This article is an excerpt from the Shortform summary of "Nudge" by Richard H. Thaler and Cass R. Sunstein. Shortform has the world's best summaries of books you should be reading.
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What does Nudge look like in action? What are some nudge examples?
Examples of Nudge theory are wide-ranging. Nudge examples include healthcare and marriage.
Read on for detailed nudge examples.
Nudge Examples in Healthcare
It’s a truth universally acknowledged that the rising expense of health care in the US is unsustainable, yet researchers and policymakers struggle to rein in costs. But Nudge theory examples can help.
One area where experts believe money could be saved is medical liability. Tort reform, the argument goes, would reduce the need for doctors to purchase expensive malpractice insurance, a cost that is passed onto health insurance companies in the form of high provider service fees and onto health-care consumers in the form of high premiums or deductibles. Estimates show that hospitals pay anywhere from $11 billion to $29 billion a year to handle medical malpractice lawsuits.
Under current law, patients are guaranteed the right to sue for medical malpractice. But what if they could waive that right in pursuit of a lower price? Libertarian paternalism’s answer to skyrocketing health-care prices is to allow patients the freedom to waive their right to sue for medical malpractice. This would allow patients who waive their right to sue to receive care at a discount. This Nudge theory example shows a possible solution.
If patients were allowed to waive their right to sue, insurance companies could offer plans “with” or “without” the right to sue. Even better, insurance companies could make the “without” plan the default, allowing patients to opt in to the “with” plan at an additional cost.
One objection to weakening malpractice liability is that the “deterrence effect” of that liability will be weakened as well; in other words, doctors, knowing they can’t or won’t be sued, may be more inclined to risky treatments or negligent care. This argument is undermined by the fact that malpractice insurance premiums typically aren’t “experience rated”—that is, doctors’ premiums don’t go up when they’re sued, so there’s no financial incentive to offer better treatment (though no doctor wants to be accused of malpractice).
There’s also the fact that scant few patients injured by malpractice actually sue: One study found that less than 2% of patients treated negligently by a New York hospital over one year ended up filing suit.
Choice in the Institution of Marriage
Libertarian paternalism seeks to reduce the footprint of the State and promote freedom in as many areas of human life as it can. Nudge examples offer reforms in this situation. One reform that would protect personal and religious freedom is removing the State from the marriage business—by making “marriage” solely a private or religious designation.
In a world where libertarian paternalistic principles held sway, the legal status and various material benefits—tax advantages, inheritance and ownership rights, and medical privileges—currently conferred by “marriage” would become the features of “civil unions.” In other words, any two people—gay or straight, of any sex, race, and/or religion—would be able to obtain a civil union from the state, thus reserving the various rites, symbols, and restrictions of traditional “marriage” for religious institutions.
Perhaps the most serious objection to a reform like this is its effect on children and/or the more vulnerable half of a marriage (often the female in a heterosexual couple). Those who mount this objection argue that legal marriage provides robust protections for these parties, in the forms of custody rights, child-support payments, alimony, etc. However, there’s no reason to think that these legal obligations couldn’t be maintained under a “civil union” licensing scheme instead of a “marriage” scheme. Between the legal obligations and rights conferred by a “civil union” and the personal and spiritual commitment signified by a private or religious “marriage,” no family will be worse off with the dissolution of legally sanctioned “marriage.”
Nudge Examples for Couples
The question of the official institution of marriage notwithstanding, libertarian paternalism offers new ways of looking at the old rules of people’s attachments to each other in these nudge examples.
As we learned in Chapter 1, most people know that 50% of marriages end in divorce, yet nearly 0% of newlyweds think theirs will. This unbridled optimism often leads couples to forego prenuptial agreements, which could offer the opportunity for more vulnerable halves of couples to protect themselves.
The Nudge theory example and libertarian paternalistic solution is, of course, to improve the legal defaults. In the absence of a prenuptial agreement (which would override any default rules), the examples of Nudge theory include post-divorce custody and financial arrangements that should resemble their pre-divorce form—that is, if one parent has been the clear primary caretaker, that parent should continue in that role, with financial support from the other party.
A libertarian paternalist would also make divorce law simpler and clearer. At the moment, judges have wide discretion in divorce proceedings, and because individuals are both biased toward their own position and ignorant of divorce law, judgments often shock either party. With a more limited range of possible judgments—analogous to criminal sentencing guidelines, for example—and better information provided to newlyweds, individuals will have a better idea of what to expect from a divorce.
There are many nudge examples that could work here. One example is a support-payment range derived from a publicly available formula based on the couple’s respective ages, vocations, earning potential, past earnings, health, and other factors. Deviations from the formula might be possible, but rare, and so separating spouses would be more inclined to agree to more reasonable terms.
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