Designing Choices with Helping Biases

Decades of psychology research illustrates that people often don't know their own preferences for what they want. In other words, you can frame questions in different ways to elicit different responses. If people really understood what they wanted, they would not be fooled by framing effects. Decisions are influenced by cognitive errors, framing effects, mental shortcuts, social influences, and other psychological biases. When people are given the freedom of choice in financial decisions, they often choose badly. Should the government, corporations, and other institutions choose for them?

This is a question of ideology. Libertarians advocate the maximization of individual liberty, thus they value the freedom of choice. On the other hand, paternalism is the attitude that an authoritative figurehead should make decisions on behalf of others for their own good. Thus, Richard Thaler and Cass Sunstein's promotion of libertarian paternalism seems like an oxymoron. In their book, Nudge, they argue that private and public institutions should attempt to guide people's decisions and behavior in a direction that will improve their own welfare. That is, peoples' choices should be deliberately framed in a manner that steers them to making choices that will make them better off. Yet in the end, each person is free to choose. For example, health care options can be framed in a manner that leads to healthier lifestyles.

I am planning to post thoughtful choice architecture examples of programs designed to exploit behavioral biases for the good of the decision-maker. This post will act as a Table of Contents for those examples.

See Posts:

Combining Gambling and Saving

Opt-in and Opt-out Pension Design

Save More Tomorrow

Reference: See Cass Sunstein and Richard Thaler, "Libertarian Paternalism Is Not an Oxymoron," The University of Chicago Law Review 70(2003): 1159-1202.