The Cafeteria
A friend of yours, Carolyn, is the director of food services for a large city school system. She is in charge of hundreds of schools, and hun- dreds of thousands of kids eat in her cafeterias every day. Carolyn has for- mal training in nutrition (a master’s degree from the state university), and she is a creative type who likes to think about things in nontraditional ways.
One evening, over a good bottle of wine, she and her friend Adam, a sta- tistically oriented management consultant who has worked with super- market chains, hatched an interesting idea. Without changing any menus, they would run some experiments in her schools to determine whether the way the food is displayed and arranged might influence the choices kids make. Carolyn gave the directors of dozens of school cafeterias specific in- structions on how to display the food choices. In some schools the desserts were placed first, in others last, in still others in a separate line. The location of various food items was varied from one school to another. In some schools the French fries, but in others the carrot sticks, were at eye level.
From his experience in designing supermarket floor plans, Adam sus- pected that the results would be dramatic. He was right. Simply by re- arranging the cafeteria, Carolyn was able to increase or decrease the con- sumption of many food items by as much as 25 percent. Carolyn learned a big lesson: school children, like adults, can be greatly influenced by small
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2 INTRODUCTION changes in the context. The influence can be exercised for better or for worse. For example, Carolyn knows that she can increase consumption of healthy foods and decrease consumption of unhealthy ones.
With hundreds of schools to work with, and a team of graduate student volunteers recruited to collect and analyze the data, Carolyn believes that she now has considerable power to influence what kids eat. Carolyn is pon- dering what to do with her newfound power. Here are some suggestions she has received from her usually sincere but occasionally mischievous friends and coworkers:
1. Arrange the food to make the students best off, all things considered.
2. Choose the food order at random.
3. Try to arrange the food to get the kids to pick the same foods they would choose on their own.
4. Maximizethesalesoftheitemsfromthesuppliersthatarewillingtoof- fer the largest bribes.
5. Maximize profits, period.
Option 1 has obvious appeal, yet it does seem a bit intrusive, even pater- nalistic. But the alternatives are worse! Option 2, arranging the food at random, could be considered fair-minded and principled, and it is in one sense neutral. But if the orders are randomized across schools, then the children at some schools will have less healthy diets than those at other schools. Is this desirable? Should Carolyn choose that kind of neutrality, if she can easily make most students better off, in part by improving their health?
Option 3 might seem to be an honorable attempt to avoid intrusion: try to mimic what the children would choose for themselves. Maybe that is re- ally the neutral choice, and maybe Carolyn should neutrally follow peo- ple’s wishes (at least where she is dealing with older students). But a little thought reveals that this is a difficult option to implement. Adam’s experi- ment proves that what kids choose depends on the order in which the items are displayed. What, then, are the true preferences of the children? What does it mean to say that Carolyn should try to figure out what the students would choose “on their own”? In a cafeteria, it is impossible to avoid some way of organizing food.
Option 4 might appeal to a corrupt person in Carolyn’s job, and manip- ulating the order of the food items would put yet another weapon in the arsenal of available methods to exploit power. But Carolyn is honorable and honest, so she does not give this option any thought. Like Options 2 and 3, Option 5 has some appeal, especially if Carolyn thinks that the best cafeteria is the one that makes the most money. But should Carolyn really try to maximize profits if the result is to make children less healthy, espe- cially since she works for the school district?
Carolyn is what we will be calling a choice architect. A choice architect has the responsibility for organizing the context in which people make de- cisions. Although Carolyn is a figment of our imagination, many real peo- ple turn out to be choice architects, most without realizing it. If you de- sign the ballot voters use to choose candidates, 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 em- ployees fill out to enroll in the company health care plan, you are a choice architect. If you are a parent, describing possible educational options to your son or daughter, you are a choice architect. If you are a salesperson, you are a choice architect (but you already knew that).
