What is the Nudge Theory?
People’s minds are complicated. But what can be used to control a person’s decisions? There is a concept in behavioral psychology called the Nudge Theory. By using the Nudge Theory, one uses positive reinforcement and indirect suggestions to influence the behavior, and decision making of people. One can turn psychological momentum into action by creating strong situations. As the father of the Nudge Theory, Dr. Richard Thaler said: “A nudge, as we will use the term, is any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives.” This might seem impossible, but here are two examples of how the Nudge Theory was used.
According to the American Transplant Foundation, 18 people die every day in the United States for want of an organ transplant. Furthermore, there are more than one hundred and twenty thousand people, waiting for an organ donation. In order to solve this problem, the government tried various ways such as advertising, putting out signs, and giving speeches. But even though people knew that organ donation was a good thing to do, the donation rate still stayed the same. Why? Because in the United States, you had to “opt in” for organ donations. By saying “opt-in,” I mean that you have to go through various procedures to donate organs. A study shows that this condition targets, people’s perceptions of what is the normal and usual thing to do. People tend to conform to the status quo. In countries like the United States, the status quo is to donate organs upon death. People, especially before they passed away, do not want to give up and think about death. Another reason is that people are lazy. You have to put in efforts by filling many forms to do the organ donation. And there are people who do not want to go through these procedures, even though they might want to donate their organs. So, the problem is that almost nobody wants to remind themselves about their own death, nobody has time to “opt-in” the organ donations, and nobody wants to give up on themselves before he or she passes away.
In other countries such as Austria, their donation rate is about more than 90%. What are their solutions to this problem? They have laws that make organ donation the default option at the time of death. You have to “opt out” if you do not want to donate your organs. When you have to opt-in, people are too lazy to fill in forms to give organ donations; when you have to opt out, people are still too lazy to fill in forms to quit organ donations. People also cared about the social norm. In “opt out” countries, it is normal to donate organs; but in the “opt-in” countries, it is not a usual thing to donate your organs (Scheiber).
Another example is related to the retirement saving programs. People do not seem to use the retirement programs that were provided, and the government wants to change this phenomenon. As what was bothering Macqueen “why it seems so hard for Canadians to set aside regular savings for retirement, even though we know we really should.” The fact is that the more choices that were offered, the less likely employees were to enroll in any retirement program at all. When two funds offered, there was 75% participation; when 59 funds offered, the participation rate dropped to 60%. So, the solution to this case is to provide fewer retirement programs. Or, the companies can make the employees “opt out” of the program if they refuse to save for their retirement program.
“By knowing how people think, we can make it easier for them to choose what is best for them, their families and society. And people have a strong tendency to go along with the status quo or default option” said by Dr. Richard Thaler. By using the Nudge Theory, it can help people make the right decision. By using the Nudge Theory, it can benefit society. By using the Nudge Theory, it can control people’s behavior.
Annotated Bibliography
Chu Ben. “This Is What Nudge Theory Means – and Why You Should Care about It.” The Independent, Independent Digital News and Media, 13 Jan. 2018, www.independent.co.uk/news/business/analysis-and-features/nudge-theory-richard-thaler-meaning-explanation-what-is-it-nobel-economics-prize-winner-2017-a7990461.html.
This source provides the definition of the Nudge Theory. It also provides the reason why Nudge Theory is important and why should we care about it.
Macqueen Alexander. “Can a Little Nudge Help in Saving for Retirement?” The Globe and Mail, 23 Apr. 2018, www.theglobeandmail.com/globe-investor/can-a-little-nudge-help-in-saving-for-retirement/article37092054/.
This source provides an example of the retirement program. The problem that was faced by the government that people do not participate in the retirement program. By using the Nudge Theory, the people have higher participation and the government only need a little change in the policy.
Scheiber, Francesca. “'Opt Out' Policies Increase Organ Donation.” sparq.stanford.edu.
15 October 2018. Web.
This source provides an example in daily life using the Nudge Theory. By putting people automatically into organ donation, you have to “opt out” if you do not want to donate organs, there is a large increase of the organ donation of the country in total.