Thaler and Sunstein's Nudge is best read as a list of examples of and general principles for developing choice architecture in order to improve outcomes. It can provide an understanding of the pros can cons of opt-out, opt-in, forced choices, random selection, and default preferences.


This book was sold to me as something more than that, and the authors continuously repeat their "libertarian paternalism" catch phrase. Simply put, there's very little that could be called libertarian about this book. School choice is a possible exception, but kids always complicate patterns.

To quote the video of the authors on the book's amazon page, "this book is not so much about whether we should have big or small government." The primary failing is that while government programs may be improved through choice architecture, there will always be force involved to the extent that government is making decisions. Reducing the size of the government budget is by default a way to increase liberty, and their refusal to acknowledge that makes their "libertarian paternalism" mantra ring hollow.

The most interesting fact I learned from this book is that the social security website has operating hours.

A very interesting and entertaining book on human behavior and the choices we make to live our lives. Another book, I recommend that takes a look at men's human behavior and choices they make about living their lives is Why Men Die Before Women and How to Prevent It. Replete with personal experiences and exercises,Mr Scaglione and Dr Shore make an excellent arguement on changing choices and how to do it to live a higher quality and longer life.

I'm not an economist and I rarely read non-fiction, but this is an excellent book. The authors' insights seem just like common sense -- except no one really thought of it before. Treat yourself to a good and educational read.

I found this book to provide an interesting perspective into human behavior. The authors make a good case for Libertarian Paternalism. The book is well written and accessible to a wide audience.

I liked the book. It was interesting and well written...not extremely addicting, but enjoyable.

"Nudge" explains that you can help unsophisticated citizens make safer, healthier, and wiser public policy choices through the use of an influence tactic the book labels as, "choice architecture." Through the artful selection, wording, and sequencing of choices, unsophisticated people can be lead to pick options that are smarter.

The authors believe that choice architecture can produce large and significant changes in the behavior of unsophisticates and offer carefully cited studies that support this assertion. In other words, choice architecture works well in the real world.

Thinking inferentially and assuming the assertions of the book are true, if you read this book you are sophisticated. And probably are largely immune to the subtle, but large and irresistable effects of choice architecture.

Wow.

The Tversy & Kahneman & Thaler-type psychological claims about systematic mistakes are a lot more controversial than Thaler and Sunstein let on. I do have a question though: if people make all these mistakes in their decision making processes, why do we trust them to elect the right people who can figure out the right things to advise people to do? Won't these biases end up with politicians who have the same misconceptions as the voters?

The book would be a lot more honest if it were to clearly state the objections to these psychological claims and try to refute them. What is presented instead is a bunch of strawman objections. Do people really overestimate their chances of success? Or is it that the experiments upon which these claims are made flawed? For example, take Thaler's old experiment about students in his classes overestimating their grades in his class. He claims that the students have been assured that he won't know their identities, but even if there is only a couple percent probably that the teacher will know who you are, why would you say that you think that you are going to fail the class? What is the pay off for giving an accurate prediction.

Using government to "nudge" people in the right direction through controlling the information that they receive is problematic, even if to a less extent than using government regulations. I have no reason to believe that the government indoctrination is going to be any more accurate than the indoctrination that goes on in schools regarding global warming. I have no reason to believe that this is going to be any more accurate than government regulations.

My dictionary tells me that "nudge," which rhymes with "judge" and means a gentle push, is probably of Norwegian origin. The authors are careful to distinguish this from the Yiddishism "noodge," meaning pest or bore (@4). So maybe a bakkel, which is what they call doughnuts in Norway, would be a more appropriate analogy for this book than a bagel. But either way, the book is missing something at its core. And it is not as much of a departure from the Chicago School worldview as some reviews would have you believe.

1. Richard Thaler (RT) and Cass Sunstein (CS) base their recommendations on the experimental studies of A. Tversky, D. Kahneman and, among others, RT himself. As developed during the past three decades or so, these have led to the field of "behavioral economics" (and a Nobel Prize for Kahneman). The gist is that people have certain "irrational" ways of looking at the world that lead them to act differently from the way most economists assume for their convenience of their theories. By "nudge" they mean a design element in a thing or in a process that anticipates these psychological tendencies, and steers people toward behavior that, ideally, helps them without limiting their freedom.

Many of the principles and techniques they describe (which other reviewers on this page summarize) have been known and exploited for far longer than there were fancy names for them. Retailers have set at prices $9.98 rather than $10.00 since time immemorial, relying on "availability". The wisdom of writing contracts and designing business processes with "idiot-proof" procedures (the term I was taught decades ago, in lieu of "nudge") is similarly ancient, at least within better law firms and companies. So RTCS's notion that nudges could be used more often when designing social policy shouldn't be very controversial. And on their face, many of their analyses make sense.

2. RTCS do skate on thin ice near the end, when they make it explicit that they're relying on "the invisible hand" of markets to make their proposals work (e.g., @239-240) - a hand whose existence, or at least invisibility, is controversial. They're also on shaky ground when they suggest that John Rawls's "publicity principle" should be a constraint on nudges "in both the public and private sectors" (@244-245). This principle states that governments shouldn't select policies that they wouldn't be willing or able to defend publicly to their own citizens. RTCS don't spell out, though, the scope of this principle in the private sector. Should the analogue of "citizen" be shareholder, or indeed all citizens? If the latter, what's the source of this duty? If to shareholders only, where does that leave the rest of us?

3. But those are details. The deeper problem is what's missing from the big picture of this book. Namely: society.

"There is no such thing as society. There are individual men and women, and there are families." So said Margaret Thatcher, and though RTCS don't quote her, they seem to share this view. Everything in this book is focused on decisions made by individuals (called "Humans" by RTCS) for their own good or ill, and based on their own preferences. The only other entity is a "Planner", such as a legislature, bureaucracy, judiciary or corporate management. Its relationship to individuals is top-down. Moreover, the Planner's own psychological quirks are rarely discussed. In effect, the "homo economicus"-type of rationality that behavioral economics denies to Humans is shifted up one level to the Planner.

The idea that people might act together to influence the Planner, select the Planner, communicate their will to the Planner, or rebel against the Planner is totally missing from this book (aside from a passing reference in a footnote (@238). This is very much in line with Robert Reich's observation in "Supercapitalism" (2007) that collective action and debate in American democracy has been replaced by an atomistic consumerism affecting all aspects of life, including politics.

The worldview expressed in "Nudge" is a far cry from the idea of "active liberty" described by Supreme Court Justice Stephen Breyer in his book of that name (2005). Democratic participation in lawmaking is central to Breyer's view, and policy decisions should be based on facilitating that participation. OTOH, in their footnote, RTCS make the conjunction of good laws and popular will sound like an occasional happy accident: "Social practices, and the laws that reflect them, often persist not because they are wise but because Humans, often suffering from self-control problems, are simply following other Humans. ... We do not mean here to question the view that laws that really do embody the judgments of many people often deserve support for that reason" (@238n). Of course one can think of examples where what RTCS say here is right; slavery, for example. But many other cases are less clear-cut (not that RTCS even express any opinion on the slavery issue or the "wisdom" of any other human rights). This footnote embodies the entire discussion of democracy you'll find in this book. RTCS don't even specify who those "many people" might be -- "Planners" perhaps?

