From “The Dramatic Effect of a Firm Nudge” by Sunstein and Thaler in the Financial Times:
In the past three decades, psychologists and behavioural economists have learnt that people’s choices can be dramatically affected by subtle features of social situations. For example, inertia turns out to be a powerful force. If people’s magazine subscriptions are automatically renewed, they renew a lot more than if they have to send in a renewal form. Moreover, people are influenced by how problems are framed. If told that salami is “90 per cent fat-free” they are far more likely to buy salami than if they are told it is “10 per cent fat”. Social norms matter a lot. If people think others are recycling, or paying their taxes, they are far more likely to recycle and to pay their taxes. The important message is that small details can induce large changes in behaviour.
Read the full piece in which the two respond to recent critics who wonder how nudges can ever be expected to fix massive, complex problems like terrorism or global warming.
Separately, Thaler reports this amusing bit about his frustrating experience with food labels.
“I wanted to check the fat content of some food items. It turns out that the standard tables I found are in a format that makes calculating the most relevant number (% of calories from fat) about as difficult to calculate as possible. That is, the fat content is listed as grams per ounce! You have to look up the number of grams in an ounce just to get started!”
From the Wall Street Journal, “Disclosure is the Best Kind of Credit Regulation.”
The two will participate in a Financial Times online Q&A session Friday at 11 a.m. EST or 4 p.m. BST. You can submit questions now.