This document provides a summary of Richard Thaler's book "Nudge" which introduces the concept of choice architecture and libertarian paternalism. It discusses how human decision making is influenced by automatic cognitive processes and prone to biases, in contrast to rational economic assumptions. Nudges are any aspects of the choice environment designed to alter behavior in a predictable way without restricting freedom of choice. The goal of nudges is to help people make choices that better align with their long-term interests and well-being by triggering automatic thinking that favors those outcomes, as our rational decision making can be overwhelmed by intuitive thinking and biases. Examples discussed include cafeteria food layouts and incentives to reduce unhealthy behaviors.

1. An Introduction toAn Introduction to NUDGENUDGE
Improving Decisions AboutImproving Decisions About
Health,Health, Wealth,Wealth, andand HappinessHappiness
byby Richard H.ThalerRichard H.Thaler && Cass R. SunsteinCass R. Sunstein

2. An introduction to
Nudge•US economist Thaler wonUS economist Thaler won the
Nobel prizeNobel prize for his
contributions in the field of
behavioural economics,behavioural economics,
showing how human traitshuman traits
affect supposedly rationalrational
markets.

3. PGPPGP

4. Overview of Nudge
•An individual’s behaviour is not always in
alignment with their intentions (termed
a value-action gap).It is common
knowledge that humans are not fully
rational beings; that is, people will often
do something that is not in their own self
interest, even when they are aware that
their actions are not in their best interest.
• As an example, when hungry, dieters
often under-estimate their ability to lose
weight, and their intentions to eat healthy
can be temporarily weakened until they
are satiated.

5. Overview of Nudge
•A nudge makes it more likely
that an individual will make a
particular choice, or behave in
a particular way, by altering
the environment so that
automatic cognitive processes
are triggered to favour the
desired outcome.

6. What is a nudge?
A nudgenudge is any aspect of the
design of a choicedesign of a choice (“choice(“choice
architecture”)architecture”) that altersalters
people’s behaviorpeople’s behavior in a
predictablepredictable way,
without forbiddingforbidding anything
or actually changingactually changing the
choice at all.at all.

7. PGPPGP
Thaler's 'Nudge Theory' Came
From Flies In Men's Urinals

8. Why do we need
nudges?

9. Tyranny of Choice!Tyranny of Choice!

11. The paradox of choice: Too many good
options?

12. TooToo many goodmany good options?options?

13. Decision Paralysis!

14. ONE BUSINESS
HAS FIGURED
OUT THE
SOLUTION!

15. KetchupKetchup
Mixed NutsMixed Nuts
Tomatoes: One ChoiceTomatoes: One Choice

16. One Choice- Mixed NutsOne Choice- Mixed Nuts

17. One Choice- TomatoOne Choice- Tomato
KetchupKetchup

19. Aiming To Reduce Cleaning Costs?
The picture of a fly in the urinals at
Schiphol Airport has been touted as a
simple, inexpensive way to reduce
cleaning costs. Where does it come
from, and how effective is it really?

20. A Victorian urinal target dating back at least as far as the 1880s features a bee.
The Latin for bee is apis, a vulgar joke understandable to Victorian gentlemen,
but almost certainly lost on 21st-century men.

21. ‘Guys are simple-minded and love to play with their urine
stream, so you put something in the toilet bowl and they’ll
aim at that,’ says Reichardt. ‘It could be anything. I’ve seen
a golf flag, a bee, a little tree. It just happens that at
Schiphol it’s a fly.’

22. The urinal fly was introduced to Schiphol in the early
1990s, suggested by Jos van Bedaf, manager of the
cleaning department. This photo was taken shortly
before our photographer was arrested for taking
pictures in the airport’s restrooms.

23. This FlyFly is etchedetched on
the urinal as an
aiming incentiveaiming incentive,
and was proven to
reduce spillagespillage by
80%.

24. Another example is
a social program
that gives TeenTeen
momsmoms a dollar a
day every dayevery day that
they are notnot
pregnant.pregnant.

25. A Dollar a Day Not to Get PregnantA Dollar a Day Not to Get Pregnant

26. Freedom of choice is best,
right?
•Many economistseconomists like to say
that we should present all
options to people, and letlet
them choosethem choose.
• The authors say this makes
the false assumptionfalse assumption that
almost all people, almost all
of the time, make choices
that are in their best interest

27. half- human/half-Vulcanhalf- human/half-Vulcan
SpockSpock
Fictional character in Star TrekFictional character in Star Trek
Star Ship: EnterpriseStar Ship: Enterprise

28. "Star Trek" T V Serial"Star Trek" T V Serial star ship USS EnterpriseUSS Enterprise mission
in space in the 23rd century. Captain James T. KirkCaptain James T. Kirk --
along with half- human/half-Vulcanhalf- human/half-Vulcan science officerscience officer
SpockSpock,

29. They are assuming that wewe are all like SpockSpock.
And like SpockSpock we always only choose the
most logical choicelogical choice.
However, while part of our mind really is likeis like
Spock,Spock,
we all have TWOTWO decision makers in our head whohead who
battlebattle it out for each decision –
our 1.SpockSpock (in scientific terms, our ReflectiveReflective
Cognitive SystemCognitive System) and but also
our 2.HomerHomer (Simpsons)(Simpsons) (Automatic CognitiveAutomatic Cognitive
System).System).

30. The Simpsons is an American animated sitcom created
by Matt Groening for the Fox Broadcasting Company. The
series is a satirical depiction of working-class lifeworking-class life,
epitomized by the Simpson family, which consists
of Homer,Homer, Marge, Bart, Lisa, and Maggie.

