In our understanding, a policy is ‘paternalistic’ if it tries to influence choices in a way that will make choosers better off, as judged by themselves. (Location 119)

private and public choice architects are not merely trying to track or to implement people’s anticipated choices. Rather, they are self-consciously attempting to move people in directions that will make their lives better. They nudge. (Location 126)

A nudge, as we will use the term, is any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting the fruit at eye level counts as a nudge. Banning junk food does not. (Location 128)

‘planning fallacy’ –the systematic tendency toward unrealistic optimism about the time it takes to complete projects. It will come as no surprise to anyone who has ever hired a contractor to learn that everything takes longer than you think, even if you know about the planning fallacy. (Location 159)

Tags: planning

‘status quo bias,’ a fancy name for inertia. For a host of reasons, which we shall explore, people have a strong tendency to go along with the status quo or default option. (Location 163)

Two important lessons can be drawn from this research. First, never underestimate the power of inertia. Second, that power can be harnessed. If private companies or public officials think that one policy produces better outcomes, they can greatly influence the outcome by choosing it as the default. As we will show, setting default options, and other similar seemingly trivial menu-changing strategies, can have huge effects on outcomes, from increasing savings to improving health care to providing organs for lifesaving transplant operations. (Location 168)

Tags: inertia, change

Suppose that a chess novice were to play against an experienced player. Predictably, the novice would lose precisely because he made inferior choices – choices that could easily be improved by some helpful hints. In many areas, ordinary consumers are novices, interacting in a world inhabited by experienced professionals trying to sell them things. (Location 188)

It seems reasonable to say that people make good choices in contexts in which they have experience, good information, and prompt feedback – say, choosing among ice cream flavors. People know whether they like chocolate, vanilla, coffee, licorice, or something else. They do less well in contexts in which they are inexperienced and poorly informed, and in which feedback is slow or infrequent – say, in choosing between fruit and ice cream (where the long-term effects are slow and feedback is poor) or in choosing among medical treatments or investment options. (Location 191)

Choosers are human, so designers should make life as easy as possible. Send reminders, and then try to minimize the costs imposed on those who, despite your (and their) best efforts, space out. As we will see, these principles (and many more) can be applied in both the private and public sectors, and there is much room for going beyond what is now being done. (Location 251)

PART I Humans and Econs (Location 276)

that our understanding of human behavior can be improved by appreciating how people systematically go wrong. (Location 300)


We will call the first the Automatic System and the second the Reflective System. (Location 309)

The Automatic System is rapid and is or feels instinctive, and it does not involve what we usually associate with the word thinking. (Location 311)

Brain scientists are able to say that the activities of the Automatic System are associated with the oldest parts of the brain, the parts we share with lizards (as well as puppies). (Location 314)

The Reflective System is more deliberate and self-conscious. (Location 322)

One way to think about all this is that the Automatic System is your gut reaction and the Reflective System is your conscious thought. Gut feelings can be quite accurate, but we often make mistakes because we rely too much on our Automatic System. (Location 333)

Tags: system 1 and 2

The Automatic System can be trained with lots of repetition – but such training takes a lot of time and effort. One reason why teenagers are such risky drivers is that their Automatic Systems have not had much practice, and using the Reflective System is much slower. (Location 339)

Most of us are busy, our lives are complicated, and we can’t spend all our time thinking and analyzing everything. When we have to make judgments, such as guessing Angelina Jolie’s age or the distance between Cleveland and Philadelphia, we use simple rules of thumb to help us. We use rules of thumb because most of the time they are quick and useful. (Location 360)

Amos Tversky and Daniel Kahneman (1974), has changed the way psychologists (and eventually economists) think about thinking. Their original work identified three heuristics, or rules of thumb – anchoring, availability, and representativeness – and the biases that are associated with each. (Location 368)

Their research program has come to be known as the ‘heuristics and biases’ approach to the study of human judgment. More recently, psychologists have come to understand that these heuristics and biases emerge from the interplay between the Automatic System and the Reflective System. (Location 370)

Tags: system 1 and 2, brain

Anchoring (Location 372)

‘anchoring and adjustment.’ You start with some anchor, the number you know, and adjust in the direction you think is appropriate. (Location 378)

Tags: anchoring

In many domains, the evidence shows that, within reason, the more you ask for, the more you tend to get. Lawyers who sue cigarette companies often win astronomical amounts, in part because they have successfully induced juries to anchor on multimillion-dollar figures. Clever negotiators often get amazing deals for their clients by producing an opening offer that makes their adversary thrilled to pay half that very high amount. (Location 397)

