Q & A with R. Thaler on What It Really Means to Be a "Nudge"
On the fuzzy border between economics and psychology
Posted Mar 04, 2015
Nudge is one of the most important and influential books on behavioral science and public policy I’ve ever read. Co-authored by economist Richard Thaler and lawyer Cass Sunstein, the book lays out the rationale for adopting policies designed to make it more likely that people will act in their own best interests rather than, say, spend money they shouldn’t spend or eat food they shouldn’t consume. In the book, Thaler and Sunstein discuss how recent advances in behavioral science should inform our attitudes towards rational decision making. Specifically, these behavioral science findings show that people don’t always make rational decisions, raising questions about when or whether outsiders—like governments or employers—should step in to help people avoid making bad choices.
But has enthusiasm for the book led people to see nudges where they don’t exist? That was the question I posed in a recent post, where I argued that it was wrong to call a well-designed traffic light a nudge: “Not all good design, even good design that influences behavior, is a nudge,” I wrote. “A well-designed prison cell is more likely to deter prisoners from trying to escape than a poorly designed one. But that does not make it a nudge.”
The day after I wrote those words, my email inbox included a forthright message from Dick Thaler, telling me I was seriously misguided about nudges. That email began an exchange that turned into a question and answer session reproduced here with Thaler’s permission.
Ubel: You say I am wrong about what constitutes a nudge. Can you elaborate?
Thaler: Sunstein and I define a “good” nudge as something that will affect Humans but not Econs and will be in their best interest.
Ubel: By Econs, you mean those hypothetical, perfectly rational decision makers with unlimited willpower and cognitive processing ability who underlie neoclassical economic theory. Right?
Thaler: Yes. Econs don’t need nudges, because they do what is in their best interests anyways. But Humans often need nudges.
Ubel: Can you explain why you think a well-designed traffic light is a nudge?
Thaler: A bigger red light is certainly a legitimate nudge. Surely stopping at a red light qualifies as being in your best interest, both to avoid an accident and a ticket. And a mere human might be more likely to notice a bigger red light. Good signage also is part of nudging activity. We like people to find their way rather than get lost. Of course GPS is the ultimate nudge in that domain.
Ubel: I stand (well actually, sit) corrected. Nudges are a broader a concept than I had realized. What then do you make of my contention that the concept of behavioral economics has gotten muddled—has become too broad?
Thaler: I certainly agree that the definition of behavioral economics has been abused. But you are very wrong to write in your post that behavioral economics is mostly psychology. It is mostly economics. Go to any behavioral economics conference, and you will see that. The sad truth is that many behavioral economists know very little about psychology.
Ubel: But what about people like Danny Kahneman, whose work helped inspire the field of behavioral economics. He is a psychologist. Is he doing behavioral economics?
Thaler: Danny would never refer to himself as a behavioral economist, despite having won a Nobel Prize in economics. Prospect theory is a foundational building block for much of behavioral economics and was published in an economics journal, but at that time neither Amos [Tversky] nor Danny knew almost anything about economics. I know because I spent a year with them in 1997-98 while they were finishing that paper (published in 1979). Later Danny collaborated with some economists, including me, on papers that would certainly qualify as behavioral economics but he rightly thinks of himself as a psychologist.
Ubel: Okay here’s my confusion. I can see that an economist, in general, has an economics degree. Therefore when I have conducted research that fits squarely in economics, I haven’t made myself into an economist. That’s why I refer to myself as a behavioral scientist rather than a psychologist or economist, since I have no advanced degree in either of those fields. But putting aside what makes a person an economist or not, what does it mean for an idea to be an example of behavioral economics? For example, when medical researchers (working with Amos Tversky) demonstrated framing effects in how people perceived medical procedures—where people found that they looked more favorably on a surgery with a 90% survival rate than on one with a 10% mortality rate—were those researchers doing behavioral economics research? Or psychology research? Or both? Does it even matter?
Thaler: I don’t think it matters all that much what label we give to types of research but if you are asking me the question I would say that paper was pure psychology. I don’t see any economics in it.
Ubel: I have reviewed grant proposals for agencies that have requested projects using behavioral economics. I have discovered that many researchers submitting proposals to these agencies equate the idea of a “nudge” with behavioral economics. In other words, if they can improve people’s behaviors while leaving them free to act, they have nudged those people. Therefore, they conclude they are doing behavioral economics. Who is confused here: me or them?
Thaler: Everyone is confused. This is partly because, as you note in your post, some people have decided to call themselves behavioral economists for strategic reasons, perhaps because it is now trendy, or perceived to have higher status than (say) professor of marketing, and this sort of behavior can lead journalists to be confused. Many now think Robert Cialdini is a behavioral economist, a notion that Bob would find quite funny. It is true that I am one of the co-authors of Nudge and I am a behavioral economist but it does not mean that everything we write about in that book is behavioral economics, nor does it mean that my co-author, the distinguished legal scholar Cass Sunstein, is a behavioral economist.
Ubel: Do you worry that people are equating nudges with behavioral economics. For example, a recent story in an Education publication started like this: “Susan Dynarski did a brilliant piece recently in the New York Times about “nudging” students towards success. She draws the term from Cass Sunstein, who wrote a book about behavioral economics and some of its concrete applications. For example, some schools that wanted students to select fruit more often for lunch discovered that simply placing the fruit in a more conspicuous and convenient place in the lunch line made a difference.” I have heard scores of people refer to the cafeteria nudge as an example of behavioral economics. What is your take on this?
Thaler: The cafeteria example is the one we use to start our book. It is meant to help define the term “choice architecture”, a term we coined for the book. Coining a term is not the same as creating a field! As other researchers are fleshing out the principles of good choice architecture, for example Eric Johnson and Elke Weber, we can see that it is a multi-disciplinary topic that includes elements of cognitive psychology, human factors design, social psychology, and so forth. Some of the applications, such as the design of defined contribution pension plans lay the domain of economics, and can lead to some interesting economic questions such as whether plans succeed at increasing saving rates. So I think we should just not get bogged down in these labels. You are a physician who does research in behavioral science. Just because some of it might have policy implications does not mean that you should have to call yourself an economist to be taken seriously. The whole point of a nudge, and of creating the Behavioural Insights Team in the UK and now others around the world, was to give non-economists a voice in designing policy. So far very little of what the BIT has done has involved much economics. So when people carelessly use the term behavioral economics to describe this entire field, they are slurring all the great work done by people in all the other fields that have made great contributions to making public policy fit for humans. If we need one catch-all term my preferred choice is behavioral science.
Ubel: Finally, I’d be remiss to conduct this Q and A without asking you: What is your new book about and when will it be available?
Thaler: My new book is very much about behavioral economics. The title is Misbehaving: The Making of Behavioral Economics. It tells the story or, accurately, the many stories of how behavioral economics got started, going back to when it was just a vague feeling that there could be a way to incorporate more psychology into economics. At that time, no one would have ever dreamed of calling himself a behavioral economist to raise his status! In writing the book I decided only to include things that were fun to talk about. I hope that makes it fun to read. It is out May 18th.
***Previously published in Forbes***