It sometimes appears Barrack Obama has an exhaustive set of tools to help in both understanding and managing an immense group of stakeholders. His latest tool? Nudges. A recent Times article [on Obama] led me to pick up Richard Thaler & Cass Sunstein’s latest books: “Nudges: Improving Decisions About Health, Wealth and Happiness“. Appears that it’s not just Obama who’s using Nudges. Almost everyone is- whether one is aware of their use is another matter.
Click here for the published article (page 25)
Thaler recently spoke at the Rotman School of Management’s (University of Toronto) annual Life- Long Learning Series. At the event, a Nudge was defined as: “the use of non- coercive practices and polices to make people better off…” In essence, Thaler & Sunstein argue that the (everyday and strategic) choices we are faced with can be better positioned, for an optimal outcome, through: (good) “choice architecture“, encompassing the design and presentation of (sets of) choices.
Thaler & Sunstein’s work draws heavily from the field of behavioural economics, which has gained a renewed focus with the scrutiny now placed on the, in hindsight at least, irrational and sub-optimal decisions made that have lead to the present economic downturn. Nudges introduces two types of ‘agents’: humans and econs. Humans represent the masses; the agents who make sub- optimal decisions because of the inalienable flaws in human decision making. Conversely econs are a (fictional) set of agents who make choices with perfect information, consideration of that information and complete rationality and objectivity. Given the impossibility of the latter, Thaler & Sunstein propose that with, what they call, “liberalist paternalism“, or the pursuit of free-choice that ensure an optimal choice, government and organisations can better direct agent choices, via choice architecture.
Nudge is a timely and interesting read, when considering the distrust and scepticism around corporation and government abilities to protect and benefit their constituents. However, the concept that, if architected correctly, choices can be “nudged” to favour one choice over another, even if optimal for the agent making the choice, does raise serious ethical considerations. Thaler & Sunstein are quick to point out that transparency is absolutely paramount in choice architecture, to allow agents to make choices with optimal information. When challenged, at the Rotman event, as to the ‘paternalist’ nature of choice architecture, and the ethical issues it raises, Thaler quickly pointed out that there is no neutral choice, so properly architecting how the choices are made actually benefits the agent.
The concepts are relatively simple in theory, but certainly more difficult in implementation, but the extensive uses of case studies, from pension planning to urinating at the airport, certainly brings a sense of ‘achievability’ to designing one’s own choice architecture. As customers become increasingly ‘choice- savvy’, educated and demanding of transparency, any organisation looking to understand and collaborate with its agents, customers and stakeholders, should certainly include Nudges in it’s strategy design. Any other choice, is simply sub- optimal.