4. A corollary of RTCS's ignoring society is that they have no sensitivity to culture (notwithstanding numerous references to TV shows). This is most obvious in their chapters on organ donations (Ch. 11) and marriage (Ch. 15). The idea of a market for the purchase and sale of human organs "has obvious merit, [but] it is also spectacularly unpopular for reasons that are not well understood" (@175). Maybe the reason is that peoples' cultural beliefs lead them to find the idea of such a market repugnant?

Or how about RTCS's proposal that the institution of marriage be left to private religious groups, with government providing only the institution of civil union - for everyone. They don't consider the idea that a nation's laws should express the cultural values of its people. Nor do they consider whether civil unions would be accepted without stigma in society - or even within families. Since many inter-faith marriages wouldn't be recognized under the laws of any specific religion, do RTCS expect people to shop around for a more convenient religion, or give up religion altogether? Maybe someday people will come around to RTCS's ultra-rational view (which may also be tinted by the apparently divorced status of at least one of them), but we're a long way from it. They need to deal with that.

One more thing about culture: RTCS assert that Tversy & Kahneman-type psychological tendencies arise from brain function (@19), and throughout the book they use the word "Human" to describe people who display those tendencies. I'm not an expert in this area of research, but it isn't clear how much of it has relied on subjects from non-Western cultures. Previous multi-cultural studies in behavioral economics, such as "Foundations of Human Sociality" edited by J. Heinrich & al. (2004), show considerable variation across cultures. So the details of "choice architecture" may be far more culturally-specific, and less scientifically grounded, than RTCS acknowledge. Certainly the book's point of departure, how to engineer behavior on the basis of individual preferences to behaviors, is very American. It would be quite alien to many books on social policy from France, Germany or Japan, for example. BTW playing this scientistic rhetorical trump card in matters of policy is a hallmark of the Chicago School. See, e.g., James Hackney Jr.'s "Under Cover of Science" (2007), which, despite not being enitrely convincing about the historical reasons for this rhetorical trope, is entirely correct in identifying it.

5. CS was close with the Clinton Administration, and an early supporter of Obama. He's probably on the short list for a Federal judgeship - even to fill a Supreme Court vacancy - next time the Democrats take the White House. Before reading this book, I'd have welcomed such an appointment. Now, I'd be much more cautious to do so. America is a society in addition to being a group of individuals. And that society is the source of any "Planner's" authority. I hesitate to give such authority to anyone who forgets where it comes from, and forgets the values that underlie it. Unfortunately, that is exactly what the authors of "Nudge" appear to have forgotten.

My dictionary tells me that "nudge," which rhymes with "judge" and means a gentle push, is probably of Norwegian origin. The authors are careful to distinguish this from the Yiddishism "noodge," meaning pest or bore (@4). So maybe a bakkel, which is what they call doughnuts in Norway, would be a more appropriate analogy for this book than a bagel. But either way, the book is missing something at its core.

1. Richard Thaler (RT) and Cass Sunstein (CS) base their recommendations on the experimental studies of A. Tversky, D. Kahneman and, among others, RT himself. As developed during the past three decades or so, these have led to the field of "behavioral economics" (and a Nobel Prize for Kahneman). The gist is that people have certain "irrational" ways of looking at the world that lead them to act differently from the way most economists assume for their convenience of their theories. By "nudge" they mean a design element in a thing or in a process that anticipates these psychological tendencies, and steers people toward behavior that, ideally, helps them without limiting their freedom.

Many of the principles and techniques they describe (which other reviewers on this page summarize) have been known and exploited for far longer than there were fancy names for them. Retailers have set at prices $9.98 rather than $10.00 since time immemorial, relying on "availability". The wisdom of writing contracts and designing business processes with "idiot-proof" procedures (the term I was taught decades ago, in lieu of "nudge") is similarly ancient, at least within better law firms and companies. So RTCS's notion that nudges could be used more often when designing social policy shouldn't be very controversial. And on their face, many of their analyses make sense.

2. RTCS do skate on thin ice near the end, when they make it explicit that they're relying on "the invisible hand" of markets to make their proposals work (e.g., @239-240) - a hand whose existence, or at least invisibility, is controversial. They're also on shaky ground when they suggest that John Rawls's "publicity principle" should be a constraint on nudges "in both the public and private sectors" (@244-245). This principle states that governments shouldn't select policies that they wouldn't be willing or able to defend publicly to their own citizens. RTCS don't spell out, though, the scope of this principle in the private sector. Should the analogue of "citizen" be shareholder, or indeed all citizens? If the latter, what's the source of this duty? If to shareholders only, where does that leave the rest of us?

3. But those are details. The deeper problem is what's missing from the big picture of this book. Namely: society.

"There is no such thing as society. There are individual men and women, and there are families." So said Margaret Thatcher, and though RTCS don't quote her, they seem to share this view. Everything in this book is focused on decisions made by individuals (called "Humans" by RTCS) for their own good or ill, and based on their own preferences. The only other entity is a "Planner", such as a legislature, bureaucracy, judiciary or corporate management. Its relationship to individuals is top-down. Moreover, the Planner's own psychological quirks are rarely discussed. In effect, the "homo economicus"-type of rationality that behavioral economics denies to Humans is shifted up one level to the Planner.

The idea that people might act together to influence the Planner, to select the Planner, or communicate their will to the Planner, or rebel against the Planner is totally missing from this book. This is very much in line with Robert Reich's observation in "Supercapitalism" (2007) that collective action and debate in American democracy has been replaced by an atomistic consumerism affecting all aspects of life, including politics. The worldview expressed in "Nudge" is a far cry from the idea of "active liberty" described by Supreme Court Justice Stephen Breyer in his book of that name (2005). Democratic participation in lawmaking is central to Breyer's view, and policy decisions should be based on facilitating that participation. RTCS might say that the subject of democracy lies outside the scope of their book, but you can't escape such issues in any public "choice architecture" process.

4. A corollary of RTCS's ignoring society is that they have no sensitivity to culture (notwithstanding numerous references to TV shows). This is most obvious in their chapters on organ donations (Ch. 11) and marriage (Ch. 15). The idea of a market for the purchase and sale of human organs "has obvious merit, [but] it is also spectacularly unpopular for reasons that are not well understood" (@175). Maybe the reason is that peoples' cultural beliefs lead them to find the idea of such a market repugnant?

Or how about RTCS's proposal that the institution of marriage be left to private religious groups, with government providing only the institution of civil union - for everyone. They don't consider the idea that a nation's laws should express the cultural values of its people. Nor do they consider whether civil unions would be accepted without stigma in society - or even within families. Since many inter-faith marriages wouldn't be recognized under the laws of any specific religion, do RTCS expect people to shop around for a more convenient religion, or give up religion altogether? Maybe someday people will come around to RTCS's ultra-rational view (which may also be tinted by the apparently divorced status of at least one of them), but we're a long way from it. They need to deal with that.