Availability (Location 401)

most people use what is called the availability heuristic. They assess the likelihood of risks by asking how readily examples come to mind. If people can easily think of relevant examples, they are far more likely to be frightened and concerned than if they cannot. (Location 403)

Tags: heuristics

Note: We look at how readily an example comes to mind to determine our calculation of how likely that example is to occur

Accessibility and salience are closely related to availability, and they are important as well. If you have personally experienced a serious earthquake, you’re more likely to believe that an earthquake is likely than if you read about it in a weekly magazine. Thus vivid and easily imagined causes of death (for example, tornadoes) often receive inflated estimates of probability, and less-vivid causes (for example, asthma attacks) receive low estimates, even if they occur with a far greater frequency (here a factor of twenty). (Location 408)

Or suppose that people falsely think that some risks (a nuclear power accident) are high, whereas others (a stroke) are relatively low. Such misperceptions can affect policy, because governments are likely to allocate their resources in a way that fits with people’s fears rather than in response to the most likely danger. (Location 420)

Representativeness (Location 427)

The third of the original three heuristics bears an unwieldy name: representativeness. Think of it as the similarity heuristic. The idea is that when asked to judge how likely it is that A belongs to category B, people (and especially their Automatic Systems) answer by asking themselves how similar A is to their image or stereotype of B (that is, how ‘representative’ A is of B). (Location 428)

The ‘above average’ effect is pervasive. Ninety percent of all drivers think they are above average behind the wheel, (Location 510)

(Second marriage, Samuel Johnson once quipped, ‘is the triumph of hope over experience.’) (Location 518)

Note: 2nd marriage 'is the triumph of hope over experience'

GAINS AND LOSSES (Location 533)

People hate losses (and their Automatic Systems can get pretty emotional about them). Roughly speaking, losing something makes you twice as miserable as gaining the same thing makes you happy. In more technical language, people are ‘loss averse.’ How do we know this? (Location 534)

Tags: heuristics

Note: People hate losses

Loss aversion helps produce inertia, meaning a strong desire to stick with your current holdings. If you are reluctant to give up what you have because you do not want to incur losses, then you will turn down trades you might have otherwise made. (Location 546)

STATUS QUO BIAS (Location 551)

FRAMING (Location 576)

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. (Location 597)

The picture that emerges is one of busy people trying to cope in a complex world in which they cannot afford to think deeply about every choice they have to make. People adopt sensible rules of thumb that sometimes lead them astray. Because they are busy and have limited attention, they accept questions as posed rather than trying to determine whether their answers would vary under alternative formulations. The bottom line, from our point of view, is that people are, shall we say, nudge-able. Their choices, even in life’s most important decisions, are influenced in ways that would not be anticipated in a standard economic framework. (Location 601)

2 Resisting Temptation (Location 617)

Self-control problems can be illuminated by thinking about an individual as containing two semiautonomous selves, a far-sighted ‘Planner’ and a myopic ‘Doer.’ You can think of the Planner as speaking for your Reflective System, or the Mr Spock lurking within you, and the Doer as heavily influenced by the Automatic System, or everyone’s Homer Simpson. The Planner is trying to promote your long-term welfare but must cope with the feelings, mischief, and strong will of the Doer, who is exposed to the temptations that come with arousal. (Location 658)


Eating turns out to be one of the most mindless activities we do. Many of us simply eat whatever is put in front of us. That is why even massive bowls of cashews are likely to be consumed completely, regardless of the quality of the food that is soon to be arriving. (Location 670)

Large plates and large packages mean more eating; they are a form of choice architecture, and they work as major nudges. (Hint: if you would like to lose weight, get smaller plates, buy little packages of what you like, and don’t keep tempting food in the refrigerator.) (Location 683)

Tags: diet

Note: Use smaller plates to eat less

That is when Thaler intervened by offering David the following deal. David would write Thaler a series of checks for $100, payable on the first day of each of the next few months. Thaler would cash each check if David did not put a copy of a new chapter of the thesis under his door by midnight of the corresponding month. Furthermore, Thaler promised to use the money to have a party to which David would not be invited. David completed his thesis on schedule four months later, never having missed a deadline (though most chapters were completed within mere minutes of being due). (Location 712)

