Question: Who decides what the best outcome is?
Thaler: Well, there’s the question. Clearly it’s not Richard Thaler and Cass Sunstein. One criticism I frequently hear is that we think we know what’s best for people and this is elitist thinking. I think in many situations, it is pretty easy for the choice architect to have a good idea what choices people would really prefer. I think if we go back to default options in the open enrollment period, do we think that people who forget to enroll are going to want no healthcare? Probably not. So it’s not that we think we know what’s best for them. It’s that we have a pretty good idea of what they would want the default to be if they were the choice architect. Sure, there may be some tough cases, but I think most of us would rather be healthier. We’d rather have our kids be well educated. We would rather not starve in retirement. We would rather not wake up some morning and have our mortgage doubled because of some term that was buried in the fine print. So I think we can make a lot of progress without much controversy. And there will be a few cases where it’s harder, and that’s what the politicians are elected to deal with.
Question: How do politicians sort out those hard cases amid conflicting interests?
Thaler: It’s difficult. I want to emphasize that we don’t envision a larger role for government. Government has to make decisions. They have to nudge. So why not do it effectively and transparently? And if we don’t like the way the government is doing it, then throw the bums out and elect somebody who will do a better job.
For more of the wide-ranging interview, check out the latest special behavioral issue of the Yale School of Management’s journal Qn.