Sunday, May 04, 2008


I just read "Nudge: Improving Decisions About Health, Wealth, and Happiness." It nicely combines two subjects I've been very interested in recently-- behavioral economics and public policy.

The basic idea is to use knowledge of our built-in biases to nudge us towards doing the right thing. For example, if you ask people to put 3% of their salary into a retirement plan today, most people will say no. But if you ask them if they're willing commit to putting 3% in the next time they get a raise, most people will say yes.

We value money or things that we own right now more than things we don't.

Another example they use: install a light that shows people how much energy your house is using (green for not much, red for a lot), and people use a lot less energy.

We're not very good at turning long-term goals into short-term actions, unless we get short-term reminders. New York city's recent requirement that chain restaurants post calorie counts alongside items in their menus will be a very interesting test of this-- will the short-term reminder help people eat less and get skinnier?

I really like the approach of encouraging people to do the right thing with "nudges" instead of trying to force them with mandates. Now, if I could just figure out a way of nudging people to be less verbose in Town Meeting...


Anonymous said...

I'm a little surprised by your comments about the NYC calorie regulations. I would have thought that this is the kind of thing government meddling/hyper-regulation that you would tend to oppose. Complicating the issue is the fact that there's not always a sharp line between a nudge and a mandate.

On accelerating TM: One place to start would be to reduce speaking times from our current 5/3 system (five minutes to make a motion, three to make a comment) to something like 4/2. This would definitely provide a "nudge" in the right direction, and encourage people to be more concise.

Gavin Andresen said...

Yeah, it's a mandate for the restaurants and a nudge for the customers. In a perfect world, private organizations would compete to provide us with exactly the information we want to know, when we want to know it. I can imagine my future cell phone figuring out that I'm in a McDonalds, seeing that I bought a Big Mac last time I was there (I'd give McDonalds permission to track what I eat in exchange for them telling my cell phone, too), and telling me that I'd better order the salad because I haven't eaten enough fiber today...

I can even imagine a credit card that I can tell to PREVENT me from paying for a Big Mac if it doesn't fit into my diet (there's a chapter in Nudge about possible market opportunities for credit cards to give you nudges).

Until then, I would rather governments require that companies provide us with information rather than banning things that they think are "bad" for us. I'm completely opposed to the trans-fat bans that are happening, but would be more open to restaurants being required to post the amount of trans-fat in each dish.

We'll quickly run into the mortgage disclosure problem, though, and be so overwhelmed with information we just ignore it...