There are many parallels between choice architecture and more tradi- tional forms of architecture. A crucial parallel is that there is no such thing as a “neutral” design. Consider the job of designing a new academic build- ing. The architect is given some requirements. There must be room for 120 offices, 8 classrooms, 12 student meeting rooms, and so forth. The building must sit on a specified site. Hundreds of other constraints will be imposed—some legal, some aesthetic, some practical. In the end, the ar- chitect must come up with an actual building with doors, stairs, windows, and hallways. As good architects know, seemingly arbitrary decisions, such as where to locate the bathrooms, will have subtle influences on how the people who use the building interact. Every trip to the bathroom creates an opportunity to run into colleagues (for better or for worse). A good building is not merely attractive; it also “works.”
As we shall see, small and apparently insignificant details can have major impacts on people’s behavior. A good rule of thumb is to assume that “everything matters.” In many cases, the power of these small details comes from focusing the attention of users in a particular direction. A wonderful example of this principle comes from, of all places, the men’s
INTRODUCTION 3
4 INTRODUCTION rooms at Schiphol Airport in Amsterdam. There the authorities have etched the image of a black housefly into each urinal. It seems that men usually do not pay much attention to where they aim, which can create a bit of a mess, but if they see a target, attention and therefore accuracy are much increased. According to the man who came up with the idea, it works wonders. “It improves the aim,” says Aad Kieboom. “If a man sees a fly, he aims at it.” Kieboom, an economist, directs Schiphol’s building expansion. His staff conducted fly-in-urinal trials and found that etchings reduce spillage by 80 percent.1
The insight that “everything matters” can be both paralyzing and em- powering. Good architects realize that although they can’t build the per- fect building, they can make some design choices that will have beneficial effects. Open stairwells, for example, may produce more workplace inter- action and more walking, and both of these are probably desirable. And just as a building architect must eventually build some particular building, a choice architect like Carolyn must choose a particular arrangement of the food options at lunch, and by so doing she can influence what people eat. She can nudge.*
Libertarian Paternalism
If, all things considered, you think that Carolyn should take the opportunity to nudge the kids toward food that is better for them, Option
*Please do not confuse nudge with noodge. As William Safire has explained in his “On Language” column in the New York Times Magazine (October 8, 2000), the “Yiddishism noodge” is “a noun meaning ‘pest, annoying nag, persistent complainer.’ . . . To nudge is ‘to push mildly or poke gently in the ribs, especially with the elbow.’ One who nudges in that manner—‘to alert, remind, or mildly warn another’—is a far geshrei from a noodge with his incessant, bothersome whining.” Nudge rhymes with judge, while the oo sound in noodge is pronounced as in book.
While we are all down here, a small note about the reading architecture of this book when it comes to footnotes and references. Footnotes such as this one that we deem worth reading are keyed with a symbol and placed at the bottom of the page, so that they are easy to find. We have aimed to keep these to a minimum. Numbered endnotes contain information about source material. These can be skipped by all but the most scholarly of readers. When the authors of cited material are mentioned in the text, we sometimes add a date in parentheses—Smith (1982), for example—to enable readers to go directly to the bibliography without having first to find the endnote.
1, then we welcome you to our new movement: libertarian paternalism. We are keenly aware that this term is not one that readers will find imme- diately endearing. Both words are somewhat off-putting, weighted down by stereotypes from popular culture and politics that make them unappeal- ing to many. Even worse, the concepts seem to be contradictory. Why combine two reviled and contradictory concepts? We argue that if the terms are properly understood, both concepts reflect common sense—and they are far more attractive together than alone. The problem with the terms is that they have been captured by dogmatists.
The libertarian aspect of our strategies lies in the straightforward insis- tence that, in general, people should be free to do what they like—and to opt out of undesirable arrangements if they want to do so. To borrow a phrase from the late Milton Friedman, libertarian paternalists urge that people should be “free to choose.”2 We strive to design policies that main- tain or increase freedom of choice. When we use the term libertarian to modify the word paternalism, we simply mean liberty-preserving. And when we say liberty-preserving, we really mean it. Libertarian paternalists want to make it easy for people to go their own way; they do not want to burden those who want to exercise their freedom.
The paternalistic aspect lies in the claim that it is legitimate for choice ar- chitects to try to influence people’s behavior in order to make their lives longer, healthier, and better. In other words, we argue for self-conscious efforts, by institutions in the private sector and also by government, to steer people’s choices in directions that will improve their lives. In our un- derstanding, a policy is “paternalistic” if it tries to influence choices in a way that will make choosers better off, as judged by themselves.3 Drawing on some well-established findings in social science, we show that in many cases, individuals make pretty bad decisions—decisions they would not have made if they had paid full attention and possessed complete informa- tion, unlimited cognitive abilities, and complete self-control.
