Richard Thaler, one of the fathers of behavioral economics and a professor at the Booth School of Business at the University of Chicago, has won the 2017 Nobel Memorial Prize in Economic Science.
A nudge, as we will use the term, is any aspect of the choice architecture (Choice architecture is the design of different ways in which choices can be presented to consumers, and the impact of that presentation on consumer decision-making.) that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting fruit at eye level counts as a nudge. Banning junk food does not.
Renowned for his use of data to observe and predict how people behave in the real world, Thaler’s career has been a lifelong war on Homo economicus, that mythical species of purely rational hominids who dwell exclusively in the models of classical economic theory.
In studies that borrowed from psychology, sociology, and plain-old curiosity, Thaler demonstrated that mankind was afflicted by emotion and irrationality, which influences their decision making on everything from retirement savings, to health-care policy, to professional sports.
But Thaler didn’t contend that humans were randomly irrational. More importantly, he observed that people are predictably irrational. Some of Thaler’s most interesting work studied the predictably irrational effects of ownership, confidence, and a sense of fairness.
Ownership: According to classic economic theory, a product’s value shouldn’t depend on ownership. In one of his most famous experiments (which he conducted with the Nobel-winning psychologist Daniel Kahneman), Thaler gave mugs to half the students in a classroom and asked the students to assign a value to the mugs. Students who already had a mug considered it twice as valuable those who did not. People place a higher value on what they already own—a so-called “endowment effect.”
Confidence: More information should lead to better decision-making—in theory. But in a study, Thaler found that professional teams place too much value on early picks, in large part because smart scouts delude themselves into thinking that they can forecast the next superstar. “The more information teams acquire about players, the more overconfident they will feel about their ability to make fine distinctions,” Thaler wrote. This suggests that a downside of “Moneyball” strategies and advanced analytics is that it makes sports teams overconfident about their forecasting abilities.
Fairness: Thaler’s research has shown that people have firm standards of fairness. Since most consumers don’t know what goods are actually worth, they determine value based on what seems fair. Perhaps $5 for an umbrella is fair—but what if the price was raised from $1 during a downpour? That familiar feeling that one is being gouged might discourage sales in ways that have nothing to do with the utility of the umbrella. In recessions, employers tend to fire workers rather than cut their wages, perhaps out of a sense that workers will consider pay cuts to be unfair.
If irrational human behavior can be predicted, then it can be incited, or nudged. Thaler coined the term “nudging” to describe cheap and easy interventions that change people’s decision-making. The term can apply to both weighty and trivial causes, from encouraging savings by auto-enrolling employees in retirement plans to putting a housefly sticker in a men’s urinal to “improve aim.”
Like any academic concept that breaks into the mainstream, nudging has its doubters. Libertarians say nudges can be tricky and infantalizing. Liberals have claimed they sometimes sacrifice effectiveness for cleverness. (For example, if a government wants to increase saving, it might be more efficient to force savings through a program like Social Security than to rely on companies to nudge their employees toward 401(k) plans.) To his credit, Thaler has acknowledged that nudging is a weapon that can used both for good and bad.
Three principles should guide the use of nudges:
■ All nudging should be transparent and never misleading.
■ It should be as easy as possible to opt out of the nudge, preferably with as little as one mouse click.
■ There should be good reason to believe that the behavior being encouraged will improve the welfare of those being nudged.
In 2013, Robert Shiller won the Nobel in Economics for his work showing that markets are not rational and that their short-term gyrations are often driven by “animal spirits” that are more emotional than logical. Thaler did more than perhaps any other economists to devise a vocabulary for these animal spirits. While he is famous for exploding the myth of rational decision-making, the irony is that insisting that human beings are not rational is by far the more rational approach to studying their behavior.
When The New York Times asked how he would spend the prize money, Thaler said: “This is quite a funny question. I will try to spend it as irrationally as possible.”
Food For Thought :- Can we use NUDGE for making India a less-cash economy ?
Darknet, also known as dark web or darknet market, refers to the part of the internet that is not indexed or accessible through traditional search engines. It is a network of private and encrypted websites that cannot be accessed through regular web browsers and requires special software and configuration to access.
The darknet is often associated with illegal activities such as drug trafficking, weapon sales, and hacking services, although not all sites on the darknet are illegal.
Examples of darknet markets include Silk Road, AlphaBay, and Dream Market, which were all shut down by law enforcement agencies in recent years.
These marketplaces operate similarly to e-commerce websites, with vendors selling various illegal goods and services, such as drugs, counterfeit documents, and hacking tools, and buyers paying with cryptocurrency for their purchases.
Anonymity: Darknet allows users to communicate and transact with each other anonymously. Users can maintain their privacy and avoid being tracked by law enforcement agencies or other entities.
Access to Information: The darknet provides access to information and resources that may be otherwise unavailable or censored on the regular internet. This can include political or sensitive information that is not allowed to be disseminated through other channels.
Freedom of Speech: The darknet can be a platform for free speech, as users are able to express their opinions and ideas without fear of censorship or retribution.
Secure Communication: Darknet sites are encrypted, which means that communication between users is secure and cannot be intercepted by third parties.
Illegal Activities: Many darknet sites are associated with illegal activities, such as drug trafficking, weapon sales, and hacking services. Such activities can attract criminals and expose users to serious legal risks.
Scams: The darknet is a hotbed for scams, with many fake vendors and websites that aim to steal users’ personal information and cryptocurrency. The lack of regulation and oversight on the darknet means that users must be cautious when conducting transactions.
Security Risks: The use of the darknet can expose users to malware and other security risks, as many sites are not properly secured or monitored. Users may also be vulnerable to hacking or phishing attacks.
Stigma: The association of the darknet with illegal activities has created a stigma that may deter some users from using it for legitimate purposes.
AI, or artificial intelligence, refers to the development of computer systems that can perform tasks that would normally require human intelligence, such as recognizing speech, making decisions, and understanding natural language.
Virtual assistants: Siri, Alexa, and Google Assistant are examples of virtual assistants that use natural language processing to understand and respond to users’ queries.
Recommendation systems: Companies like Netflix and Amazon use AI to recommend movies and products to their users based on their browsing and purchase history.
Efficiency: AI systems can work continuously without getting tired or making errors, which can save time and resources.
Personalization: AI can help provide personalized recommendations and experiences for users.
Automation: AI can automate repetitive and tedious tasks, freeing up time for humans to focus on more complex tasks.
Job loss: AI has the potential to automate jobs previously performed by humans, leading to job loss and economic disruption.
Bias: AI systems can be biased due to the data they are trained on, leading to unfair or discriminatory outcomes.
Safety and privacy concerns: AI systems can pose safety risks if they malfunction or are used maliciously, and can also raise privacy concerns if they collect and use personal data without consent.