One more thing about culture: RTCS assert that Tversy & Kahneman-type psychological tendencies arise from brain function (@19), and throughout the book they use the word "Human" to describe people who display those tendencies. I'm not an expert in this area of research, but it isn't clear how much of it has relied on subjects from non-Western cultures. Previous multi-cultural studies in behavioral economics, such as "Foundations of Human Sociality" edited by J. Heinrich & al. (2004), show considerable variation across cultures. So the details of "choice architecture" may be far more culturally-specific. and less scientific, than RTCS acknowledge. Certainly the book's point of departure, how to engineer behavior on the basis of individual preferences to behaviors, is very American. It would be quite alien to many books on social policy from France, Germany or Japan, for example.

5. CS was close with the Clinton Administration, and an early supporter of Obama. He's probably on the short list for a Federal judgeship - even to fill a Supreme Court vacancy - next time the Democrats take the White House. Before reading this book, I'd have welcomed such an appointment. Now, I'd be much more cautious to do so. America is a society in addition to being a group of individuals. And that society is the source of any "Planner's" authority. I hesitate to give such authority to anyone who forgets where it comes from, and forgets the values that underlie it. Unfortunately, that is exactly what the authors of "Nudge" appear to have forgotten.

Richard Thaler, an economist at the University of Chicago School of Business, is one of the founders of modern behavioral economics, along with economists Amos Tversky and Daniel Kahneman. Cass Sunstein is a legal scholar and political science professor at the University of Chicago, and has been at the forefront of applying the results of experimental economics to social problems, especially in the field of law.

This book has one Big Idea, and it is a very important one. The idea is called "status quo bias," meaning that in many choice situations, people value the status quo (what they currently have), and will forgo the opportunity to switch to an alternative unless the alternative is significantly more attractive than the status quo. In situations where it is difficult to evaluate the exact benefits and costs of what one has over what one could only obtain with some conscious effort, people will tend to stick with what they have.

For example, in the United States, the default condition with respect to organ donation is "no donation," so if people want to donate their organs upon death, they must explicitly state this preference. In France, the default condition is "donation," and an individual who does not like this default condition must expressly indicate a desire not to donate. Consequently, the rate of organ donation is France is several times higher than it is in the United states.

The idea behind Nudge is that the choice of a default condition can both allow individuals to choose as they please in a democratic, market society, while at the same time improving social outcomes by providing default conditions that lead to socially useful choices. Thaler and Sunstein call this "libertarian paternalism." While one might think that this minimal sort of market intervention can have only a limited impact on social outcomes, the organ donation example suggests otherwise. Perhaps the most important policy of this type would be a mandate that employers make contributions to retirement savings, in the form of 401(k) and other plans be the default, so that individuals who do not wish to save would have to register the desire to opt out of the plans. A related ideas developed in the book is that employees commit to saving a certain fraction of future raises they are awarded by employers, the idea being that it people do not want to reduce their "status quo" income in order to save, but they may be willing to accept a lower new "status quo" when the status quo changes. This is a very sensible idea.

A second sort of libertarian paternalism takes the form of having the government require firms reveal with clarity and salience the full terms of contractual agreement with consumers. For instance, the nutritional content of restaurant food might be required on the menu, or the precise interest rate on a mortgage might be required to be posted, or all the charges of a broker might be required to be itemized on a monthly statement. These measures are "paternalistic," because if consumers were fully aware of the situation, they might demand this information from firms, and market competition would then lead to compliance. The role of the government in this situation would then be the more traditional one of enforcing "truth in advertizing"---firms are not allowed to misrepresent their offerings.

Libertarian paternalism, of course, is not a panacea, and will not replace the price system as the central mechanism for allocating goods and services, and will not obviate the need for legislation that corrects market failures, such as the tendency for excessive energy use to undermine the natural environment, and perhaps even partially offsets such "human frailties" as the tendency towards undersaving and abusing illegal substances. However, libertarian paternalism is attractive as a first line of attack on even these problems, and should be part of the policy-maker's toolkit.

Fascinating examples illuminate a fascinating concept: that we can be "choice architects" structuring our environments so that our natural biases and heuristics lead to better choices and outcomes. Some of the examples are mundane and familiar--such as putting healthy food in a more convenient location than junk food--but the authors quickly move into exploring more novel, unexpected, and compelling possibilities. My only complaint is that the second half of the book couldn't compete with the first half.

Thaler and Sunstein pulled off something fairly rare and valuable in this book; they offered up a social/political idea that isn't currently being offered up by either the Republicans or the Democrats, but is still politically viable for either party. That's a good thing, because it can be easy to forget that the Democrats and Republicans aren't the only sources of political, social and economic ideas out there.

The authors label themselves as Libertarian Paternalists, two terms that would not normally go together. Libertarians tend to want very small government with a high degree of freedom for citizens, while paternalists tend to think the government should show citizens the right way to do things even at the expense of their freedoms.

Thaler and Sunstein marry the two ideas, saying that governments should not limit peoples' options, but should offer guidance in certain decision-making scenarios. Those decisions would be the ones that are complex for lay-people to make (like prescription drug plan options) or have many options (like choosing a manager for your retirement investments). While the authors do not want to reduce the number of options available or make the decision for anyone (libertarian), they do want to provide well-researched default options and/or forms of encouragement they call nudges to get people headed in a sensible direction (paternalism).

They give a small-stakes example of arranging the food choices in a school cafeteria so that the healthiest options are positioned at eye level at the beginning of the line so they are chosen more frequently (this apparently does really work). They don't want to take away the less healthy options, but neither do they heed the call to stay completely uninvolved. It's a hard philosophy to fault from either side of the political aisle and seems promising for implementation on a number of troubling political fronts we face right now.

Highly recommended for people who like new ideas and are curious to hear about something that isn't being talked up by either of our two major political parties right now.

The authors make some good points about "choice" architecture. Their Libertarian Paternalism might also be referred to as the "Power of Default Choices."

It was worth the money and time to read the book.

The sub title of the book "Improving Decisions about Health, Wealth and Happiness" should have been a hint at what the book was really about which is "choice architecture" a way to further "libertarian paternalism" meaning that if choices are presented to you in a certain way, you'll make better choices and it'll seem like you're making the choice of your own free will instead of being "nudged" into making the "right" choice.

I'm a big fan of learning why we make the types of choices we make and possibly how to influence those choices. I'm also a big fan of learning how to make better choices for myself.

This book, however, leans heavily to the public policy side of things like how to get people to choose more wisely for retirement savings and the like. It really isn't about Health, Wealth and Happiness. It's about creating systems to "nudge" people into making choices they might not otherwise make.

Well-written and good mix of economics and psychology and practical/every-day issues, but a little obvious at points

This is a fascinating book. It is well-written, and offers a lot of information about Behavioral Economics, with many interesting examples.

