Book Review: Nudge

by Mr. Cheap

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“Nudge:  Improving Decisions About Health, Wealth and Happiness” by Richard Thaler and Cass Sunstein is a book about how presenting choices in a different way can lead to widely differing proportions of people making each selection.  At the very beginning they present an experiment where a nutritionist running cafeterias wanted to provide student with the full range of options, but encourage them to make healthier choices.  She found that simply by having carrot sticks (or a similar nutritious item) FIRST in the line increased choice of these over options like french fries by 25%.

The rest of the book presents numerous case studies where, through actions as simple as the order food is presented in a cafeteria line, the choices GROUPS of people make can be massively swayed.  They don’t make any claim (or express any desire) to change the decision of one person.  Instead their focus is on shifting the number of people from choosing one option to another.

Another example they gave is the default choice (what people are assigned to if they don’t choose anything).  In most situations, regardless of how important the decision is, the default choice will get a disproportionate number of people selecting it (a number won’t get around to making a choice and will just leave it as is).

This has always made me angry in the university environment.  At both schools that I’ve attended there were a number of “optional” fees that were charged to your account, then you were given a window of time to submit paperwork to get your money back.  Even if someone got a refund every term, the next term the funds would be automatically be deducted from their account and they would have to take action to get them back (again).  The people running the show wanted to benefit from the default option (leaving the cash in their pockets, not yours).

A running theme in the book is contrasting what they call Econs (think ultra-rational decision makers like Mr. Spock on “Star Trek”) with Humans (think Homer Simpson on “The Simpsons”).  Many policies are designed for Econs, then all us Humans make choices that are bad for us.

This was one of the most dense economics-style books I’ve read in a while, and it took me a bit longer to work through than most books do.  It was very well cited and provides a lot of information, but someone picking it up should realize that they’re getting something closer to a textbook than a pleasure read.

At the end of the book they summarize that the book is about two things, choice architecture (offering choices such that people have the full range of options but will be pushed towards one option) and what they call “paternal libertarianism”.  By this they mean, offer the full range of choices (libertarianism), but use the power to push towards the option that best helps people (paternalism).  I found this element of the book (if sincere) quite naive.  People architecting choices will, as I’ve seen at my universities and every other situation I can think of, “nudge” people in the direction that’s best for the NUDGER, not the NUDGEE.  I’m certain the people setting up the fee structures at my universities had rationalizations for what they’d done, just as I’m sure businesses and governments can easily rationalize “Nudges” they put in place for their own benefit.

I wonder if the authors introduced this element to the book just so they wouldn’t be accused of writing a Machiavellian book on ways to control groups of people (which, make no mistake, this is in part).

Overall I greatly enjoyed this book.  If you’re at all involved in determining how choices are offered to people (even by something as simple as designing a form, being in sales or administering a company benefit plan) this is a book that is well worth reading.  If you find the general ideas enticing, I think this is a solid book with some good meat to it.  Consumers are certainly being manipulated by techniques detailed in it (and have been since LONG before it was published), so if you’re the type of person who doesn’t like being pushed into a decision, it’s probably also worth reading just so you’ll be more aware of ways this is done to us.

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{ 2 comments… read them below or add one }

1 2 Cents @ Balance Junkie

This sounds really interesting for both “nudgers” and “nudgees”. I think one of the problems with the financial services industry today is that the default position is toward advisors who collect high (and often hidden) fees to nudge clients toward products that favour the advisor (and their firm) rather than the client.

I know there are a fair number of advisors who don’t like the situation either, but they have to follow the business model of the industry in order to make a living. Maybe it’s time for a new business model. :)

2 Mr. Cheap

$0.02: Yes, it’s certainly a problem and unfortunately, as you say, something even people embedded in the system are often powerless to do anything about.

I think the only way to force a change would be for people to become aware enough of this that they would start making a fuss every time they saw a “nudge” that was against their best interests. They’d also have to refused to be placated when the organization offering the choices said “just don’t make that choice, choose something else!”

I don’t really see this happening any time soon.

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