One interesting example of a government-imposed self-control strategy is daylight saving time (or summer time, as it is called in many parts of the world). Surveys reveal that most people think that daylight saving time is a great idea, primarily because they enjoy the ‘extra’ hour of daylight during the evening. Of course, the number of daylight hours on a given day is fixed, and setting the clocks ahead one hour does nothing to increase the amount of daylight. The simple change of the labels on the hours of the day, calling ‘six o’clock’ by the name ‘seven o’clock,’ nudges us all into waking up an hour earlier. Along with having more time to enjoy an evening softball game, we end up saving energy too. Historical note: the idea was first suggested by Benjamin Franklin during his tenure as an American delegate in Paris. A well-known skinflint, Franklin calculated that thousands of pounds of candle wax could be saved with his idea. However, the idea did not catch on until World War (Location 737)

3 Following the Herd (Location 823)

ties were originally used as napkins; they actually had a function.) (Location 833)

Tags: societal norms

If you see a movie scene in which people are smiling, you are more likely to smile yourself (whether or not the movie is funny); yawns are contagious, too. Conventional wisdom has it that if two people live together for a long time, they start to look like each other. This bit of folk wisdom turns out to be true. (Location 838)

Social influences come in two basic categories. The first involves information. If many people do something or think something, their actions and their thoughts convey information about what might be best for you to do or think. The second involves peer pressure. If you care about what other people think about you (perhaps in the mistaken belief that they are paying some attention to what you are doing – see below), then you might go along with the crowd to avoid their wrath or curry their favor. (Location 850)

On the other hand, social scientists generally find less conformity, in the same basic circumstances as Asch’s experiments, when people are asked to give anonymous answers. People become more likely to conform when they know that other people will see what they have to say. Sometimes people will go along with the group even when they think, or know, that everyone else has blundered. Unanimous groups are able to provide the strongest nudges – even when the question is an easy one, and people ought to know that everyone else is wrong. (Location 891)

The clear lesson here is that consistent and unwavering people, in the private or public sector, can move groups and practices in their preferred direction. (Location 911)

We can see here why many groups fall prey to what is known as ‘collective conservatism’: the tendency of groups to stick to established patterns even as new needs arise. Once a practice (like wearing ties) has become established, it is likely to be perpetuated, even if there is no particular basis for it. (Location 919)

An important problem here is ‘pluralistic ignorance’ – that is, ignorance, on the part of all or most, about what other people think. We may follow a practice or a tradition not because we like it, or even think it defensible, but merely because we think that most other people like it. Many social practices persist for this reason, and a small shock, or nudge, can dislodge them.6 A dramatic example is communism in the former Soviet bloc, which lasted in part because people were unaware how many people despised the regime. Dramatic but less world-historical changes, rejecting long-standing practices, can often be produced by a nudge that starts a kind of bandwagon effect. (Location 924)


One reason why people expend so much effort conforming to social norms and fashions is that they think that others are closely paying attention to what they are doing. If you wear a suit to a social event where everyone else has gone casual, you feel like everyone is looking at you funny and wondering why you are such a geek. If you are subject to such fears, here is a possibly comforting thought: they aren’t really paying as much attention to you as you think. (Location 960)

Tags: societal norms

In many domains people are tempted to think, after the fact, that an outcome was entirely predictable, and that the success of a musician, an actor, an author, or a politician was inevitable in light of his or her skills and characteristics. Beware of that temptation. Small interventions and even coincidences, at a key stage, can produce large variations in the outcome. Today’s hot singer is probably indistinguishable from dozens and even hundreds of equally talented performers whose names you’ve never heard. We can go further. Most of today’s governors are hard to distinguish from dozens or even hundreds of politicians whose candidacies badly fizzled. (Location 989)

An especially good way to gain weight is to have dinner with other people.11 On average, those who eat with one other person eat about 35 percent more than they do when they are alone; members of a group of four eat about 75 percent more; those in groups of seven or more eat 96 percent more. (Location 1014)

Tags: health

advertisers are entirely aware of the power of social influences. Frequently they emphasize that ‘most people prefer’ their own product, or that ‘growing numbers of people’ are switching from another brand, which was yesterday’s news, to their own, which represents the future. They try to nudge you by telling you what most people are now doing. (Location 1023)

