Nudge: Improving Decisions About Health, Wealth, and Happiness

These notes are old and were written while reading — they don’t necessarily reflect my current views.

Ideas: Model the candy at the party with transaction costs Prog Bar: 0.01% progress: 0.01

Well, it’s Thaler: He advocates for liberal paternalism in form of Nudges, which change the structure and context of decision making and therefore influence agents behaviour without prohibitions and rules. He wants to nudge people into better decisions (after their own definition). In fact I would be more open to nudging them for the common good. You can make an argument that this is a optimal way to account for externalities while minimally infringing on peoples rights. I take more issue with the claim that there is behaviour that is better for the people from their perspective than what they have chosen. He makes the example that a chess novice playing against a grandmaster will make mistakes that will cost him the game. He would very much like to make different decisions if he would be advised. Neglecting the fact that there might be an inherent utility of testing ones own skills against a grandmaster instead of the advice of others, we assume that this is true. This is still a bad example as the problem is the availability of advice. If another grandmaster would have been present willing to give the chess novice great free advice, the novice would have had two options: Take the advice or reject it. No matter what he would choose, we have to assume that it’s the decision that maximises his utility. Our approach should therefore to reduce transaction costs where ever possible so people can make their own optimal decisions, not to nudge them somewhere. It’s a transaction cost problem, not a problem of human irrationality.

He takes stance that freedom of contract ought to be upheld and that intervention should come in the form of nudges. He makes this point across medical care, retirement plans, environmental protection and others.