slow and feedback is poor) or in choosing among medical treatments or in-
vestment options. If you are given ﬁfty prescription drug plans, with mul-
tiple and varying features, you might beneﬁt from a little help. So long as
people are not choosing perfectly, some changes in the choice architecture
those of some bureaucrat). As we will try to show, it is not only possible to
design choice architecture to make people better off; in many cases it is
easy to do so.
The ﬁrst misconception is that it is possible to avoid inﬂuencing people’s
choices. In many situations, some organization or agent must make a
choice that will affect the behavior of some other people. There is, in those
situations, no way of avoiding nudging in some direction, and whether in-
tended or not, these nudges will affect what people choose. As illustrated
by the example of Carolyn’s cafeterias, people’s choices are pervasively in-
ﬂuenced by the design elements selected by choice architects. It is true, of
course, that some nudges are unintentional; employers may decide (say)
whether to pay employees monthly or biweekly without intending to cre-
ate any kind of nudge, but they might be surprised to discover that people
save more if they get paid biweekly because twice a year they get three pay
checks in one month. It is also true that private and public institutions can
strive for one or another kind of neutrality—as, for example, by choosing
randomly, or by trying to ﬁgure out what most people want. But uninten-
tional nudges can have major effects, and in some contexts, these forms of
neutrality are unattractive; we shall encounter many examples.
Some people will happily accept this point for private institutions but
strenuously object to government efforts to inﬂuence choice with the goal
of improving people’s lives. They worry that governments cannot be
trusted to be competent or benign. They fear that elected ofﬁcials and bu-
reaucrats will place their own interests ﬁrst, or pay attention to the narrow
goals of self-interested private groups. We share these concerns. In partic-
ular, we emphatically agree that for government, the risks of mistake, bias,
and overreaching are real and sometimes serious. We favor nudges over
commands, requirements, and prohibitions in part for that reason. But
governments, no less than cafeterias (which governments frequently run),
have to provide star
able. As we shall emphasize, they do so every day through the rules they
set, in ways that inevitably affect some choices and outcomes. In this re-
spect, the antinudge position is unhelpful—a literal nonstarter.
The second misconception is that paternalism always involves coercion.
In the cafeteria example, the choice of the order in which to present food
items does not force a particular diet on anyone, yet Carolyn, and others in
her position, might select some arrangement of food on grounds that are
paternalistic in the sense that we use the term. Would anyone object to
putting the fruit and salad before the desserts at an elementary school
cafeteria if the result were to induce kids to eat more apples and fewer
Twinkies? Is this question fundamentally different if the customers are
teenagers, or even adults? Since no coercion is involved, we think that
some types of paternalism should be acceptable even to those who most
embrace freedom of choice.
gan donations, marriage, and health
care, we will offer speciﬁc suggestions in keeping with our general ap-
proach. And by insisting that choices remain unrestricted, we think that
the risks of inept or even corrupt designs are reduced. Freedom to choose
is the best safeguard against bad choice architecture.
Choice Architecture in Action
Choice architects can make major improvements to the lives of
others by designing user-friendly environments. Many of the most suc-
cessful companies have helped people, or succeeded in the marketplace,
for exactly that reason. Sometimes the choice architecture is highly visible,
and consumers and employers ar
iPhone are good examples because not only are they elegantly styled, but
it is also easy for the user to get the devices to do what they want.) Some-
times the architecture is taken for granted and could beneﬁt from some
Consider an illustration from our own employer, the University of Chi-
cago. The university, like many large employers, has an “open enrollment”
period every November, when employees are allowed to revise the selec-
tions they have made about such beneﬁts as health insurance and retire-
ment savings. Employees are required to make their choices online. (Pub-
lic computers are available for those who would otherwise not have
Internet access.) Employees receive, by mail, a package of materials ex-
plaining the choices they have and instructions on how to log on to make
these choices. Employees also receive both paper and email reminders.
Because employees are human, some neglect to log on, so it is crucial to
decide what the default options are for these busy and absent-minded em-
ployees. To simplify, suppose there are two alternatives to consider: those
who make no active choice can be given the same choice they made the
previous year, or their choice can be set back to “zero.” Suppose that last
year an employee, Janet, contributed one thousand dollars to her retire-
ment plan. If Janet makes no active choice for the new year, one alternative
would be to default her to a one thousand–dollar contribution; another
would be to default her to zero contribution. Call these the “status quo”
and “back to zerchitect choose be-
tween these defaults?
Libertarian paternalists would like to set the default by asking what
reﬂective employees in Janet’s position would actually want. Although this
principle may not always lead to a clear choice, it is certainly better than
choosing the default at random, or making either “status quo” or “back to
zero” the default for everything. For example, it is a good guess that most
employees would not want to cancel their heavily subsidized health insur-
ance. So for health insurance the status quo default (same plan as last year)
seems strongly preferred to the back to zero default (which would mean
going without health insurance).
an employee sets aside money each month that can be used to pay for cer-
tain expenditures (such as uninsured medical or child care expenses).
Money put into this account has to be spent each year or it is lost, and the
predicted expenditures might vary greatly from one year to the next (for
example, child care expenses go down when a child enters school). In this
case, the zero default probably makes more sense than the status quo.
