Discover what nudges are in behavioral economics, their non-coercive nature, and how they influence decision-making without limiting freedom or changing economic incentives.
Table of Contents
Question
What are nudges?
A. Coercive measures that enforce behaviour changes by limiting options.
B. Techniques that rely solely on providing extensive information to individuals.
C. Persuasive arguments that engage full rational capacities to influence decisions.
D. Non-coercive influences that encourage better choices without restricting options or significantly changing economic incentives.
Answer
D. Non-coercive influences that encourage better choices without restricting options or significantly changing economic incentives.
Explanation
Nudges are a concept rooted in behavioral economics and were popularized by Richard Thaler and Cass Sunstein in their book Nudge: Improving Decisions About Health, Wealth, and Happiness. They refer to subtle interventions in the decision-making environment (or “choice architecture”) that influence behavior in predictable ways without restricting freedom of choice or imposing significant economic consequences.
Key characteristics of nudges include
- Non-Coercive Nature: Nudges do not force individuals to make specific decisions. Instead, they guide choices by leveraging cognitive biases and heuristics.
- Preservation of Options: All options remain available; a nudge does not forbid or eliminate any choices.
- Minimal Economic Impact: Nudges do not rely on financial incentives or penalties to drive behavior change.
- Ease of Avoidance: The intervention must be easy and inexpensive for individuals to opt out of.
Examples of Nudges
- Default Options: Automatically enrolling employees in retirement savings plans with the option to opt out increases participation rates.
- Choice Framing: Placing healthier food at eye level in cafeterias encourages better dietary decisions without removing unhealthy options.
- Social Norms Messaging: Informing hotel guests that “70% of people reuse their towels” increases towel reuse rates.
Why Other Options Are Incorrect
A (Coercive measures): Nudges are inherently non-coercive and do not limit options.
B (Providing extensive information): While information can aid decision-making, nudges rely on altering the environment rather than solely providing data.
C (Persuasive arguments): Nudges work by influencing automatic, subconscious processes (System 1 thinking), rather than engaging full rational capacities (System 2 thinking).
By understanding these principles, you can see why nudges are a powerful tool for influencing behavior while respecting individual autonomy.
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