Book SummaryNudge, by Richard H. Thaler and Cass R. Sunstein

1-Page Summary1-Page Book Summary of Nudge

In Nudge, Richard H. Thaler and Cass R. Sunstein propose a series of reforms—“nudges”—that can help policymakers and other choice designers lead people to make better choices without restricting their freedom to choose. Thaler and Sunstein argue that no choice is ever neutral because the way a choice is presented, even if randomly, affects the way people engage with it—and so governments, private companies, and other entities should frame options in ways that can improve people’s decisions. Thaler and Sunstein call their approach to designing choices “libertarian paternalism,” which implies the freedom of libertarianism combined with the guidance of paternalism, but without the coercion often associated with paternalism.

Major Concepts

Common Biases

Thaler and Sunstein argue that people have evolved to make snap decisions in a wide variety of areas in order to save time and mental energy—we’re more likely to survive if we rely on rules of thumb (largely accurate guides based on experiences in similar situations) when deciding, for example, whether an animal is a threat (if we spend time carefully analyzing it, we might be eaten before reaching our conclusion). They note that while such rules of thumb—also called heuristics or biases—can be helpful, they can also mislead us into making poor decisions.

(Shortform note: Thaler and Sunstein focus on how mental shortcuts can lead us into poor judgment calls, but other writers note that these kinds of gut reactions can be enormously beneficial. In Blink, Malcolm Gladwell argues that judgments made by our unconscious mind, based on limited information and made in fractions of a second, can often prove more accurate than well-thought-out analysis. He says that this is due to the fact that evolution has trained our minds to home in on the most important aspects of a situation and ignore all irrelevant facts. In contrast, our more rational brain tries to give equal consideration to all facts, which can distract us from the most important aspects of a decision.)

Some of the biases that Thaler and Sunstein discuss, upon which many of their nudges rely, include:

• The anchoring bias—when we take a fact we know (or think we know) and adjust it to account for a fact we don’t (Shortform note: Impulsive decision-making favors anchoring bias, so using a simple checklist can help you overcome it.)
• The availability bias—when we answer questions and make judgments on the basis of whether comparable examples come readily to mind rather than statistical probability (Shortform note: In business, you can avoid availability bias by creating diverse teams and seeking broad input.)
• The representativeness bias—when we categorize a phenomenon based on how similar it is to the stereotype of some category (Shortform note: To avoid representativeness bias, ask others to point out when you’re relying on it.)
• The status quo bias—when we stick with our first choice or current situation for no good reason (Shortform note: Marketers often try to overcome consumers’ status quo bias by framing the current status as a losing proposition.)
• The loss aversion bias—when we psychologically feel losses more strongly than gains, and therefore try to avoid them, even if it means we pass up opportunities in doing so or make risky decisions to avoid losses (Shortform note: Studies show that people feel losses more than gains by approximately two to one.)

(Shortform note: The names of these biases were coined by various behavioral economists, including Thaler, Daniel Kahneman, Amos Tversky, William Samuelson, and Richard Zeckhauser. They’re widely used today in the field of behavioral economics and are accepted as a basis for many psychology theories in both academic circles and on more informal platforms, like blogs.)

Libertarian Paternalism

Thaler and Sunstein developed “nudges” to work against these common biases. They call their method of nudges “libertarian paternalism,” defined as a combination of libertarianism (prioritizing individual freedom regardless of ends) with paternalism (constraining choice to bring about better results).

Libertarian paternalism seeks to preserve liberty—our freedom to do what we like, as long as it doesn’t infringe on another—while using techniques suggested by behavioral economics and psychology to point us in the most beneficial direction.

Choice Design

According to Thaler and Sunstein, any choice, from the most mundane to the most momentous, has a certain design—that is, a method, order, or style of presentation that affects how we choose. Think about grocery stores. There’s a reason food companies pay for prime shelf space: The more likely we are to see a...

