University of Chicago professor Richard Thaler has been awarded the Nobel Prize in Economics for his research in behavioral economics, which inspects how human biases impact financial markets… and cause us to make questionable choices.
Thaler’s field combines psychology and economics to question our baseline assumption that humans always make decisions in their own best interest, and looks at how we can subtly “nudge” people to help them help themselves.
Because, as it turns out, we’re not always our own best advocates
Thaler’s studies found that, in fact, “individuals make pretty bad decisions — decisions they would not have made if they had paid full attention and possessed […] complete self-control.”
We’re constantly battling our bias to give in to short-term temptation at the expense of long-term gains. It’s why we spend too much on takeout, but can’t seem to save for retirement.
We’re more willing to exert “self-control” if it means we can put off pain to the future (e.g., the New Year’s resolutions we so readily make on January 1, under the delusion that we’ll start “tomorrow for sure…”).
We’re also incredibly easy to influence… it just takes a little nudge
Throughout his career, Thaler has argued that “choice architects” like legislators and employers should create policies that “nudge” people towards better decisions.
A “nudge” is anything that predictably alters people’s behavior without limiting their options (re: banning junk food) or significantly changing their economic incentives (making chips $1k a bag).
Case in point: just the rearrangement of school cafeteria food can increase/decrease consumption of certain items by 25%.
Obviously, there’s a big argument for corporations and governments doing everything in their power not to influence people’s decisions. But Thaler argues that’s almost impossible — and even if it were, we’re not always better off left to our own devices.