31. “Gut” basic feeling or
reaction without a logical
rationale
(Automatic Cognitive
System)
“Mind”
(Reflective Cognitive
System)
vs
.
Homer SimpsonHomer Simpson
Fictional characterFictional character
Star Trek TV SerialStar Trek TV Serial
Fictional characterFictional character
Mr. SpockMr. Spock

32. Here’s a classic example. Spock would
look at this image and see clearly that
the two tabletops are exactly the same
size. But most of us feel pretty sure
that the one on the left is longerleft is longer and
skinnier than the one on the right.

33. 1.There is no such
thing as a nudge‐
less choice.

34. So the conclusion the authors
draw from this is that
SOMETHINGSOMETHING is always
influencinginfluencing your choices.
People are influenced by smallsmall
factorsfactors in the design of an
experience, so even if you
don’t consciously design youryour
choice architecture,choice architecture, it is still
there, affecting the actions of
the choosers.

35. Choice architectureChoice architecture

37. Here’s another example.
In this cafeteria, SpockSpock
would only put food on
his tray that is good for
him, only taking as muchmuch
as he needsas he needs and only
what he can afford.

39. So say you are designing a cafeteria layoutcafeteria layout.
What should you do? Ignore the fact that the
layout affects what people buy?
Randomly rotate the placement of foodsRandomly rotate the placement of foods?
Set it up to sell the most of the expensive
stuff?
Or set it up so people choose more healthypeople choose more healthy
foods?

40. The book encourages that last option with what they
call “libertarian paternalism”“libertarian paternalism” --
Nudging the userNudging the user (through placement, in thisthrough placement, in this
exampleexample) to make the best choice for his well being –
WHAT OUR SPOCK WOULD WANTWHAT OUR SPOCK WOULD WANT, while not
restricting choice at all.
They are not banning junk food, just making it less
likely that someone will choose it on their own.

41. HomerHomer SpockSpock

42. 3.When we see the
benefits now,
costs later.

43. D
DonutDonut

44. •I enjoyenjoy the benefit of this
donut now,donut now,
•I pay the costcost (to my
health, waistline) later.later.
•I enjoyenjoy coming home to a
cool housecool house because my AC
was running all day,
•I pay the costscosts (both bills
and environmental) later.later.

45. 10.Availability Bias:
We overestimate
the likelihood of
events we can
easily remember.
?

47. We are much more scared of vividvivid
and easily imagined threatsand easily imagined threats (like
plane crashes or tornadoes), than
we are of mundane but much more
common dangers (like asthmaasthma
attacksattacks).
We are 20x more likely to die of
asthma attack than tornado, so if
we were purely rational, we’d be
20x more scared of asthma than
tornadoes.

48. Based on the beauty pageant
contestants you’ve seen in the media
lately, you might think that ALL ofALL of
them are dumb as a post. (That’sthem are dumb as a post. (That’s
not true.)not true.)

49. Another example: If you wore your
old hatold hat during two gamestwo games which
your team won, you might assume
that it’s a lucky hat,lucky hat, and that if youif you
don’t wear itdon’t wear it during the next game,
your team will losewill lose. (Sorry, there’s
no connection.)

51. It does seem that
someone who wearswears
this shirt might onlythis shirt might only
have been half ashave been half as
workedworked up about
getting the gun as he is
about losing it.
I will give up my Gun, When they pry
it from my cold , dead fingers

52. 15.Framing Bias:
“10 out of 100“10 out of 100
die.”die.”vs.
“90 out of 100 are90 out of 100 are
cured.”cured.”

53. AAutopilot

54. You also have a third system...
Mindless choosing:Mindless choosing: your autopilot
just continues doing what it’s used to
- driving the same route, or
continuing to eat when there’scontinuing to eat when there’s
food in front of you.food in front of you.
There was one study mentioned in the
book where participants were given very
stale popcornstale popcorn, either a large baglarge bag or a
small bagsmall bag, and then watched a moviewatched a movie.
Participants with the large bag ate 34%large bag ate 34%
more,more, just because it was there and they
were on autopilot.on autopilot.

55. 18.We18.We
predictablypredictably
follow the herdfollow the herd..

57. 19.So how can
we help our
Spock defeat our
Homer?

59. MIND MappingsMIND Mappings means
how we translate data
about an option into what it
actually means for us.
Like translating kilowattskilowatts of
energy into dollarsdollars on the
electricity bill, or translating
megapixelsmegapixels to maximum
print sizeprint size.

60. 20.Reca20.Reca
pp

61. NudgesNudges are about
designing choicesdesigning choices to
try to help peopletry to help people
make choices more
with their rationalrational
mind (their inner
SpockSpock) and less with
their gut.gut.( their inner( their inner
HomerHomer))

62. There are certain situations:
Benefits nowBenefits now, cost latercost later;
decisions we have to
make infrequently, places
where the feedbackfeedback isn’t
immediate or the outcome
is hard to imagineimagine, where
the HomerHomer in us has the
upper hand,

63. and we can use our
knowledge of ourknowledge of our
predictable psychologypredictable psychology in
these ways mentioned:
1.Incentives,1.Incentives,
2.2.UnderstandingUnderstanding
3.Mindmappingsmappings,
4.Defaults,4.Defaults,
5.5.Giving feedbackGiving feedback, and
6.Structuring complex choices6.Structuring complex choices
to nudge our Spocknudge our Spock to rebalancerebalance the
power.

64. Thank youThank you