Nudge Summary Shortform Introduction

In Nudge, Richard H. Thaler and Cass R. Sunstein propose a series of reforms—“nudges”—that can help policymakers and other choice designers lead people to make better choices without restricting their freedom to choose. Thaler and Sunstein’s premise is that no choice is ever neutral because the way a choice is presented, even if randomly, affects the way people engage with it—and so governments, private companies, and other entities should frame options in ways that can improve people’s decisions. Thaler and Sunstein call their approach to designing choices “libertarian paternalism,” which implies the freedom of libertarianism combined with the good will of paternalism.

In this guide, you’ll learn how flesh-and-blood humans differ from the humans studied in economics, why people make bad investment choices, and how Thaler and Sunstein propose to revitalize the institution of marriage (by abolishing it). You’ll also find commentary on the psychological research underlying Nudge’s concepts as well as more recent data that sheds new light on Thaler and Sunstein’s findings.

About the Authors

Richard H. Thaler

Richard H. Thaler is the Charles R. Walgreen...

Nudge Summary Part 1: Overview of Biases, Libertarian Paternalism, and Nudges

In Nudge, Richard H. Thaler and Cass R. Sunstein propose a series of reforms—“nudges”—that can help policymakers and other choice designers lead people to make better choices without restricting their freedom to choose. Thaler and Sunstein’s premise is that no choice is ever neutral because the way a choice is presented, even if randomly, affects the way people engage with it—and so governments, private companies, and other entities should frame options in ways that can improve people’s decisions.

In this first part, we’ll examine some common biases that Thaler and Sunstein argue drive people to make poor decisions, we’ll give an overview of libertarian paternalism, and we’ll look at when Thaler and Sunstein think nudges are needed.

Common Biases

Thaler and Sunstein argue that people have evolved to make snap decisions in a wide variety of areas in order to save time and mental energy—we’re more likely to survive if we rely on rules of thumb (largely accurate guides based on experiences in similar situations) when deciding—for example, whether an animal is a threat (if we spend time carefully analyzing it, we might be eaten before reaching our...

Nudge Summary Part 2: Designing Choices—Overview

According to Thaler and Sunstein, the most effective way for choice designers to influence choosers’ decisions is through the educated and purposeful design of choices. They outline six techniques—anticipating error, offering defaults, emphasizing outcomes, drawing maps, narrowing the field, and offering incentives—that can be applied to some of the most difficult and momentous choices people face to help them make better choices.

(Shortform note: In fact, all nudges are essentially a form of anticipating error: They respond to—and attempt to disrupt—particular habits in decision-making that lead us astray. The six techniques are tools to help manage that instinctive error.)

Parents use these six techniques intuitively. (Parents, whether they realize it or not, are seasoned choice designers.) How do parents nudge their children toward more healthy food choices, for example?

1. They might anticipate error—that is, their child raiding the cookie jar when the parents aren’t looking—and choose to hide the treats (or not keep them in the house at all).
2. They might institute a healthy default—for example, the child is always allowed fruit for dessert—which could...

Shortform Exercise: Be a Choice Designer

Apply choice design in your own life.

Think about a choice that you’ve recently presented to someone in your life. (It can be as simple as asking someone what they want for dinner!) Write down the choice and to whom you offered it.

Nudge Summary Technique 1: Offer Defaults

The first of the four choice design techniques we’ll examine in detail is Thaler and Sunstein’s most versatile nudge: the default—that is, the choice that’s automatically made if the chooser does nothing.

The theory underlying this style of nudge is people’s innate status quo bias. Thaler and Sunstein apply the default nudge to a number of areas, including retirement saving, investment choices, and organ donations, each of which is detailed below.

(Shortform note: While Thaler and Sunstein advocate using the default choice technique to nudge people toward their best interests, it can also be used to get people to act against their interests and in favor of “nudgers.” For example, in the 2020 US presidential election, both parties came under fire for using an auto-checked box on online donation forms authorizing weekly recurring donations—which many donors failed to notice until they’d committed thousands of dollars.)

