I saw Cass Sunstein (co-author of Nudge) speak last week about the idea of Choosing not to Choose. Fascinating talk, about how Nudge is used in public policy, but also about the ethics of it.
With regard to life choices – choices about finance and health – he talked about two particular biases that affect how we make our choices, and how they can create blind spots and make us choose poorly.
Given two similar rewards, humans show a preference for one that arrives sooner rather than later. Humans are said to discount the value of the later reward, by a factor that increases with the length of the delay (this is called Hyerbolic Discounting for those who care for the longer more obscure names).
So, in terms of finance and health, this is a kind of ‘Jam Today’ bias. There is a famous Marshmallow experiment with children around this bias, and we have to work cognitively very hard to offset it (if we care to!)
A similar bias causes a person to believe that they are less at risk of experiencing a negative event compared to others. An example here might be smoking. For those wanting longer on this one, there is a really nice Ted Talk on Optimism Bias by Tali Sharot.
An interesting point about the biases (and a key point from Nudge’s Libertarian Paternalism philosophy) is that a third party is not subject to these biases, and therefore may be better placed to make a better.
Also, considering these biases, and combining them with a UK financial product advertised by puppets, then it is easy to see how these ideas may be used to nudge people to choices that may not be in their best interest.