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Book Excerpt: Nudge: Improving Decisions About Health, Wealth, and Happiness

Read this book excerpt from "Nudge" by Richard H. Thaler and Cass R. Sunstein.

The credit card companies had a good intuitive understanding of what psychologists would come to call “framing.” The idea is that choices depend, in part, on the way in which problems are stated. The point matters a great deal for public policy. Energy conservation is now receiving a lot of attention, so consider the following information campaigns: (a) If you use energy conservation methods, you will save $350 per year; (b) If you do not use energy conservation methods, you will lose $350 per year. It turns out that information campaign (b) framed in terms of losses, is far more effective than information campaign (a). If the government wants to encourage energy conservation, option (b) is a stronger nudge.

Framing works because people tend to be somewhat mindless, passive decision makers. Their Reflective System does not do the work that would be required to check and see whether reframing the questions would produce a different answer. One reason they don’t do this is that they wouldn’t know what to make of the contradiction. This implies that frames are powerful nudges, and must be selected with caution.

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