Study questions/guide for Nudge
Introduction
1.What do the authors mean by libertarian paternalism? What is a nudge?
2.How do the authors distinguish between humans and econs.
3.Is it possible to avoid influencing people’s choices?
4.Why do people save more when they are paid bi-weekly than monthly?
Ch. 1
1.What fact about the arch in St. Louis might people not see when looking at the arch?
2.What are some differences between the Automatic cognitive system (System 1) and the reflective cognitive system (system 2)?
3.Here are some behavioral rules of thumb and ways that people think that are inconsistent with the consumer maximization model we have discussed.: Anchoring, Availability bias, Representativeness, Optimism and overconfidence, Loss aversion, Status quo bias, Framing effects. What do they refer to?
Ch. 2.
1.How is dynamic inconsistency related to temptation, procrastination, and mindlessness?
2.Why would someone ever choose a Christmas club as a savings device?
Ch. 3
1.What rational reasons might lead people to follow the herd?
2.What idea in the chapter do the following statements refer to?
Don’t worry about what other people are thinking about you. They’re not thinking about you. They are thinking about themselves: just like you.
3.Give an example of bandwagon effects.
Ch. 4
1.Markets and individual choice seems to work pretty well when people engage in frequent transactions that give constant feedback (going to the store to buy milk or gas). Authors argue they don’t work so well when decisions are infrequent.
Ch. 5
1.The authors discuss six principles of good choice architecture and use a mnemonic device to help remember them:
iNcentives
Understanding mappings from choice to welfare
Default option
Give feedback
Expect error
Structure complex choices
What examples do the authors give to illustrate these six principles?
What does the acronym RECAP refer to?
Ch. 6
1.What evidence is there that people save too little? What changes to the default option for pension plans could nudge people to save more?
2.Describe the “Save More Tomorrow” plan.
Ch. 7
1.My standard stock tip is to “Buy low and sell high.” What do “humans” actually do?
2.Explain whether or not it is a good idea to invest your entire 401k pension plan in the company where you work?
Ch. 8
1.Authors argue that Regulation Z (Truth in lending act) was good choice architecture when it was passed, but, it is no longer so good. Why?
2.How could RECAP nudge people to make better decisions in credit markets for things like mortgages, student loans, and credit cards?
Ch. 9
1.If the US were to privatize Social Security the design of a good default option for citizens contributing to their own pension plan would be critical.
a.What kind of characteristics should the default option pension plan have?
b.What mistakes were made in the design of the Swedish default option?
Ch. 10
1.The authors like (somewhat) President Bush’s prescription drug plan Medicare Part D. However, they think that the default option could have been better designed. What problems are evident in the prescription drug plan and how could a better default option be designed?
2.What role should RECAP play in redesigning the prescription drug plan?
Ch. 11
What evidence is there that redesigning the default option for organ donation could increase organ donations? (The default option in most states is you have to sign your driver’s license in front of a witness.)
I didn’t know about the policy of “Routine Removal.” What are your normative views on this policy?
Ch. 12
Authors argue that people make pretty good decisions when they have good information and receive feedback on their decisions. For instance, I can go to the grocery store and buy a beef steak. After cooking it I receive feedback on the quality of the beef. Why is information and feedback lacking for some things like environmental amenities/dis-amenities?
How might we get better feedback and information on vehicle fuel economy?
A note (not from the book)-In California lots of people install solar panels on the roof of their house. Interestingly, some people tend to install the panels on the side of the house that faces the street even if that side of the house does not get the best angle of the sun.
From what the authors write on pages 194-196, why might people do such a thing?
Could peer pressure help provide an environmental nudge?
Ch. 13
A weak chapter.
Again, good choices require information and feedback. Parents/students often don’t get feedback until after their children have graduated and have entered college or the job market.
How did administrators in San Marcos, TX nudge students toward college?
Ch. 14
Interesting. Why have the courts been unwilling to allow consumers to give up the right to sue doctors/hospitals for medical malpractice? I wonder what the potential cost savings would be? Once again, freedom to contract might be the appropriate nudge.
Ch. 15
Why does government offer married couples benefit and tax advantages that single people or people who cohabitate don’t receive? What do they mean by privatizing marriage? I agree with the authors, but I think they don’t consider one possible problem. Will courts and government allow private institutions to discriminate? That is, if one church does not want to allow gay people to get married within that church will government allow that?
Ch. 16-I only have a dozen nudges in my book. What do you think are the three most interesting/important nudges that the authors address?
Here is my question for you. I would like more students to major in economics. What kind of nudges could I (or the department) design that would help nudge students into majoring in economics?
Ch. 17
What is the slippery slope that might be associated with libertarian paternalism?