Richard Thaler: What Is A Nudge? How can a simple adjustment - a nudge - change our behavior for the better? Professor Richard Thaler says his "nudge theory" can make it easier for people to save money, eat healthily and more.
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What Is A Nudge?

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What Is A Nudge?

What Is A Nudge?

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GUY RAZ, HOST:

It's the TED Radio Hour from NPR. I'm Guy Raz. Here's an idea.

RICHARD THALER: If you want to encourage people to do something, make it easy.

RAZ: This idea comes from economist Richard Thaler.

THALER: It's best said to the tune of the Eagles song.

(SOUNDBITE OF SONG, "TAKE IT EASY ")

EAGLES: (Singing) So take it easy.

THALER: Even without the song, it works pretty well. And this idea works on humans but wouldn't work on Homo Economicus, those perfectly rational creatures that populate the economics textbooks.

RAZ: Yeah.

THALER: But not Earth.

RAZ: OK, so let's back up. Richard Thaler, who, by the way, teaches at The University of Chicago...

THALER: Booth School of Business.

RAZ: ...Is a behavioral economist who's deceptively simple idea...

THALER: Make it easy.

RAZ: ...Has been used by governments and advertisers and businesses to gently alter the decisions we all make every day.

THALER: You know, I suggested this idea in a paper I wrote nearly 20 years ago.

RAZ: Now, back then...

THALER: Nobody paid much attention to it.

RAZ: Richard was known - still is in fact - as an economist with ideas that are sometimes a little unusual.

THALER: Yeah. I think that would be a polite way of putting it.

RAZ: (Laughter) What's a - what would be the...

THALER: Crank would be a, you know, a less polite way of putting it.

RAZ: Anyway, this idea, this paper that he wrote 20 years ago...

THALER: Just...

RAZ: ...Didn't sound very exciting.

THALER: Suggesting various ways of increasing saving.

RAZ: Like for retirement.

THALER: And this was one idea I threw out.

RAZ: OK, at the time, a lot of companies had a hard time getting people to sign up for a 401k retirement plan because it was a pain.

THALER: A participant had to fill out a bunch of forms, decide how much to save and how to invest it, and that could all be very daunting.

RAZ: But Richard knew there had to be a way to make it easier. And after some thought, he concluded the easiest way to get people to make the right choice was to reverse the choice.

THALER: So an employee, when first eligible for the plan, gets a pile of forms and says if you don't fill these out, we're going to enroll you in the plan at this saving rate and invest it this way. But feel free to opt out or choose to save more or invest it some other way. It's all up to you. But if you do nothing, this is what's going to happen.

RAZ: So it turned out, it was pretty easy for a lot of people to do nothing. And when a company in Minnesota was one of the first to try out Richard's idea...

THALER: The enrollment rate went from 49 percent to 86 percent.

RAZ: Wow.

THALER: And that's the number of people who enrolled within the first year.

RAZ: That's amazing, just from a little tweak to say, you know, we're not going to make you opt in. We're going to...

THALER: That was it.

RAZ: We're going to make you opt out.

THALER: That was the only change they made.

RAZ: Richard Thaler lives for stories like these. Another example - a study done out of Cornell University in 2013 found...

THALER: That merely slicing up apples and putting them into a plastic bag greatly increases apple consumption by kids.

RAZ: By, like, 70 percent in schools where they tried this.

THALER: And that's because we've made it easy.

RAZ: This idea that a small tweak to the way a choice is framed can actually change a person's decision. It might seem obvious, but Richard and his colleague economist Cass Sunstein were the first to suggest it could be used for good, to help us save for retirement, to eat healthier, to live better. And they called this idea nudge.

THALER: You know, Cass Sunstein and I don't claim that we invented nudging. I sometimes suggest that Eve invented nudging with that apple. And we don't know whether the apple she offered to Adam was sliced. But people have been nudging since there have been people.

RAZ: Today on the show - nudge, ideas about how small changes in the words we use or the way we think can have a huge impact on behavior and outcomes.

Richard Thaler and Cass Sunstein's book about this, by the way, is called "Nudge." Richard will be back a little later in the show.

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