If I can read this book and am not internally conflicted at times, that should scare you (as it may indicate that I think my preferences are always best); however, the book's premise is so valid that the concept must be not only fleshed out in detail, but it must be implemented in some fashion (as the book points out, it cannot not be implemented). The good news is that I was internally conflicted (over which option towards which one should nudge another) and I think most readers will be as well.

The opening story of the school cafeteria sets the stage well and makes the premise clear: people make choices and the way we structure those choices influences the choices they make whether we intend to influence them or not. In light of this, why not choose to influence people to make good choices?

The difficulty is in determining what the good choices are. The book argues that the good choices are those that the people would make for themselves if they had all the best information. However, one still has to ask how one can trust the government to provide all the best information and to even use that with integrity to help people make good choices. It is a difficult dilemma - particularly in modern America where there is such distrust for government.

At the same time, I would certainly rather the school cook place the healthy foods where my child is most likely to choose them than to place the unhealthy foods there. That is a pretty clear decision; however, how does one decide on issues like health insurance and savings. The book suggests that we should make individuals "work" to opt-out of insurance or savings rather than to "work" to opt-in. The point is that people are more likely to have health insurance if the default, with a new job, is that it is taken out of their pay. Additionally, people are more likely to invest in a 401k if the default is that it is taken out of their pay and, unless they make a decision to do otherwise (presumably at the time of hire), it will continue to be.

This seems like a good practice until you realize that the company is defaulting to taking money from the employee and using it for the "employee's good". I can certainly see a time period of struggle where employees may be suing their employers for taking their money without their "explicit permission". That is that since it was a default and not a granting of permission it could be problematic. I supposed time and courts will tell.

This is a tremendous book that brings an important topic to the forefront. Do we need to consciously help people make "better" decisions or can we allow them to make "mistakes" and learn or not learn from those? It does seem to have implications on free will, but at the same time so does doing nothing. This, I'm sure, will become an excellent debate in the coming decades.

Nudge is a wonderful book that disconfirms expectancies. It is a form of Ashtanga or power yoga for the brain--with benefits that extend beyond the last page. Humourous and seductive in its conversational style, it provides a compact history of research on human behavior before moving along to its proposals for improving decisionmaking and results. As a mental workout, it is enjoyable as well as rewarding. While reading this book, my reflective self kept asking, "Am I really reading something that is teaching me something? It's too much fun for me to actually be learning valuable stuff." Then, I would stop all of the internal discussion and get back to reading.

To mangle the words of my yoga teacher, "Sometimes, the heart arrives before the head does." In the future, when neuro-scientists get around to analyzing the results of experiments comparing the brainwaves of people who are given this book versus those who take to the mats, the electrodes that light up inside the brain will probably look exactly alike. After you read Nudge and gain its insights, you might justifiably say that you already knew this--it's human nature to wish to conform with the views of others, as you'll see in this book.


In my opinion, there will probably be two types of readers for this book:

1. People who like Yoga. For this type of reader, the book might look like a `how to' guide for getting people to do things in a better way for themselves. The book starts small and builds nicely. In this way, one can follow the trail that Thaler and Sunstein carve out from within the wilderness of human behavior. They explain and establish the basic tenets of prospect theory and translate those insights into actions that promote improved decisions and better results. They introduce the concept of `choice architecture' and its theoretical underpinnings in politics. To change up the pace and add more input, the authors debunk commonly espoused topics such as `the hot hand' by demonstrating the inability of people to accurately judge results. They discuss biases that kick in when we think we're actually seeing things clearly. These readers will take the book and discuss it at dinner parties and baseball games. Its information will be shared and extended in many venues by these types of readers.
2. People who don't like Yoga. This type of reader recoils at any mention of things that might seem to be a `how to' or a `self-help' book. But even this reader will dig in and secretly read this book.This covert reader will harvest its powerful insights and tools and use them each and every day. This person will neither quote the authors directly nor cite their examples in daily conversation. However, this will take supreme effort. Since this reader will retain all of the concepts and begin to utilize them in practice in their daily lives, cognitive dissonance will rule this reader--the mismatch between what this reader knows is valuable and what this reader actually declares as valuable will constantly hobble this reader. To others: Be wary of this type of reader because even though this book is never mentioned, this reader knows about human behavior. This type of reader is carrying the concealed weapon of knowledge around inside her head.

In power Yoga, the teacher or guru is honored for leading the student down the proper path. Consider this review a herogram to the authors of Nudge--> Namaste.

Nobody forced my neighbor to buy that expensive plasma TV. After reading Nudge now he knows why he spent so much more money than he intended. It seemed like such a bargain, standing right next to a much more expensive set in the store display. In Thaler and Sunstein's terms, the store nudged him to buy that TV. They organized the choice set in a way that gently moved him towards what they want him to do. They got him to buy a pricey TV by taking advantage of the principle of contrast. Such psychological biases have been exploited since the beginning of human commerce to sell us things we don't need. This book makes a compelling argument that the same psychological biases can be used to get us what we really want.

After reading Nudge it is easy to understand how small things can make a big difference. For instance, most people I know would like to save more money; most of them don't. Nudge convincingly argues that people can, and should be helped to do that. Very few of us can commit to saving more money today, but most of us can commit today to save more money tomorrow. This human tendency can be used to help people save, and Nudge describes how several companies have already implemented such programs successfully by nudging employees to committing in advance to save part of a future salary increase.

By relying on a large body of work in Psychology and Behavioral Economics, Thaler and Sunstein elegantly argue that people have predictable, systematic biases and that this knowledge can be put to work to help all of us.

Their basic thesis is simple and brilliant: First, how options are presented matters. There is no neutral way to present options. If you present the salads first in a buffet, people will eat more healthy food than if you put salads at the end. Second, don't reduce choice, but organize the options so that people will be more likely to end up with what they themselves would prefer. This is as true for the salad bar as it is for health care.

This amazing book is useful for individuals and policy makers. Policy makers should be interested because such "choice architecture" is strictly non-partisan. Individuals should be interested because this book will nudge them to improve their life their way.

Someone should contact the publisher/author so this book can be sold in a Kindle edition. I really want to read it, but will wait until I can get it on my Kindle.

Some designers think that Schiphol in Amsterdam is the world's finest airport. Its layout is logical and efficient, internet terminals are numerous and free, and stores are so attractive that locals come to the airport to shop. Even the men's urinals are innovative - they contain a small ceramic fly baked into the target zone. The fly reduces mopping by 80% by reminding men to focus their efforts.

Richard Thaler and Cass Sunstein cited the strategic placement of ceramic insects as an example of a "nudge" - a low cost incentive to make the right choice. If you read the blog Jam Side Down, from which this review is condensed, you are very likely to read this book. If you liked Freakonomics, Predictably Irrational, or The Logic of Life, you will like Nudge even better - it packs about 50% more insight per page and the insights matter more. If you follow the blogs or columns of Tyler Cowen, Thomas Sowell, or Robert Samuelson, you are in for a treat.

The book is full of both ideas and of examples like the ceramic fly that leave you thinking "why don't we always do it this way?"