Smiles, Frowns, and Saving Energy Social nudges can also be used to decrease energy use. To see how, consider a study of the power of social norms, involving nearly three hundred households in San Marcos, California.20 All of the households were informed about how much energy they had used in previous weeks; they were also given (accurate) information about the average consumption of energy by households in their neighborhood. The effects on behavior were both clear and striking. In the following weeks, the above-average energy users significantly decreased their energy use; the below-average energy users significantly increased their energy use. The latter finding is called a boomerang effect, and it offers an important warning. If you want to nudge people into socially desirable behavior, do not, by any means, let them know that their current actions are better than the social norm. (Location 1099)

But here is an even more interesting finding. About half of the households were given not merely descriptive information but also a small, nonverbal signal that their energy consumption was socially approved or socially disapproved. More specifically those households that consumed more than the norm received an unhappy ‘emoticon,’ like Figure 3.2a, whereas those that consumed less than the norm received a happy emoticon, like Figure 3.2b. Figure 3.2. Visual feedback given to power customers in San Marcos, California Unsurprisingly, but significantly, the big energy users showed an even larger decrease when they received the unhappy emoticon. The more important finding was that when below-average energy users received the happy emoticon, the boomerang effect completely disappeared! When they were merely told that their energy use was below average, they felt that they had some ‘room’ to increase consumption, but when the informational message was combined with an emotional nudge, they didn’t adjust their use upward. (Location 1106)

PRIMING (Location 1118)

It turns out that if you ask people, the day before the election, whether they intend to vote, you can increase the probability of their voting by as much as 25 percent! (Location 1131)

Note: You can increase participation by asking people to confirm verbally the day before

A study of a nationally representative sample of more than forty thousand people asked a simple question: Do you intend to buy a new car in the next six months?23 The very question increased purchase rates by 35 percent. (Location 1133)

Often we can do more to facilitate good behavior by removing some small obstacle than by trying to shove people in a certain direction. (Location 1143)

people’s judgments about strangers are affected by whether they are drinking iced coffee or hot coffee! Those given iced coffee are more likely to see other people as more selfish, less sociable, and, well, colder than those who are given hot coffee.27 This, too, happens quite unconsciously. (Location 1158)

4 When Do We Need a Nudge? (Location 1163)

offer nudges that are most likely to help and least likely to inflict harm.* A slightly longer answer is that people will need nudges for decisions that are difficult and rare, for which they do not get prompt feedback, and when they have trouble translating aspects of the situation into terms that they can easily understand. (Location 1166)

Benefits Now – Costs Later (Location 1176)

Self-control issues are most likely to arise when choices and their consequences are separated in time. At one extreme are what might be called investment goods, such as exercise, flossing, and dieting. For these goods the costs are borne immediately, but the benefits are delayed. For investment goods, most people err on the side of doing too little. Although there are some exercise nuts and flossing freaks, it seems safe to say that not many people are resolving on New Year’s Eve to floss less next year and to stop using the exercise bike so much. (Location 1178)

At the other extreme are what might be called sinful goods: smoking, alcohol, and jumbo chocolate doughnuts are in this category. We get the pleasure now and suffer the consequences later. (Location 1182)

rare, difficult choices are good candidates for nudges. (Location 1202)

Learning is most likely if people get immediate, clear feedback after each try. Suppose you are practicing your putting skills on the practice green. If you hit ten balls toward the same hole, it is easy to get a sense of how hard you have to hit the ball. Even the least talented golfers will soon learn to gauge distance under these circumstances. Suppose instead you were putting the golf balls but not getting to see where they were going. In that environment, you could putt all day and never get any better. (Location 1204)

For irrational consumers to be protected there has to be competition. Sometimes that competition does not exist. Consider the case of extended warranties on small appliances, typically a bad deal for consumers. To take a specific hypothetical example, suppose that a cell phone costs two hundred dollars. The cell phone has a free warranty for the first year, but the cell phone company offers, for twenty dollars, an extended warranty for the second year of the phone’s life. After that the consumer plans to buy a new phone. Suppose that the chance that the phone will break during the second year is 1 percent, so on average consumers will get two dollars’ worth of benefits from having this policy – but the price of the extended warranty is twenty dollars in order to include a normal profit to the insurer and a kickback (er, commission) to the salesperson at the cell phone store. Of course, Econs understand all this and thus do not purchase extended warranties. (Location 1262)

5 Choice Architecture (Location 1289)

for a given choice, there is a default option – an option that will obtain if the chooser does nothing – then we can expect a large number of people to end up with that option, whether or not it is good for them. And as we have also stressed, these behavioral tendencies toward doing nothing will be reinforced if the default option comes with some implicit or explicit suggestion that it represents the normal or even the recommended course of action. (Location 1348)