This problem is not merely hypothetical. We once had a meeting with
three of the top administrative ofﬁcers of the university to discuss similar
issues, and the meeting happened to take place on the ﬁnal day of the em-
ployees’ open enrollment period. We mentioned this and asked whether
the administrators had remembered to meet the deadline. One said that he
was planning on doing it later that day and was glad for the reminder. An-
other admitted to having forgotten, and the third said that he was hoping
that his wife had remembered to do it! The group then turned to the ques-
tion of what the default should be for a supplementary salary reduction
program (a tax-sheltered savings program). To that point, the default had
been the “back to zero” option. But since contributions to this program
could be stopped at any time, the group unanimously agreed that it would
be better to switch to the status quo “same as last year” default. We are
conﬁdent that many absent-minded professors will have more comfortable
retirements as a result.
This example illustrates some basic principles of good choice architec-
ture. Choosers are human, so designers should make life as easy as possi-
ble. Send reminders, and then try to minimize the costs imposed on those
who, despite your (and their) best efforts, space out. As we will see, these
principles (and many more) can be applied in both the private and public
sectors, and there is much room for going beyond what is now being done.
A New Path
We shall have a great deal to say about private nudges. But many of
the most important applications of libertarian paternalism are for govern-
ment, and we will offer a number of recommendations for public policy
and law. Our hope is that that those recommendations might appeal to
both sides of the political divide. Indeed, we believe that the policies sug-
gested by libertarian paternalism can be embraced by Republicans and
Democrats alike. A central reason is that many of those policies cost little
or nothing; they impose no burden on taxpayers at all.
Many Republicans are now seeking to go beyond simple opposition to
government action. As the experience with Hurricane Katrina showed,
government is often required to act, for it is the only means by which the
necessary resources can be mustered, organized, and deployed. Republi-
cans want to make people’s lives better; they are simply skeptical, and le-
gitimately so, about eliminating people’s options.
For their part, many Democrats are willing to abandon their enthusiasm
for aggressive government planning. Sensible Democrats certainly hope
Democrats have come to agree that freedom of choice is a good and even
indispensable foundation for public policy. There is a real basis here for
crossing partisan divides.
Libertarian paternalism, we think, is a promising foundation for biparti-
sanship. In many domains, including environmental protection, family
law, and school choice, we will be arguing that better governance requires
less in the way of government coercion and constraint, and more in the
way of freedom to choose. If incentives and nudges replace requirements
and bans, government will be both smaller and more modest. So, to be
clear: we are not for bigger government, just for better governance.
Actually we have evidence that our optimism (which we admit may be a
bias) is more than just rosy thinking. Libertarian paternalism with respect
to savings, discussed in Chapter 6, has received enthusiastic and wide-
spread bipartisan support in Congress, including from current and former
conservative Republican senators such as Robert Bennett (Utah) and Rick
Santorum (Pa.) and liberal Democrats such as Rahm Emanuel of Illinois.
In 2006 some of the key ideas were quietly enacted into law. The new law
will help many Americans have more comfortable retirements but costs es-
sentially nothing in taxpayer dollars.
In short, libertarian paternalism is neither left nor right, neither Demo-
cratic nor Republican. In many areas, the most thoughtful Democrats are
going beyond their enthusiasm for choice-eliminating programs. In many
areas, the most thoughtful Republicans are abandoning their knee-jerk
opposition to constructive governmental initiatives. For all their differ-
ences, we hope that both sides might be willing to converge in support of
some gentle nudges.
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These two figures capture the key insight that behavioral economists
have borrowed from psychologists. Normally the human mind works re-
markably well. We can recognize people we have not seen in years, under-
stand the complexities of our native language, and run down a flight of
stairs without falling. Some of us can speak twelve languages, improve the
fanciest computers, and/or create the theory of relativity. However, even
Einstein would probably be fooled by those tables. That does not mean
something is wrong with us as humans, but it does mean that our under-
standing of human behavior can be improved by appreciating how people
systematically go wrong.
To obtain that understanding, we need to explore some aspects of hu-
man thinking. Knowing something about the visual system allowed Roger
Shepard (1990), a psychologist and artist, to draw those deceptive tables.
He knew what to draw to lead our mind astray. Knowing something about
the cognitive system has allowed others to discover systematic biases in the
way we think.
How We Think: Two Systems
The workings of the human brain are more than a bit befuddling.
How can we be so ingenious at some tasks and so clueless at others? Bee-
thoven wrote his incredible ninth symphony while he was deaf, but we
would not be at all surprised if we learned that he often misplaced his
house keys. How can people be simultaneously so smart and so dumb?
Many psychologists and neuroscientists have been converging on a de-
scription of the brain’s functioning that helps us make sense of these seem-
ing contradictions. The approach involves a distinction between two kinds
of thinking, one that is intuitive and automatic, and another that is reflec-
tive and rational.
We will call the first the Automatic System and the sec-
ond the Reflective System. (In the psychology literature, these two systems
are sometimes referred to as System 1 and System 2, respectively.) The key
features of each system are shown in Table 1.1.
The Automatic System is rapid and is or feels instinctive, and it does not
involve what we usually associate with the word thinking.When you duck
because a ball is thrown at you unexpectedly, or get nervous when your air-
plane hits turbulence, or smile when you see a cute puppy, you are using
BIASES AND BLUNDERS
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