The authors are faculty of the University of Chicago and both distinguished scholars. Thaler is famous for pioneering "behavioral economics" which studies the influence of social, cognitive, and emotional biases on economic decisions. Cass Sunstein is a comically prolific legal scholar who has written about roughly every legal topic there is. His CV lists twenty-eight books and more than three hundred articles (and cautions that it displays only "a very partial listing"). They are tightly connected to the Obama campaign. Austin Goolsby is Obama's lead economic advisor and Thaler's colleague and soulmate. Sunstein was Obama's colleague on the law faculty and is leaving Chicago to become the director of Harvard's Program on Risk Regulation.

Sunstein and Thaler embrace a political philosophy that they term "libertarian paternalism". They deeply respect the right of individuals to make their own (even palpably stupid) choices and would far prefer to see government guide choices than ban activities.

The philosophy at first appears oxymoronic - "libertarian" being conservative to the extent that it is laissez faire and "paternalism" being liberal to the extent that it favors state intervention or protection. Squaring the tension between these ideas is the task and the beauty of the book. The central thesis of Nudge is that like it or not, the way we structure choices creates incentives. Structuring smarter choices provides people with a nudge.

The authors argue that whether we want to or not, we architect choices all the time. They open with a fine example of a school cafeteria that discovers that it can nudge kids towards better diets by putting healthy foods at eye level and in front. They assert further that we can use the emerging science of choice architecture to nudge people to make choices that are healthy, pro-education, financially intelligent, and environmentally sound. You don't ban stupid choices - but you create non-punitive incentives for good ones (for example, you make organ donation an opt-out, not an opt-in program. You save tens of thousands of lives every year and nobody is any worse off for having structured the choice more intelligently). The notion of choice architecture is the great idea at the heart of the book.

But why do we need to nudge? Well, because we often make choices that are not in our self interest - especially if the decisions are complex, infrequent, or make a difference someday instead of now. In these cases, markets fail because choice fails. Humans (as opposed to the fictional "Econs" that the authors mock throughout the book) appear to be well-designed to make simple decisions with immediate consequences such as stepping off of the curb - although the authors point out that in the more touristed precincts of London, even that decision benefits from the "Look Right" nudge on the sidewalk.

Humans (think Homer Simpson, not Econs like Star Trek's Mr. Spock) think poorly when the choices are overly complex or can be delayed without immediate cost (or worst, both). Signing up for a complex mortgage or not joining a 401k plan is painless today -- and who can really figure out the implication of all of those choices? The authors argue that a nudge will at least stack the deck in our favor and reduce the frequency and severity of bad choices.

A good example of smart choice architecture is the Save More Tomorrow Plan which Thaler developed in the mid nineties. Instead of asking employees to save more and reduce their take home pay, a Save More Tomorrow Plan asks employees to check a box to increase their savings rate each time they get a raise. Over time, the result is a dramatic increase in savings as employees commit to save instead of spending future income. With a nudge, Thaler has promoted voluntary savings, preserved choice (employees can opt-out, although few do) and added little if any additional administrative cost.

Transparency figures prominently in many of the nudges that the authors recommend. They urge that credit card companies be required to annually disclose how much we've spent on late fees and interest payments and to do it online using standardized definitions that permit consumers to compare the cost of alternative cards (something that is gruesomely difficult today).

Unfortunately the book stops short of applying "libertarian paternalism" to more controversial nudges - perhaps because the authors do not agree on what to do. Outlawing paid sex or recreational drugs is understandable because these frequently represent poor choices but the cost of prohibition clearly exceeds the social benefits. Libertarian paternalism can contribute to a better choice architecture in these controversial cases. Since tenure is a valuable nudge given to faculty so that they enjoy complete freedom to explore society's most challenging and controversial problems, the reluctance of the authors to do so suggests either caution bordering on cowardice or, dare we say it, a failed nudge.

Some years back, I passed through Schiphol in Amsterdam and realized why some designers consider it the world's finest airport. Its layout is logical and efficient, public internet terminals are numerous and free, and the stores, including a full 24/7 supermarket, are so attractive that locals come to the airport to shop.

But it was the urinals that made the biggest impression. At my first pit stop, I looked down and noticed that an insect had unfortunately chosen to land directly in the target zone. I took aim and was secretly pleased when I scored a direct hit. When the bug did not flinch, I realized that the joke was on me.

The purpose of the ceramic fly was instantly clear - to minimize needless mopping by reminding men to focus their efforts. Baking an insect onto a urinal reportedly reduces the amount of janitorial work required at the airport. Years later, JFK airport awarded the company that designed Schipol the contract to build the new international terminal in New York - so you no longer have to fly to Holland to witness this miracle of sensible design.

I recalled my visit when Richard Thaler and Cass Sunstein cited the strategic placement of ceramic insects as an example of a "nudge" - a low cost incentive to make the right choice. The two men have just published an important, educational, and fun book titled Nudge. If you read Jam Side Down, where this review first appeared, you are very likely to read this book not only because I will recommend it highly but because everyone who reads it will recommend it highly.

It is rare for a book to really change the way I see things. I have been exposed to enough bad ideas that I am a slightly jaded intellectual grouch. Too few ideas strike me as genuinely new and fewer still are presented in a provocative enough manner to make you care whether they are new or not. So when a book re-frames the way I look at, well, almost everything - I want to scramble to high ground and alert the village. When the authors are scholars who have been to the wilderness and questioned the sacred tenets of their respective disciplines, the impact is even more revelatory. If you liked Freakonomics, Predictably Irrational, or The Logic of Life, you will like Nudge even better - it packs about 50% more insight per page and the insights matter more. If you follow the blogs or columns of Tyler Cowen, Thomas Sowell, or Robert Samuelson, you are in for a treat.

The book is full of both ideas and of examples like the ceramic fly that leave you thinking "why don't we always do it this way?" The book is like a naughty dessert - you start it eagerly, savor each bite, and feel annoyed that it ends sooner than expected since the good professors were exceedingly generous with their endnotes.

The authors are faculty of the University of Chicago and both distinguished, long ball scholars. Thaler is world famous for pioneering "behavioral economics" which studies the influence of social, cognitive, and emotional biases on economic decisions. The idea that homo econimus makes choices that are affected by society, emotions, or consistent errors is heresy among heirs to Milton Friedman and other rational choice stalwarts at the University of Chicago (although in most respects, Thaler refines Friedman instead of refuting him). When Daniel Kahneman received the 2002 Nobel Prize in Economics for his work in Prospect Theory, a cousin of Behavioral Economics, he immediately credited Thaler's fundamental influence on his thinking.

Cass Sunstein is a highly influential legal scholar with broad interests . Sunstein has written about roughly every legal topic there is, including the use and misuse of cost/benefit analysis in public policy decisions, animal rights, gay rights, methods for aggregating information such as prediction markets and wikis, FDR's second bill of rights (which proposed a right to an education, a right to a home, a right to health care, a right to protection against monopolies, and more), presidential impeachment (he actively opposed the impeachment of Clinton), and constitutional law. Sunstein writes for the New Republic and frequently blogs at the (Eugene) Volokh Conspiracy and at the (Lawrence) Lessig blog. He is comically prolific. His CV lists twenty-eight books and more than three hundred articles (and cautions that it displays only "a very partial listing"). I have never met Sunstein, but the smartest scholar I know assures me that Sunstein is one of the smartest scholars he knows.