Leaving the gas cap behind is a special kind of predictable error psychologists call a ‘postcompletion’ error.1 The idea is that when you have finished your main task, you tend to forget things relating to previous steps. Other examples include leaving your ATM card in the machine after getting your cash, or leaving the original in the copying machine after getting your copies. (Location 1407)

We have sketched six principles of good choice architecture. (Location 1601)

iNcentives Understand mappings Defaults Give feedback Expect error Structure complex choices (Location 1603)

PART II Money (Location 1610)

7 Naïve Investing (Location 1838)

The first question investors face is this: how much risk to take? As a rule, riskier investments such as stocks (also called equities) earn higher rates of return than safer investments such as government bonds or money market accounts. Choosing the appropriate mix of stocks and bonds (and possibly other assets such as real estate) is called the asset-allocation decision. If an investor is willing to allocate more of her money to risky assets, then she will usually make more money, but of course more risk means taking the chance that returns will actually be lower. And the decision of how much to save is related in complex ways to the willingness to bear risk. Someone who insists on investing everything in a safe money market account that earns a modest rate of interest had better be saving quite a bit if she wants to have enough to have a comfortable retirement. (Location 1844)

Recall from Chapter 1 that Humans are loss averse. Roughly speaking, they hate losses about twice as much as they like gains. With this in mind, consider the behavior of two investors, Vince and Rip. Vince is a stock broker, and he has constant access to information about the value of all of his investments. By habit, at the end of each day, he runs a little program to calculate how much money he has made or lost that day. Being Human, when Vince loses five thousand dollars in a day he is miserable – about as miserable as he is happy at the end of a day when he gains ten thousand dollars. How does Vince feel about investing in stocks? Very nervous! On a daily basis, stocks go down almost as often as they go up, so if you are feeling the pain of losses much more acutely than the pleasure of gains, you will hate investing in stocks. (Location 1881)

Over a twenty-year period, stocks are almost certain to go up. (There is no twenty-year period in history in which stocks have declined in real value, or have been outperformed by bonds.) So Rip calls Vince, tells him to put all his money in stocks, and sleeps like a baby. (Location 1890)

The lesson from the story of Vince and Rip is that attitudes toward risk depend on the frequency with which investors monitor their portfolios. (Location 1892)

8 Credit Markets (Location 2010)

Let’s examine two important lending markets – mortgages, and credit cards (Location 2020)

When markets get more complicated, unsophisticated and uneducated shoppers will be especially disadvantaged by the complexity. (Location 2049)

Credit cards serve two functions. First, they provide a mode of payment in lieu of cash, and have largely replaced checks for that purpose in face-to-face transactions – thankfully – although occasionally you still get stuck behind someone in a grocery store checkout line who wants to write a check for a $7.37 purchase. The second purpose of a credit card is to provide a ready source of liquidity if you want to spend more than you currently have in cash. (Location 2129)

credit cards can be addicting. Consider some numbers from the United States: •    The U.S. Census Bureau reported that there were more than 1.4 billion credit cards in 2004 for 164 million cardholders – an average of 8.5 cards per cardholder. •    Currently, 115 million Americans carry a month-to-month credit card debt. (Location 2137)

For mortgages and credit cards, life is far more complicated than it needs to be, and people can be exploited. (Location 2174)

the active choosers elected to invest nearly half their money (48.2 percent) in the stocks of Swedish companies. This reflects the well-known tendency of investors to buy stocks from their home country, something that economists refer to as the home bias. (Location 2287)

Tags: likeability

Consider the following fact. Sweden accounts for approximately 1 percent of the world economy. A rational investor in the United States or Japan would invest about 1 percent of his assets in Swedish stocks. Can it make sense for Swedish investors to invest 48 times more? No. (Location 2290)

As we saw in Chapter 7, individual investors tend to be trend followers, rather than good forecasters, in their asset-allocation decisions. (Location 2310)

In retrospect, it cannot be a surprise that a fund like Robur Aktiefond Contura would get a large percentage of the investments in the pool. Think about what people are being asked to do. They receive a book that lists the returns for 456 funds over various time horizons, along with a lot of other important information, involving fees and risk, that they are not well equipped to understand. The one thing they are probably sure of is that high returns are good. Of course, these are past returns, but investors have traditionally had trouble distinguishing between past returns and forecasts of future returns. (Location 2318)

