SYLVIE DOUGLIS, BYLINE: NPR.
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STACEY VANEK SMITH, HOST:
Greg Rosalsky, Planet Money newsletter auteur, welcome.
GREG ROSALSKY, BYLINE: Stacey Vanek Smith, it is such a pleasure.
VANEK SMITH: And you have come to us with a story.
ROSALSKY: That's right. It's a story featuring none other than a Nobel Prize-winning economist.
VANEK SMITH: Woo (ph).
ROSALSKY: If you're not an econ nerd, you may have never heard of him, but his name is Richard Thaler. And for an economist, he's kind of as close as you can get to, like, becoming a rock star.
VANEK SMITH: He's like the Mick Jagger of economists.
ROSALSKY: He kind of is.
VANEK SMITH: Thaler's book "Nudge" was this huge bestseller, introduced many of us to behavioral economics for the first time. So Greg, if you don't mind explaining to us, what is a nudge and kind of how does it work?
ROSALSKY: Well, let's say you, like, run a school cafeteria and you want to encourage healthy eating. You could ban junk food, and that would definitely not be a nudge. You could impose a fine on eating junk food. That also would not be a nudge. A nudge would be more like putting junk food in the back row while displaying fruits and vegetables more prominently.
RICHARD THALER: And the idea of nudge was, to what extent can you influence people's behavior without requiring anybody to do it?
VANEK SMITH: So "Nudge" was published back in 2008, and it became this kind of phenomenon, sold millions of copies, and governments all over the world started using it as, like, this template to create policies that could change behavior. A lot of them created these so-called nudge units that used the book's concepts and methods to try to get people to do things. Companies also started using all of these ideas to improve the lives of workers and consumers. And of course, Thaler won a Nobel Prize for this work.
ROSALSKY: And now he and his co-author, Cass Sunstein, are releasing "Nudge: The Final Edition." Thaler says they put a lot of work into it, probably too much work, and he doesn't want to ever do it again. So final edition - the subtitle is kind of like their meta way to nudge themselves into making sure they don't have to.
THALER: You know, I'm a big believer in commitment strategies. So if you say it's the final edition, we're not going to do it again.
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ROSALSKY: This is THE INDICATOR FROM PLANET MONEY. I'm Greg Rosalsky.
VANEK SMITH: And I'm Stacey Vanek Smith. Today on the show, we talk with Nobel Prize-winning economist and founder of behavioral economics, Richard Thaler, about nudging and some new ideas about it, some final ideas about nudging.
ROSALSKY: Yes, the nudge, also the sludge and how we can use behavioral economics to fight COVID and vaccine hesitancy.
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ROSALSKY: For a long time, economists used a model that portrayed humans as these kind of, like, supernaturally rational creatures. They were free of cognitive flaws and emotions. They had perfect self-control and discipline and clarity of judgment. And they were always able to make choices that did them the most good.
VANEK SMITH: With "Nudge," Thaler and his co-author, Cass Sunstein, offered psychological evidence and theories for why people often fail to make decisions that will do them the most good. Not only that, they offered these little practical solutions, these nudges to help us make better decisions for ourselves.
ROSALSKY: There have been many nudges that have changed our world. There have been nudges that have increased organ donation, nudges that have helped people quit smoking and lose weight and, you know, reduce litter and improve people's finances. But Thaler is the rare Nobel laureate with a sense of humor, so when he gets asked about an example of a nudge, he likes to talk about urinals.
THALER: The fly in the urinal that was used in the Amsterdam airport - they etched this image of a housefly right in the urinal. So the idea is if you give a man a target, he will aim. And they claim - we've been unable to check this data. But they claim that spillage, which is a great euphemism - that spillage was decreased significantly.
ROSALSKY: I just love the idea that there's, like, this treasure trove of urinal data that you can't get your hands on...
ROSALSKY: ...To test this proposition. Thirteen years later, still can't get the urinal data.
VANEK SMITH: This man is a Nobel laureate. Give him the urinal data.
VANEK SMITH: As important as urinals are, Thaler says their most significant nudge probably has been getting workers to boost their retirement savings. And his research shows that, like, when you make a retirement plan, the default option when workers get hired - they overwhelmingly will tend to stick with it. Researchers find that automatic enrollment more than triples the percentage of workers participating in retirement plans. It is an amazing effect that will change people's lives from just a very little tweak.
ROSALSKY: That idea was in the original version of the book. The new version has a lot more ideas. My favorite is probably this concept they call sludge. One way to nudge people into doing something is to make it easy to do. Sludge is like - it's like sinister opposite - when institutions try to prevent something by making it hard to do. Thaler says he was inspired to develop the idea of sludge when his memoir, "Misbehaving," was released a few years ago.
THALER: The first review was published in some London newspaper. And my editor saw it and sent me a link. And I clicked on it, and there was a paywall.
ROSALSKY: An ad popped up on his screen. To get past the paywall, there was a promotion. It would cost one British pound to sign up for a one-month trial subscription.
THALER: But then I said, maybe I should see what I have to do to unsubscribe. So I read the fine print, and I see that to unsubscribe, I have to give 14 days notice, and I can't do it online. I have to call London, in London business hours, not on a toll-free line. And so I knew this was just going to be a lifetime subscription.
ROSALSKY: This was the newspaper using sludge to, you know, keep subscribers and make money.
VANEK SMITH: We see the sludge all over the place. You can see it increasing the effort it takes to file your taxes, and you could also see it when we first started rolling out vaccines in the U.S. It was really difficult to book appointments at first. A lot of that was just a lack of vaccine supply, but then, you know, things also got sort of unnecessarily complicated in some places. That, for the most part, in the U.S. is gone. That sludge is gone. And now the trick has become nudging people to get the vaccine.
ROSALSKY: And Thaler says governments have been doing a pretty good job of nudging people to get the vaccine. I mean, there are things like, you know, lotteries. Despite the extreme odds against winning a lottery, people for some reason love them. And a number of states have used the chance of winning a lottery to nudge people to get vaccinated. Of course, there are still many people who are not vaccinated. Thaler says, unfortunately, nudging can only go so far.
THALER: I think at this point, firmer measures will be required that go beyond pure nudging.
ROSALSKY: In other words, Stacey, the godfather of the nudge says we may need more than a nudge at this point.
THALER: No country has decided to require vaccines. But France has come close because they've said that if you're not vaccinated, you won't be able to go to a restaurant. And as a French friend of mine told me, that's equivalent to the death penalty in France, if you can't go to the cafe. That's beyond nudging. That's...
THALER: That's shoving. Yeah, that's shoving. So I think we're going to have to go down some of these paths.
VANEK SMITH: And, you know, Greg, there's been a lot of talk about shoving, like vaccine passports or employers possibly requiring proof of vaccination to let people go back to work and colleges requiring students to be vaccinated to come back on campus. So shoves are happening, and we could see more soon.
ROSALSKY: Well, thank you very much for speaking to me. And I look forward to speaking to you 13 years from now when you release the post-final version of "Nudge."
THALER: Go to hell, Greg.
THALER: Nice talking to you.
VANEK SMITH: I think he's throwing a little sludge at you, Greg.
ROSALSKY: That was Richard Thaler. What a legend.
VANEK SMITH: This episode of THE INDICATOR was produced by Brittany Cronin, with help from Gilly Moon. It was fact-checked by Michael He. THE INDICATOR's edited by Kate Concannon and is a production of NPR.
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