The authors have intriguing connections to the Obama campaign. Austin Goolsby is Obama's lead economic advisor and Thaler's colleague and soulmate. Sunstein was Obama's colleague on the law faculty and, if you believe the Internet, is dating Harvard's Samantha Powers who was (wrongly, wrongly, wrongly) fired by Obama for calling Hillary a "monster". (Hillary is not a monster. She is a vampire who will not die - and Powers should have articulated the distinction). The romance could also be the nudge behind Sunstein's decision to leave Chicago to become the director of Harvard's Program on Risk Regulation.

Both men embrace a political philosophy that they term "libertarian paternalism". They deeply respect the right of individuals to make their own (even palpably stupid) choices and would far prefer to see government guide choices than ban activities.

The philosophy at first appears oxymoronic - "libertarian" being conservative to the extent that it is laissez faire and "paternalism" being liberal to the extent that it favors state intervention or protection. Squaring the tension between these ideas is the task and the beauty of the book. The central thesis of Nudge is that like it or not, the way we structure choices creates incentives. Structuring smarter choices provides people with a nudge (like judge - not noodge, like stooge. A nudge is a shove in the right direction. A noodge is a wonderful Yiddish term for someone who nudges too much and becomes a pain the rear).

The authors argue that whether we want to or not, we architect choices all the time. They open with a fine example of a school cafeteria that discovers that it can nudge kids towards better diets by putting healthy foods at eye level and in front. They assert further that we can use the emerging science of choice architecture to nudge people to make choices that are healthy, pro-education, financially intelligent, and environmentally sound. You don't ban stupid choices - but you create non-punitive incentives for good ones (for example, you make organ donation an opt-out, not an opt-in program. You save tens of thousands of lives every year and nobody is any worse off for having structured the choice more intelligently). The notion of choice architecture is the great idea at the heart of the book.

But why do we need to nudge? Well, because we often make choices that are not in our self interest - especially if the decisions are complex, infrequent, or make a difference someday instead of now. In these cases, markets fail because choice fails. Humans (as opposed to the fictional "Econs" that the authors mock throughout the book) appear to be well-designed to make simple decisions with immediate consequences such as stepping off of the curb - although the authors point out that in the more touristed precincts of London, even that decision benefits from the "Look Right" nudge on the sidewalk.

Humans (think Homer Simpson, not Econs like Star Trek's Mr. Spock) think poorly when the choices are overly complex or can be delayed without immediate cost (or worst, both). Signing up for a complex mortgage or not joining a 401k plan is painless today -- and who can really figure out the implication of all of those choices? And don't even start on Medicare Part D. In the face of choices like this, even the Finance faculty turn out to be more Simpson than Spock. Many of us just go on auto-pilot. The authors argue that a nudge will at least stack the deck in our favor and reduce the frequency and severity of bad choices.

The authors look at the architecture of a variety of important choices from savings and investment decisions to the structure of utility bills. They look at incentives around marriage and issue an eloquent call for privatizing the institution, in a chapter that could easily reframe marriage debates.

A good example of smart choice architecture is the Save More Tomorrow Plan which Thaler developed in the mid nineties. Instead of asking employees to save more and reduce their take home pay, a Save More Tomorrow Plan asks employees to check a box to increase their savings rate each time they get a raise. Over time, the result is a dramatic increase in savings as employees commit to save instead of spending future income. With a nudge, Thaler has turned the human tendency to procrastinate and defer pain from a vice to a virtue in a manner that preserves choice (employees can opt-out, although in practice few do) and has little if any additional administrative cost.

Transparency figures prominently in many of the nudges that the authors recommend. They urge that credit card companies be required to annually disclose how much we've spent on late fees and interest payments and to do it online using standardized definitions that permit consumers to compare the cost of alternative cards (something that is gruesomely difficult today). They would surely approve of the stickers on major home appliances that estimate the cost of energy over a five year period and would favor a similar sticker for cars showing likely fuel costs. The authors do not explore nudges that involve reduced transparency like the suggestion that making all political contributions anonymous would immediately reduce their ability to purchase self-interested legislation.

Unfortunately the book stops short of applying "libertarian paternalism" to more controversial nudges - perhaps because the authors do not agree on what to do. For example, many libertarians regard paid encounters between freely consenting adults as harmless. Others believe that prostitution is always degrading and should be outlawed. Since the authors resist banning much of anything, this seems like fertile ground for a nudge.

It would be easy to ask men to voluntarily forswear paying for pleasure and post their names on a public website. Men, in their more upstanding moments, would enroll knowing that un-enrolling takes 15 days (and the tension between what the authors call the Automatic Mind and the Reflective Mind - between our inner Homer Simpson and our inner Spock - underlies a great deal of choice architecture). The local cat house would be legal and regulated, but prevented under serious penalty from serving any man on the "do not call" list. Add the ability of anyone (reporters and wives come to mind) to request an email notification in the event that someone asks that their name be removed and a lot of the controversy and hypocrisy would disappear.

You could imagine a similar nudge for recreational drugs, which in almost all cases represent poor choices but for which the cost of prohibition vastly exceeds the social benefits. The authors are surely aware that libertarian paternalism can contribute to a better choice architecture in these controversial cases. Since tenure is a valuable nudge given to to ensure that faculty enjoy complete freedom to explore society's most challenging and controversial problems, their reluctance to do so suggests either caution bordering on cowardice or, dare we say it, a failed nudge.

Thaler and Sunstein are among another wave of academics that help keep my home town, Chicago,on the intellectual hilltop. This wasn't exactly what I was expecting, since the title seems to indicate something about decision psychology in general not a particular political ideology. But it is a good book and quick read. Whether or not you agree with the political conclusions, the lessons are well-taken.

This is the third book I've read this year that cites Kahneman & Tversky regarding human decision-making quirks. I found Hubbard's How to Measure Anything: Finding the Value of "Intangibles" in Business to be the most enlighening of all the books in this genre. Nudge may be a close tie with Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets.

Thaler and Sunstein are among another wave of academics that help keep my home town, Chicago,on the intellectual hilltop. This wasn't exactly what I was expecting, since the title seems to indicate something about decision psychology in general not a particular political ideology. But it is a good book and quick read. Whether or not you agree with the political conclusions, the lessons are well-taken.

This is the third book I've read this year that cites Kahneman & Tversky regarding human decision-making quirks. I found Hubbard's How to Measure Anything: Finding the Value of "Intangibles" in Business to be the most enlighening followed. Nudge may be a close tie with Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets.

