Sunday, November 08, 2009

Everyone Can "Nudge"

Nudge: Improving Decisions About Health, Wealth, and Happiness is  by Drs. Sunstein and Thaler. Under the banner of libertarian paternalism they argue the government can nudge people into better decisions.  For example, if the default option is to enroll the new employee into the 401K plan, enrollment will be higher and savings greater than if the default is not to enroll.

This is all well and good, and I approve.  But everyone can nudge, as it turns out in a NY Times article on the adoption of credit cards in taxis, a measure the cabbies initially resisted.  Why have they changed their minds?  The credit system provides pre-set tip amounts, so it makes it easy for the customer to tip, and to tip larger amounts than they might otherwise do. 

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