The combination of undue attention paid to recent returns and inertia in managing the portfolio thereafter means that the accident of timing (when the new system is launched) can end up having a profound impact on the investments that participants choose. (Location 2332)

PART III Society (Location 2383)

10 Prescription Drugs: Part D For Daunting (Location 2384)

11 How to Increase Organ Donations (Location 2651)

The primary sources of organs are patients who have been declared ‘brain dead,’ meaning that they have suffered an irreversible loss of all brain function but are being maintained temporarily on ventilators. In the United States, roughly twelve thousand to fifteen thousand potential donors are in this category each year, but fewer than half become donors. Because each donor can be used for as many as three organs, getting another thousand donors could save as many as three thousand lives. The major obstacle to increasing donations is the need to get the consent of surviving family members. It turns out that good default rules can increase available organs and thus save lives. (Location 2660)

To get a sense of the power of the default rule, consider the difference in consent rates between two similar countries, Austria and Germany. In Germany, which uses an opt-in system, only 12 percent of the citizens gave their consent, whereas in Austria nearly everyone (99 percent) did. (Location 2709)

12 Saving the Planet (Location 2759)

Labeling shows enormous potential for tackling environmental challenges, precisely because the concepts involved are so abstract and inscrutable to most of us. Numbers, imagery, and product comparisons help to translate and demystify the larger issues. (Location 2946)

the efforts of Southern California Edison to encourage its consumers to conserve energy – and its creative, nudgelike solution. Past attempts to notify people of their energy use with emails or text messages did no good, but what worked was to give people an Ambient Orb, a little ball that glows red when a customer is using lots of energy but green when energy use is modest. In a period of weeks, users of the Orb reduced their use of energy, in peak periods, by 40 percent. That flashing red ball really gets people’s attention and makes them want to use less energy. (Location 2965)

WHAT IS MARRIAGE? As a matter of law, marriage is no more and no less than an official status, created by the state and accompanied by government entitlements and mandates. When you are married, you get many material benefits, economic and noneconomic.1 The law varies from nation to nation, but as a general rule, these benefits fall into six major categories. (Location 3056)

Tags: marriage

Tax benefits (and burdens). In some nations, the tax system offers big rewards to many couples as a result of marriage – at least if one spouse earns a great deal more than the other. (Location 3061)

Entitlements. The law often benefits married couples through a number of entitlement programs. In the United States, for example, the Family and Medical Leave Act requires employers to allow unpaid leave to workers who seek to care for a spouse; (Location 3063)

Inheritance and other death benefits. A member of a married couple obtains a number of benefits at the time of death. (Location 3067)

Ownership benefits. Under the law, spouses may have automatic ownership rights that mere partners (Location 3069)

Surrogate decision making. Members of a married couple are sometimes given the right to make surrogate decisions of various sorts in the event of the other’s incapacitation. When an emergency arises, a spouse is permitted to make judgments on behalf of an incapacitated husband or wife. Partners are far less likely to obtain these benefits. (Location 3071)

A few of us have learned a simple rule: don’t send an angry email in the heat of the moment. File it, and wait a day before you send it. (Location 3364)

If you want people to lose weight, one effective strategy is to put mirrors in the cafeteria. (Location 3515)

In its simplest form, the publicity principle bans government from selecting a policy that it would not be able or willing to defend publicly to its own citizens. (Location 3519)

We think that the publicity principle is a good guideline for constraining and implementing nudges, in both the public and private sectors. Consider Save More Tomorrow; here people are explicitly informed of the nature of the proposal, and specifically asked whether they would like to accept it. Similarly, when firms adopt automatic enrollment, they do not make a secret of it, and can say honestly that they do so because they think that most workers will be better off joining the plan. (Location 3526)

Note in this regard that mandatory cooling-off periods make best sense, and tend to be imposed, when two conditions are met: (a) people make the relevant decisions infrequently and therefore lack a great deal of experience, and (b) emotions are likely to be running high. These are the circumstances in which people are especially prone to making choices that they will regret. (Location 3621)

A potential response to complexity would be to require simplicity – as, for example, by allowing only the standard thirty-year fixed-rate mortgages. This would be a big mistake. To eliminate complexity is to stifle innovation. A better approach is to improve transparency and disclosure. Regulators can reduce the likelihood of a future meltdown by forcing all parties to make it easier to understand the true risks of their complicated products. (Location 3728)