Nudge's purpose is to use our understanding of Man As He Is to build better policies. Rather than assume a perfectly rational human who can parse long, complicated documents with his mighty, limitless brain, Man As He Is sometimes skims and can be deceived by cleverly worded contracts. Man As He Is is often aware of his own limitations: he'll flush his cigarettes down the toilet to prevent his future self from doing what his present self knows to be harmful; he'll promise to start exercising tomorrow; and he'll curse himself for procrastinating. Perfectly Rational Man -- whom Thaler and Sunstein call an "Econ," to be contrasted with a "Human" -- would never have these problems. Econs sit down with (notional) pencil and paper and calmly work out the costs and benefits of all available actions, then take the action that maximizes their present and future happiness subject to a discount rate (future happiness is worth less than the same quantity of present happiness). They don't have an internal procrastinator at war with a rational planner, nor do they ever regret on Sunday morning what they did on Saturday night.

Nudge is for Humans, not Econs. Nudge realizes, for instance, that making 401(k)s opt-out rather than opt-in, and setting a reasonable default investment plan, will lead lots more people to save money for retirement. And now that they've been enrolled, very few people will opt out. This is what Thaler and Sunstein call "libertarian paternalism": giving people a gentle push in the direction of their own best interests (the "paternalism" part), but never taking away choices (the "libertarian" part). People can quit at any time; it's only the default that has changed.

Your 401(k)'s default investment plan is part of what Thaler and Sunstein call "choice architecture." As a 401(k) administrator, I can guide your choices in any number of ways. I can choose opt-in or opt-out; if I choose opt-out, I have to choose a default plan, whereas if I choose opt-in, I have to decide how much prodding to give you. The point is that choice is inevitable. There's no way to avoid structuring the options available to people, so the right thing to do is to pick the best default. Given this realization, most of Nudge will be entirely uncontroversial.

Thaler and Sunstein digest a mountain of psychological research and reassemble it into a convincing story about how to build policies that correct for human failings. Humans can be expected to make the right decision when faced with a routine, concrete problem -- buying food at the grocery store, say -- but all bets are off when we're asked to evaluate a complicated, large-scale problem like the impact of our air-conditioner usage on global climate change. Thaler and Sunstein want to give the market itself a nudge here. They wouldn't insist that we buy only low-power appliances. Instead, they want our appliances to give us simple, immediate feedback on our energy usage: thermometers that reveal moment-to-moment energy costs, say, and EPA fuel-economy infographics that use easy-to-understand metrics like "dollars per year."

Econs may be able to consume any information thrown at them and correctly render a judgment from what they read; Humans have finite attention spans and would rather spend time with their families than pore over fuel-economy tables. If we want Humans to make the best choices, we have to structure their choice environment to make this possible. Nudge is Thaler and Sunstein's brilliant contribution toward this goal.

Cognitive bias presents a real challenge to political philosophy - a challenge that has not yet been seriously dealt with by anyone. Economics has wrestled seriously over the question of whether people are "rational," and some would count cognitive psychology as a criticism of neoclassical economics. Less fruitfully, critical theory has fumbled around with the literature of cognitive bias, citing it as yet another reason that "it's all subjective."

But nobody has looked seriously at what a legal regime that systematically corrected for cognitive bias would look like. The notion of epistemological "planning" scares me to death. But in this easily-readable masterwork Sunstein and Thaler take a different, more modest, tack. They assume that individuals seeking to accomplish common goals will inevitably organize themselves into institutions (families, firms, a governments - doesn't matter). Cognitive psychology can sometimes reliably tell how we will react to those institutions. This means that bureaucrats (or, for that matter, advertisers) may succesfully shape our behavior by chosing certain organizational forms (the placement of sugary cereal near the floor of the supermarket). The authors' crucial insight is that we, too, can shape our own behavior through legislation. And in this way, we can make ourselves more free.

It will be objected (by me for instance) that "we" (the group) have no right to conduct this sort of liberation on the individual. They anticipate this objection with the additional proviso of "no coercion." This is not unlike Randy Barnett's argument that, since rule by consent is a myth, the only legitimate government functions are those to which no one could possibly object. On Thaler and Sunstein's account, government may legitimately correct for the cognitive bias of individual citizens, so long as the citizen can, upon reflection, opt out and do the "irrational" thing anyway. They recognize that, for their argument to hold together, the cost of exercising personal choice must be zero. But they point out that this is frequently the case, since most social institutions require default rules anyway. One must choose whether to save or spend a dollar - a default rule that allocates your paycheck to your bank account is no more "costly" in principle than one which places the money in your hand. The check must be cashed either way, but the saving rule may may therefore better serve your rational self-interest.

Where it is limited to these sorts of "no cost/no coercion" maneuvers, this kind of social engineering is extremely difficult to object to on moral grounds. After all, when we are rational or willfully irrational, this "libertarian paternalism" is no paternalism at all. But this book is haunted by the specter of passive irrationality. Not all nudges are benign. The authors are mapping (if not paving) the road to the most subtle and effective totalitarianism in history. Indeed, it may already be here.

Cognitive bias presents a real challenge to political philosophy - a challenge that has not yet been seriously dealt with by anyone. Economics has wrestled seriously over the question of whether people are "rational," and some would count cognitive psychology as a criticism of neoclassical economics. Less fruitfully, critical theory has fumbled around with the literature of cognitive bias, citing it as yet another reason that "it's all subjective."

But nobody has looked seriously at what a legal regime that systematically corrected for cognitive bias would look like. The notion of epistemological "planning" scares me to death. But Sunstein and Thaler take a different, more modest, tack. They assume that individuals seeking to accomplish common goals will organize themselves into institutions (families, firms, a governments - doesn't matter). Cognitive psychology can sometimes reliably tell how we will react to those institutions. This means that bureaucrats (or, for that matter, advertisers) may succesfully shape our behavior by chosing certain organizational forms (the placement of sugary cereal near the floor of the supermarket). The authors' crucial insight is that we, too, can shape our own behavior through legislation. And in this way, we can make ourselves more free.

It will be objected (by me for instance) that "we" (the group) have no right to conduct this sort of liberation on the individual. They anticipate this objection with the additional proviso of "no coercion." This is not unlike Randy Barnett's argument that, since rule by consent is a myth, the only legitimate government functions are those to which no one could possibly object. On Thaler and Sunstein's account, government may legitimately correct for the cognitive bias of individual citizens, so long as the citizen can, upon reflection, opt out and do the "irrational" thing anyway. The recognize that, for their argument to hold together, the cost of exercising personal choice must be zero. But they point out that this is frequently the case, since most social institutions require default rules anyway. One must choose whether to save or spend a dollar - a default rule that allocates your paycheck to your bank account is no more "costly" in principle than one which places the money in your hand. The check must be cashed either way, but the saving rule may may therefore better serve your rational self-interest.

Where it is limited to these sorts of "no cost/no coercion" maneuvers, this kind of social engineering is extremely difficult to object to on moral grounds. After all, when we are rational or willfully irrational, this "libertarian paternalism" is no paternalism at all. But this book is haunted by the specter of passive irrationality. Not all nudges are benign. The authors are mapping (if not paving) the road to the most subtle and effective totalitarianism in history. Indeed, it may already be here.

It is difficult to know where to begin to praise this book.

