Nudge Theory: Manipulated? Never Again After Reading This

Nudge theory is a behavioral economics concept which reckons with subtly altering the environment or context in which people make decisions to influence their behavior. Nudges are designed to guide behavior in predictable ways by leveraging biases. Coined by Richard Thaler in 2008 in his book with the same name, the core of the concept is influencing people’s behavior without coercion. Thaler defines it as, “A nudge, as we will use the term, is any aspect of choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives. Nudges are not mandates. Putting fruit at eye level counts as a nudge. Banning junk food does not.”

One of the most cited examples is etching images of flies into men’s urinals. The intention? To improve their aim. It works. The airport that implemented this in Amsterdam reported lowered cleaning costs. Humans are not rational beings. That is, we do things that are not necessarily in our best interest. Even when we are aware that these actions result in suboptimal outcomes. This is part of the reason why nudges work. For example, when hungry, people who diet underestimate their ability to lose weight, and their intentions to eat healthy are weakened. They then eat, get satiated, and the heroic intentions resurface.

Nudges typically come in three types: defaults, framing, and feedback. Defaults are “automatic choices”. Automatically enrolling people in retirement or investment plans results in higher participation rates. Of course, they can still opt out whenever. Else it wouldn’t be a nudge. Similarly, framing by presenting healthy food at eye level in attractive places in cafeterias encourages healthy eating. And feedback, such as notifications from smart thermostats of energy usage data prompt energy-saving behavior. Nudges capitalize on human tendencies. Inertia, confirmation bias, social proof, and anchoring, to name a few.

In the literature you might also run into the ugly sibling of nudges. Sludges. A sludge is where choice architecture is used to create friction. To make certain choices harder. They are often referred to as the dark side of nudge theory, since they are used to manipulate or exploit. These could be hidden barriers: making cancelling policies, subscriptions, or refund processes complex and time-consuming—like by requiring paperwork or countless phone calls. You might be met with dark patterns: designing websites to trick users into purchases they do not want, and bombarding them with decisions to overwhelm and result in bad choices.

Both nudges and sludges exploit psychological heuristics and biases. Nudges encourage immediate action—”join today and save!” or “get the second item half-off!” Sludges make quitting feel like a hassle—imagine if Netflix required you to call them and verify your identity to cancel a subscription. People are likely to stick to preselected options. Defaults. Whether that is saving for retirement or being an organ donor—a positive nudge—or auto-renewing a subscription they do not necessarily need—a sludge. Nudges simplify decisions to make them easier. Sludges overwhelm to tap into inertia. One makes decision-making easy. The other makes it hard. Their aims can be the same.

You will run into both a lot. They are used widely across public policy, business, advertising, and personal development. Governments place graphic warnings on cigarette packaging to deter smoking—a positive sludge. Banks use apps that round up purchases and transfer spare change and/or a predetermined amount to savings accounts—a positive nudge. Electricity bills that show you your neighbor’s statistics can nudge users towards conserving energy. Fitness apps gamify their experience—like by using streaks—to nudge users to stick to exercise regimens. Used responsibly, nudges and sludges respect freedom of choice and can help us behave well. Transparency is key. A clear and well-communicated default retirement or investment plan is ethical. Hiding fees in barely visible print or making cancellation nearly impossible is not. Small design changes loom large.