Designing Better Choices

by Richard H. Thaler and Cass R. Sunstein,
Commentary, LA Times:

The director of food services for a big-city school system hatches an interesting idea: If she changes the arrangement and display of school food, will it alter kids' decisions about what to eat? Without modifying menus, she decides to place the desserts first on the cafeteria line in one school, last in another... The results are dramatic. Simply by rearranging the cafeteria, the consumption of ... items increases or decreases.

This example is a product of our imaginations, but we know from similar real-world experiments -- in supermarket design, for example -- that the arrangement of settings is important to the choices consumers make. ...

Those who design supermarkets and school cafeterias are engaged in what we call "choice architecture"... Choice architects are everywhere. If you design the ballot that voters use..., you are a choice architect. If you are a doctor and must describe the alternative treatments available to a patient, you are a choice architect. If you design the form that new employees fill out to enroll in the company healthcare plan, you are a choice architect. ...

Cognitive psychology and behavioral economics have shown that small and apparently insignificant contextual details can have a major effect on people's behavior. Researchers tell us that if a candidate is listed first on the ballot, he may well get a 4% increase in votes. If a doctor says 90% of patients are alive five years after a certain operation, far more people will have the operation than if the doctor says 10% of patients are dead five years after having it. ...

Let's return to the cafeteria line. If, all things considered, you think the arrangement of food ought to nudge kids toward what's best for them, then we welcome you to our new movement: libertarian paternalism..., a whole new approach to the role of government.

The libertarian aspect ... lies in the straightforward insistence that, in general, people should be free to do what they like. They should be permitted to opt out of arrangements they dislike... The paternalistic aspect acknowledges that it is legitimate for choice architects to try to influence people's behavior in order to make their lives longer, healthier and better.

Private and public institutions have many opportunities to provide free choice while also taking real steps to improve people's lives.

• If we want to increase savings by workers, we could ask employers to ... enroll them automatically [in a 401k plan] unless they specifically choose otherwise.
• If we want to increase the supply of transplant organs in the United States, we could presume that people want to donate, rather than treating nondonation as the default. ...
• If we want to increase charitable giving, we might give people the opportunity to join a ... plan, in which some percentage of their future wage increases are automatically given to charities...
• If we want to respond to the recent problems in [credit markets], we might design disclosure policies that ensure consumers can see exactly what they are paying and make easy comparisons among the possible options.

We find ourselves these days mired in political battles that pit laissez faire capitalism ... against heavily regulated capitalism... But this opposition is false and misleading. Any system of free markets will include some kind of choice architecture, and that means libertarian paternalism can offer a real "third way" around the battleground. The most important social goals are often best achieved not through mandates and bans but with gentle nudges. In countless domains, applying libertarian paternalism offers the most promising alternative to the tired skirmishing in the increasingly unproductive fight between the left and the right.