Incentives, whether intrinsic or extrinsic, are not the only thing that can change behavior. Sometimes small changes in how a choice is presented, or “framed,” can matter a great deal. Do you prefer beef that is 80% lean or beef that is 20% fat? Of course, those are just two different ways of presenting the same choice but supermarkets know that advertising 80% lean sells better. And have you noticed that supermarkets place the attractive candy and gossip magazines next to the checkout line rather than beside the dishwasher detergent in aisle seven? Someone who needs detergent is going to buy detergent regardless of what aisle it’s in but most of us feel a bit guilty about candy and gossip. We enjoy these items even if we also think we consume too much of them. Putting the candy and gossip at the checkout turns it into an “impulse buy”: Just one moment of weakness and the salesclerk has already rung the item up. And where do supermarkets put the boring but often purchased items like milk? At the back of the store so you have to walk past the cookies and other temptations to get what you want.

Planning where, when, and how choices are made is sometimes called “choice architecture,” and in this case the choice architecture is geared toward getting us to spend more. In contrast, some employers now put healthier foods in especially visible spots in their work cafeterias, so as to encourage healthy eating (and lower health insurance costs) among their employees. For much the same reason, one of your authors bought a refrigerator with clear fruit and vegetable drawers placed at eye level.

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Cass Sunstein and Richard Thaler, a lawyer and an economist, have written a best-selling book called Nudge, which considers a variety of ways that governments and other organizations can use small changes in the choice architecture—what they call “nudges”—to change or improve decisions.

Most people, for example, don’t like to deviate too much from the norm, so in some cases just telling people what is normal or average can change their behavior. In San Marcos, California, the local utility company told people whether they were using more or less energy compared to the average in their neighborhood. People who learned that they were using more electricity than average lowered their consumption in future periods even though the price of electricity didn’t change. The change was especially large when people with above-average consumption also received a frowning emoticon on their bill while people with below average consumption earned a smiley face.13 By the way, good job on studying so hard.

In Chapter 21 on ethics, we discussed how some economists propose to increase the supply of transplant organs by paying donors for their kidneys. Of course, that’s a controversial option. A nudge might be less controversial. For instance, in the United States a person must choose to become an organ donor by signing a donor card. In Austria, everyone is automatically considered to be an organ donor unless they have signed a nondonor card. Either option is pretty easy but in the United States only 42% of potential donors have signed donor cards while in Austria only 1% have signed nondonor cards. As a result, 99% of Austrians are potential organ donors, more than double the U.S. percentage. Maybe Austrians are just more willing to be organ donors, but Sunstein and Thaler argue that more Americans would be willing donors if the choice to do so was made just a little bit easier.14

Inspired by Sunstein and Thaler, the British government has created a Behavioral Insights Team, popularly called the “nudge unit,” to try to find small nudges to get people to do things the government wants, such as pay their taxes on time, insulate their attics, sign up for organ donation, and stop smoking during pregnancy.

From these examples, perhaps you can see both the potential of the nudge concept but also why it is not popular with everyone. Sometimes nudging is considered a form of manipulation or a step toward controlling more of our choices. Some individuals object to nudges all the more when they are performed by governments because of the fear that this represents a Big Brother paternalistic relationship. Advocates of nudging techniques stress their non-coercive nature, how they are based on freedom of choice, and the potential for better outcomes.

The general lesson is this. Economists usually think that what matters for choice are preferences and constraints such as prices and income. And, of course, incentives do matter. But other things matter too and sometimes how choices are presented can change which choices are made, even without changing more fundamental factors. Smiley faces won’t solve the problem of climate change. For that we probably do need changes in the price of greenhouse gas emissions. But if a nudge can moderately improve outcomes at very low cost, why not nudge?

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