First off, it's seriously readable. Like Freakonomics and The Wisdom of Crowds, this book distills a ton of technical information into a sort of stage-magic act. Each example and figure was chosen with perfect care to produce both a "wow" and a rhetorical result.

But, on another level, it's also seriously important. Cognitive bias presents a real challenge to political philosophy - a challenge that has not yet been seriously dealt with by anyone. Granted, economics has wrestled seriously over the question of whether people are "rational," and some would count cognitive psychology as a criticism of neoclassical economics. Less fruitfully, critical theory has fumbled around with the literature of cognitive bias, citing it as yet another reason that "it's all subjective."

But nobody has looked seriously at what a legal regime that systematically corrected for cognitive bias would look like. This book asks the question: "Where individuals make demonstrably poor judgments, what is the role of government?" I have thought about this at great length, but I have never been able to make anything more of it than the critical theorists. I have taken it for granted that any choices that are difficult for individuals will be more even more so for bureacrats. The notion of epistemological "planning" scares me to death.

But Sunstein and Thaler take a very different tack. They assume that individuals seeking to accomplish goals with the help of others will organize themselves into institutions (whether concieved of as families, firms, a governments - doesn't matter). Cognitive psychology can sometimes reliably tell how we will react to them. This means that bureacrats (or, for that matter, advertisers) may succesfully shape our behavior by chosing certain organizational forms (the placement of sugary cereal near the floor of the supermarket).

The authors' crucial insight is that we, too, can shape our own behavior. And in this way, we can make ourselves more free.

It will be objected (by me for instance) that "we" (the group) have no right to conduct this sort of liberation on the individual. Thaler and Sunstein anticipate this objection with the additional proviso of no coercion. This is not unlike Randy Barnett's argument that, since rule by consent is a myth, the only legitimate government functions are those to which no one could possibly object. On their account, government may legitimately correct for the cognitive bias of individual citizens, so long as the citizens can, upon reflection, opt out and do the "irrational" thing anyway. The recognize that, for their argument to hold together, the cost of exercising "personal choice" must be zero. But they point out that this is frequently the case, since most social institutions require default rules anyway. One must actively choose to whether to save or spend a dollar - a default rule that allocates your paycheck to your bank account is no more "costly" than one which places the money in your hand. The check must be cashed either way, but the saving rule may may therefore better serve your rational self-interest.

Where it is limited to these sorts of "no cost/no coercion" maneuvers, this kind of social engineering is extremely difficult to object to on moral grounds. After all, if we are rational, then this "libertarian paternalism" is no paternalism at all. But this book is haunted by a specter of irrationality. If we are as irrational as the authors suggest, then they are paving the road to the most subtle and effective totalitarianism in history. Indeed, it is already here. A self-inflicted "nudge" may now be the only way to free ourselves.

This is a really, really great book that I think will become a landmark in legal and political thought. I take back everything bad I ever said about Cass Sunstein.

One of my two favorite financial journalists suggested I read this book. So I went in with very high expectations. This book more than delivered.

Like anyone of my age (50), I learned that economics was about supply and demand, and the rational choices we humans make to maximize our utility. I'm not sure why I was ever that dumb to believe it, but at least I can now see that I'm using hindsight bias.

Nudge starts with behavioral economics and one of its authors, Richard Thaler, is essentially its founder. It shows our biases and how we react in ways that do anything but maximize our wealth. I've studied this subject for some time and most books merely repeat our biases. With Nudge, however, I started learning practical things I can use with the first page of chapter one.

Nudge dares to examine things I've taken for granted for all of my life. Is a complete freedom of choice actually likely to hurt me? Should marriage be licensed by the government or other parties? Could I really be buying a lottery ticket when I buy health insurance?

Nudge goes beyond suggesting how we can make better choices to improve our health, wealth, and happiness. It examines the role of public policy in helping us help ourselves.

Not only did Nudge convey important lessons, it did so in a fascinating and entertaining way. I had a hard time putting the book down. Nudge is a brilliant book.

I find this book significantly more informative and interesting than Predictably Irrational, but here, too, the authors, Thaler & Sunstein (T&S), are not providing sufficient details for us to appreciate their conclusions and how they arrive at them. Let me give some examples of the short-comings of their reasoning:

1) In the section on optimism and overconfidence Thaler asks the students in his class: "In which decile do you expect to fall in the distribution of grades in the class." He reports: more than half the class expects to perform in the top two deciles. He says, since that's not possible, he thinks the result of the survey reveals a high degree of unrealistic optimism about performance in the class. To me the survey seems a bit flawed because at most high schools and colleges 80% or more of the students receive A or B grades and less than 20% receive C, D, F, P (Pass) or I (Incomplete) grades. Why wouldn't the students think they'd be in the top two deciles when answering the survey? The survey does not necessarily show that students are overconfident but that they may be framing or anchoring incorrectly to their past experience. And, frankly, I can't figure out the difference between the two methods - framing and anchoring - for guessing. My quibble with such experiments, surveys and polls is that they are rigged to get the effect that the experimenter has in mind and there seem to be several alternate explanations for the observed behavior.

2) In the section on gains and losses, the authors say that losing something makes *us* twice as miserable as gaining the same thing makes us happy. First of all, the ratio of two (based on the word "twice") is probably only true for the people they conducted the survey on - namely, the students - and it also depends on the item that is used in the experiment; for example, T&S use free mugs whereas Ariely, in the book Predictably Irrational, uses football tickets. In most cases the subjects are students who have limited experience and are financially constrained; therefore, the results are unlikely to apply to the population at large. Of course we value gains less than we value losses it's what every basic economics course teaches us - i.e., the marginal utility of an additional unit of anything (money, widget, gadget, food, toy, etc...) diminishes as we have more of it.

3) The authors conduct an experiment where half the students receive free mugs. This experiment is similar to the one reported by Ariely, where half the students win tickets to a football game in a lottery. T&S find that the students who get free mugs ask about twice the price for their mugs, which they are willing to sell, than those who did not get the mugs. Ariely, on the other hand, finds those who won free tickets to the football game ask for 14 times as much to sell their tickets as those students, who did not win the tickets, are willing to pay for a ticket.

These experiments, related to measuring the endowment effect, are flawed. Here is why: suppose the value of similar quality mugs in a retail store is $10. Then, clearly, the students who were given free mugs will want $10 for each of their mugs - i.e., the market value of the mugs when offering to sell them. However, the budget-constrained (poor) students, who do not have the mugs, will only offer what they can afford from their tight budget - i.e., what *they* value not what the going-price is in the market, if their reservation value is less than the market price.

4) In a different chapter the authors describe the behavior of yielding to temptation as sub-optimal and so they offer a solution for resisting it. It's not clear that yielding to temptation is suboptimal behavior. Imagine having to resist our temptation to stop and smell the roses, each time we had the opportunity to do so - how boring would that be? The solution the authors prescribe is to penalize (tax) people when they deviate from their long term plan. While their proposal seems like it could be a good idea it often turns out to be a terrible idea because the penalty makes it very costly for people to seize exciting and profitable opportunities that come along the way and open up other new possibilities.

Upon careful thinking, th