Book Journey: Nudge

 A "nudge" in behavioral economics is a way to manipulate people's choices toward a desired behavior without telling them what to do or forcing them to do it. 

The authors of the book, Thaler and Sunstein, are the minds behind the Nudge Effect. Professor Richard Thaler won the 2017 Nobel Prize in Economics, and Professor Cass Sunstein won the 2018 Holberg Prize for their contributions to understanding how human behavior affects markets. The idea's conceptual underpinning, "Econs vs. humans," assumes that while "econs" always consider the advantages and disadvantages of options before making a decision, humans do not always make perfectly rational decisions. Nudge theory can thus be used to influence people to make better choices and think more clearly. 

A situation built around nudges is formally referred to as "libertarian paternalism"; it is paternalistic because it promotes particular behaviors, but libertarian because it protects choice. They argue that governments and businesses can prevent us from making decisions that will cost us later by offering suggestions for options that would benefit both parties. Therefore, the nudge theory would be the ideal method of persuading and assisting people in making decisions. Nudges should follow the EAST principle, ensuring they are easy, attractive, social, and timely.

One example provided in the book is how to use nudges to improve tax compliance experiments in Minnesota. Four strategies were used to intervene on behalf of the taxpayer groups. The first tactic is informational: they were informed that the money they paid in taxes would go towards funding public needs and educational initiatives. The second one uses coercion by making nonpayment of taxes a penalty. The third is offering assistance: if they needed help or had questions about filling out the tax forms, they received it. The final one is related to social norms: they were told that over 90% of Minnesotans had paid all of their taxes. As a result, only one intervention—the fourth method—had a significant impact because the information encouraged them to feel included and to behave similarly to the group. People are social beings, and they usually like being a part of groups. 

Nice book!