Using Defaults to Improve Saving

Thaler and Sunstein note the troubling economic trend among Americans of declining savings. In 2005 (when Nudge was...

Shortform Exercise: Design DIY Defaults

Design some personal defaults to defeat inertia.

List some examples of defaults in your own life (do you tend to always buy the same brand of milk, clothing, or car?).

Nudge Summary Technique 2: Draw a Map

A carefully chosen default combats the human tendency toward inertia and the status quo, but how can a choice designer help active choosers navigate complicated decisions?

One way, according to Thaler and Sunstein, is to draw the choosers a map to help connect particular outcomes with particular choices.

To help choice designers effectively draw a map, Thaler and Sunstein advise that regulators mandate transparency programs whereby companies would be required to provide consumers with more—and more clearly organized—information about their products so that consumers can better compare choices and make the right decision.

By presenting us with clearer information, a transparency program could help combat our tendency to use rules of thumb.

Transparency Programs in Personal Finance

From mortgages to student loans to credit cards, Americans are some of the most indebted people on the planet. (Shortform note: Although not as indebted as some. As of 2020, according to data from the Organization of Economic Cooperation and Development (OECD), United States households are in the middle in terms of debt. Households in Spain, France, Canada, and the...

Shortform Exercise: Create DIY Transparency

Bring transparency to your personal finances by carefully examining your current financial tools and comparing them with alternative options.

Do you have a credit card? More than one? List the number of credit cards you have and the amounts owed on each. (If you don’t have a credit card, you might list any other revolving debt obligations you have.)

Nudge Summary Techniques 3 and 4: Narrow the Field and Offer Incentives

The most versatile nudges Thaler and Sunstein suggest are defaults and transparency programs, so it should come as no surprise that those are the nudges that get the most attention in the book.

That said, Thaler and Sunstein also describe an array of additional nudges, among them (1) narrowing the field of choices and (2) offering incentives.

Narrowing the Field

Thaler and Sunstein believe in people’s right to choose (hence the libertarian half of libertarian paternalism). But they also recognize that too much choice can be overwhelming and counterproductive. (Shortform note: Researchers refer to this as choice overload or the Paradox of Choice: We want more options because we think it maximizes our chances of making the best choice, but having too many choices paralyzes us.)

Medicare Part D, for example, offered seniors an incredible breadth of choices—but too little direction in terms of discerning among them. Another example: When Sweden partially privatized its social security program in the 1990s, it went the maximization route, offering Swedes up to five choices...

Nudge Summary Part 3: Controversial and Miscellaneous Nudges

Toward the end of Nudge, Thaler and Sunstein apply libertarian paternalism to some hot-button issues in American society, including tort reform and the institution of marriage. They also round out the book with a series of miscellaneous nudge ideas, two of which we’ll review below.

Reducing Health Care Prices

An evergreen topic among health policy researchers is the excessive cost of health care in the United States. (Shortform note: Compared to other economically developed countries, the US is an outlier in terms of the expense of health care. For example, in 2019, the US spent 16.8% of GDP on health care while the UK spent 10.2%, Canada spent 10.8%, France spent 11.1%, and Germany spent 11.7%. The UK, Canada, France, and Germany all have robust social insurance programs that include publicly funded health care systems.)

One of the causes of these high costs, claim Thaler and Sunstein, is malpractice insurance. The logic goes something like this: If doctors no longer had to purchase expensive liability insurance to protect themselves from being sued, they could offer their patients—in reality, their patients’...

Shortform Exercise: Where Do You Stand?

Think through Thaler and Sunstein’s provocative nudges.

Do you think patients should be allowed to waive their rights to sue for medical malpractice? Why or why not? Would you waive your rights to sue for a discount?

Shortform Exercise: Create Your Own Nudge

Have some fun creating your own nudge.

Which of the nudges you’ve read about so far is your favorite? Why?