart, Douglas Engelbart, en.wikipedia.org, energy transition, Erik Brynjolfsson, ethereum blockchain, Eugene Fama: efficient market hypothesis, experimental economics, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, Financial Instability Hypothesis, full employment, global supply chain, global village, Henri Poincaré, hiring and firing, Howard Zinn, Hyman Minsky, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of writing, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, land reform, land value tax, Landlord’s Game, loss aversion, low skilled workers, M-Pesa, Mahatma Gandhi, market fundamentalism, Martin Wolf, means of production, megacity, mobile money, Mont Pelerin Society, Myron Scholes, neoliberal agenda, Network effects, Occupy movement, off grid, offshore financial centre, oil shale / tar sands, out of africa, Paul Samuelson, peer-to-peer, planetary scale, price mechanism, quantitative easing, randomized controlled trial, Richard Thaler, Ronald Reagan, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Simon Kuznets, smart cities, smart meter, South Sea Bubble, statistical model, Steve Ballmer, The Chicago School, The Great Moderation, the map is not the territory, the market place, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, Torches of Freedom, trickle-down economics, ultimatum game, universal basic income, Upton Sinclair, Vilfredo Pareto, wikimedia commons
We (the WEIRD ones, at least) typically exhibit: availability bias – making decisions on the basis of more recent and more accessible information; loss aversion – the strong preference to avoid a loss rather than to make an equivalent gain; selective cognition – taking on board facts and arguments that fit with our existing frames; and risk bias – underestimating the likelihood of extreme events, while overestimating our ability to cope with them. There are many more. Indeed one Wikipedia page lists over 160 cognitive biases, like a jumbo-size game of spot-the-difference between rational economic man and his fallible human equivalent.36 What to do in the face of such irrational shortcomings? Introduce nudge policies, say Richard Thaler and Cass Sunstein, which they define as ‘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’.37 Thanks to Edward Bernays, brands and retailers have been nudging us for almost a century in the implicit messaging of advertisements, in the placements of products in shops and TV shows, and in the psychology of sales. But public policy can be designed to nudge us too.
Code Complete (Developer Best Practices) by Steve McConnell
Ada Lovelace, Albert Einstein, Buckminster Fuller, call centre, choice architecture, continuous integration, data acquisition, database schema, don't repeat yourself, Donald Knuth, fault tolerance, Grace Hopper, haute cuisine, if you see hoof prints, think horses—not zebras, index card, inventory management, iterative process, Larry Wall, late fees, loose coupling, Menlo Park, Perl 6, place-making, premature optimization, revision control, Sapir-Whorf hypothesis, slashdot, sorting algorithm, statistical model, Tacoma Narrows Bridge, the scientific method, Thomas Kuhn: the structure of scientific revolutions, Turing machine, web application