Nudge Summary

Richard H. Thaler and Cass R. Sunstein

Nudge

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Nudge Summary

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Nudge: Improving Decisions About Health, Wealth, and Happiness (2008), a business self-help book by Richard H. Thaler and Cass R. Sunstein,  explores the myriad of small factors that influence decision making and the things we can do to ensure that we are making the best possible decisions. The authors are both professors. Thaler teaches behavioral economics at the University of Chicago, while Sunstein taught law for twenty-seven years before leaving to work in the Office of Information and Regulatory Affairs under Barack Obama.

The first section of the book discusses what, exactly, a nudge is. Nudges refer to the myriad small factors that help us make one choice over another while still leaving all choices open to us. The authors give the example of a person who doesn’t want to go out to a party, but after some teasing and persuading from a friend agrees to go along and has a great time. The teasing from the friend is the nudge, convincing the person to go to the party without actually forcing him or her to do it. Since the decision maker ended up having a great time, attending the party was clearly the best choice to make.

Nudges are present in all walks of life, from upselling cashiers at restaurants to supermarkets that place candy next to the registers in hope of making an impulse sale. Not all of these nudges have our best interests at heart. For example, purchasing candy instead of fruit simply because it’s easier to pick up is not the healthiest possible choice we can make.

However, once we become aware of the nudges in the environment and how they affect our behavior, we can take steps to counter the negative ones and react to the positive ones. For example, if working on the computer all day nudges us to waste time online instead of getting work done, then we can install blocking software to restrict access to the most distracting sites.

When taken to the extreme, this method of designing the environment can be used to ensure that nudges guide us to automatically make the best possible choice. This is the second lesson Thaler and Sunstein impart. For example, when sending an email through Gmail, if we type something along the lines of “I’ve attached the file,” and then forget to actually attach anything, the email client will prompt us before sending the email.

The authors call these types of nudges default nudges, clues in the environment that ensure we do the right thing even if we do nothing but stick to the preset standards. As with regular nudges, default nudges can have positive or negative outcomes. For example, many companies automatically enroll their employees in a specific benefits program unless the employee specifically chooses a different program. Gyms, magazines, and other subscription-based services also automatically renew people’s memberships after they have lapsed unless the individual specifically chooses to cancel.

The first two sections of the book show that nudges can be scaled from the individual to the corporate or workplace level. In the next part, the authors show how nudges can be scaled up even further, to the level of government. They make the argument that the state can nudge its citizens to make better decisions and improve the welfare of society overall.

Many Americans make bad decisions in their daily lives, from smoking to unhealthy eating that contributes to obesity. Nudges such as taxes on sugary beverages, programs to promote healthy eating, and restricting access to cigarettes can help nudge people to choose better behaviors.

While programs designed to nudge society take time, effort, and money to set up, they generally end up saving money in the long run. In a similar program designed to reduce carbon emissions, simply requiring that organizations report their carbon emissions led to them going down over time.

There are several key principals that govern behavioral economics and how people experience nudges. Some of these include the organization of options. For example, the items at the top of a menu in a restaurant will be chosen more often than those near the middle.

Other influences include the path of least resistance in which people will choose things that make life easier over those which make them more difficult. In addition, people will also be more heavily influenced by recent events rather than ones in the more distant past, and events that seem to be part of patterns will have more influence on people’s choices than ones that seem to be random. By being aware of these and other subtle or subconscious nudges, we can be more aware of our decision making.