Nudge, is a book very much in the vein of Predictably Irrational or The Economic Naturalist.  It’s the idea (in layman’s terms) that people are inherently stupid.  We make bad decisions.  Some books just make these observations, but Nudge is a complete package.  It’s: you make bad decisions, they are hard to avoid, here’s how it can be fixed, and maybe this is how the government could help too. The authors are economists but also have suggestions for policy implementations.  They believe in a concept called Libertarian Paternalism.  That is, we are allowed to make our own decisions, but perhaps someone or something could “nudge” you towards the right decision.

The easiest example is with getting to people to invest in 401ks at work.  Some people just don’t bother, others are daunted by the idea and too scared to make the wrong decision, so they don’t.  Others do it but just put their money in a money market or something.  Can we improve the situation?  Maybe.  How about automatically enrolling everyone in a conservative balance of stocks and bonds?  People that know they don’t want to save can opt-out, and others would at least get something.  This respects everyone’s right to choose, but nudges people in the right direction.
The book goes on to talk about other topics, including social security, and Bush’s Medicare Part D.  One of the more fascination subjects revolved around a system that could dramatically increase the number of donated organs in the US.  Really good stuff that includes practical solutions to every day problems.

So what else is good about the book?  It’s written in a great format.  The first part of the book seems to focus on educating the reader about different things.  For example, there are humans and there are econs.  Econs make rational decisions, humans often times do not.  Econs are the “in a perfect world” people that we use to make assumptions.  But humans are actually people, they make dumb decisions, or avoid decisions altogether.  The book then moves on to more specific problems with their suggestions on how to fix them.  Though there are a couple of policy recommendations, the book is not political and the format made for a good read.

But no book is perfect.  Nudge is written by economists, and you can tell.  They tend to dwell on topics for much longer than my attention allows.  This made for a long read for me, though I’m a very slow reader as it is.  I tore through two other books as I read Nudge though, so it may not be for everyone.  And while they do a great job of explaining topics that even your dog can understand, the book slows as a result.

Don’t let this detract from your reading of it though.  I try not to rate books, but if you like Predictably Irrational, The Economic Naturalist, or even Freakonomics, you should give this book a run.  I hope these guys do a follow-up as I’ll be in line for it if they do.  In the mean time they have a blog and twitter account, which I follow very closely.

And just for fun, here’s a picture of my dog nudging me.  He’s saying, stop reading Nudge (which I was) and pay attention to me.

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categories: books, economics, government