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How can we make better choices and help others do the same? It’s an elusive question that has long plagued philosophers, governments, and multinational corporations – and one that Chicago Booth professor Richard Thaler has helped to crack in his award-winning work as a behavioral economist.

As the recipient of the 2017 Nobel Prize in Economic Sciences, Thaler also gained popular appeal in 2008 with his book Nudge, coauthored with Cass R. Sunstein, and again in 2015 with Misbehaving: The Making of Behavioral Economics.

During a speech in March organized by The Hong Kong Jockey Club Programme on Social Innovation, the University of Chicago, and Chicago Booth, Thaler laid out the groundwork of his theory on how to better understand and influence choice.

Read takeaways from his recent talk in Hong Kong:

Freedom to choose

The basis of Thaler’s work is the concept of “libertarian paternalism.” While it may sound like an oxymoron, libertarian paternalism is simply the combination of helping people (paternalism) and preservation of individual choice (libertarianism), Thaler said.

GPS for life

A key point, he said, is that while choices leading to better outcomes are emphasized, “no one is ever forced to do anything.” It’s a philosophy that functions like a car’s GPS.

“True libertarian paternalism says, ‘If you want to go to the airport, here’s the route we suggest.’ But if you want to stop somewhere and fill up your rental car with gas, [the GPS] never backseat drives. It just makes the world more navigable,” Thaler said.

Nudge in the right direction

Libertarian paternalism is put into practice by “nudging” individuals in a certain direction. One of the most famous examples of nudging, he said, is default enrollment into retirement savings plans, which “nudges” individuals to save for the future.

It is possible to nudge for good or evil, and Thaler describes nudging for bad as “sludge.”

Corporate choice

Corporations have a choice. There are lots of ways to make money, to run an airline or a newspaper, Thaler said. “It is one thing to automatically renew trial subscriptions to a newspaper or website, but it should be as easy to unsubscribe as to subscribe. Making people call, or worse, to send a letter, just to unsubscribe, is sludge,” he said.

Nudging for democracy

Nudging is a major tool of effective democracies, Thaler said, but it can also be used to encourage non-democratic countries to move in a more positive direction.

Certainly in authoritarian governments, there’s no reason to nudge. You can just tell everybody what to do,” he said. I think if we’re trying to nudge countries to be more democratic one way we can do that is to give them tools from behavioral science to help them achieve those goals without telling citizens exactly what to do.”

Richard H Thaler's speech in Hong Kong on March 18 was part of the Social Impact Leadership Series organized by the Hong Kong Jockey Club Programme on Social Innovation. Operated by Chicago Booth’s Rustandy Center for Social Sector Innovation, the Programme on Social Innovation is a partnership between the University of Chicago, Chicago Booth, and The Hong Kong Jockey Club and provides resources and programs to help Hong Kong’s NGOs and social entrepreneurs do their best work.

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