Libertarian paternalism is a relatively weak, soft, and nonintrusive type of paternalism because choices are not blocked, fenced off, or significantly burdened. If people want to smoke cigarettes, to eat a lot of candy, to choose an unsuitable health care plan, or to fail to save for retirement, lib- ertarian paternalists will not force them to do otherwise—or even make things hard for them. Still, the approach we recommend does count as pa-
INTRODUCTION 5
6 INTRODUCTION ternalistic, because private and public choice architects are not merely try- ing to track or to implement people’s anticipated choices. Rather, they are self-consciously attempting to move people in directions that will make their lives better. They nudge.
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. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting the fruit at eye level counts as a nudge. Banning junk food does not.
Many of the policies we recommend can and have been implemented by the private sector (with or without a nudge from the government). Em- ployers, for example, are important choice architects in many of the exam- ples we discuss in this book. In areas involving health care and retirement plans, we think that employers can give employees some helpful nudges. Private companies that want to make money, and to do good, can even benefit from environmental nudges, helping to reduce air pollution (and the emission of greenhouse gases). But as we shall show, the same points that justify libertarian paternalism on the part of private institutions apply to government as well.
Humans and Econs: Why Nudges Can Help
Those who reject paternalism often claim that human beings do a terrific job of making choices, and if not terrific, certainly better than any- one else would do (especially if that someone else works for the govern- ment). Whether or not they have ever studied economics, many people seem at least implicitly committed to the idea of homo economicus, or eco- nomic man—the notion that each of us thinks and chooses unfailingly well, and thus fits within the textbook picture of human beings offered by economists.
If you look at economics textbooks, you will learn that homo economi- cus can think like Albert Einstein, store as much memory as ibm’s Big Blue, and exercise the willpower of Mahatma Gandhi. Really. But the folks that we know are not like that. Real people have trouble with long division if they don’t have a calculator, sometimes forget their spouse’s birthday, and have a hangover on New Year’s Day. They are not homo economicus; they are homo sapiens. To keep our Latin usage to a minimum we will hereafter refer to these imaginary and real species as Econs and Humans.
Consider the issue of obesity. Rates of obesity in the United States are now approaching 20 percent, and more than 60 percent of Americans are considered either obese or overweight. There is overwhelming evidence that obesity increases risks of heart disease and diabetes, frequently leading to premature death. It would be quite fantastic to suggest that everyone is choosing the right diet, or a diet that is preferable to what might be pro- duced with a few nudges.
Of course, sensible people care about the taste of food, not simply about health, and eating is a source of pleasure in and of itself. We do not claim that everyone who is overweight is necessarily failing to act rationally, but we do reject the claim that all or almost all Americans are choosing their diet optimally. What is true for diets is true for other risk-related behavior, including smoking and drinking, which produce more than five hundred thousand premature deaths each year. With respect to diet, smoking, and drinking, people’s current choices cannot reasonably be claimed to be the best means of promoting their well-being. Indeed, many smokers, drinkers, and overeaters are willing to pay third parties to help them make better decisions.
But our basic source of information here is the emerging science of choice, consisting of careful research by social scientists over the past four decades. That research has raised serious questions about the rationality of many judgments and decisions that people make. To qualify as Econs, peo- ple are not required to make perfect forecasts (that would require omni- science), but they are required to make unbiased forecasts. That is, the forecasts can be wrong, but they can’t be systematically wrong in a pre- dictable direction. Unlike Econs, Humans predictably err. Take, for exam- ple, the “planning fallacy”—the systematic tendency toward unrealistic optimism about the time it takes to complete projects. It will come as no surprise to anyone who has ever hired a contractor to learn that everything takes longer than you think, even if you know about the planning fallacy.
Hundreds of studies confirm that human forecasts are flawed and bi- ased. Human decision making is not so great either. Again to take just one example, consider what is called the “status quo bias,” a fancy name for in-
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8 INTRODUCTION