Thaler And Sunstein's Nudge Analysis

“Incentives are the cornerstone of modern life”(Levitt and Dubner 12). Levitt and Dubner once mentioned in their book “Freakonomics”. According to Oxford dictionary, incentives are something tends to incite to action or greater effort, as a reward offered for increased productivity (“incentives”). In business field, incentives are something given by bosses to encourage their employees to endeavour in bringing benefits to their business. For a simple example, the employee who hits the monthly or year sales target will get cash or prizes as incentives. Apparently, these incentives are something that motivates employees maintains their great performance and also to motivate other employee, whoever wants to get the incentives, work harder.

They explained that: “Changes in incentives influence human behavior in predictable ways”. The main point of this concept is that the more attractive an option is the more likely an individual to choose it. Another point that they also focused on was the fact that if a particular product more costly, the more unappealing it will become to the consumer. They used examples such as employees will worker harder if they feel that they will be greatly rewarded or a student will study material that they feel will be on an

Bazerman and Moore’s (2009) defines the Anchoring Heuristic as “Individuals make estimates for values based upon an initial value (derived

“An incentive is a bullet, a key: an often tiny object with astonishing power to change anything”(Levitt 20). What professor Steven D. Levitt (a professor of economics at the University of Chicago’s dictum here is that the incentive has a lot of power in this world). And that the metaphor of comparing “incentives”to a bullet really speaks wonders to their strengths. They can change almost any situation by motivating someone to do something in a business situation, all the way to education fields. After many years of college, business and economics students are being taught how to be greedy in college. It is only a matter of time before greed is too powerful. Incentives and greed both have favorable and critical effects on individuals and the populace, but when connected together both can have dangerous effects on future selections.

When explaining economics instead of using large over-complicated words, the authors simply state that “economics is, at root, the study of incentives.” Rather than utilizing economist argot, Levitt and Dubner describe economics in a way that makes it easier to understand and put into perspective. As the passage continues, the authors provide the audience with many relatable examples such as “if you break curfew you are grounded.” People respond to incentives, it’s the way our society works, “an incentive is simply a means of urging people to do more of a good thing and less of a bad thing.” Like Levitt and Dubner previously stated, economics is the study of incentives and how it affects society and their decision making

One passage that struck me as important was Wheelan's discussion of using incentives to solve social problems. He mentioned public school education, carbon emissions, and recycling as examples of poorly designed policies that promote incentives in the wrong direction. It seems unrealistic that such important issues that are so widely argued are the result of incentives that encourage behaviors we want the public to avoid. We want dedicated teachers and we want to prevent global warming and we want to stop building new landfills, but we can't when there is no motivation to act in society's best interest. Everybody wants to take the easy way out, and when the incentives line up with our desires, there's no stopping the consequences from piling

Have you ever bribed someone to do something? Did they accept? Why did you bribe them with that? It may be because you know their values and incentives. If they accepted your bribery, you must have touched their incentive. Steven D. Levitt and Stephen J. Dubner talked a lot about incentives in their book called Think Like A Freak. Problems may be solved, but only with the right incentives.

In the book Freakonomics, Steven Levitt and Stephen Dubner note “An incentive is a bullet, a lever, a key: an often-tiny object with astonishing power to change a situation” (16). This is to showcase the amount of power an incentive can have over a person or a situation; either good or bad. Humans are found to use incentives when it comes to making daily decisions. Often, people need motives to proceed with their plans. Some tend to make either moral, social, or economic incentive. The moral incentive is about self-respect; keeping in check with what was taught to believe is right and wrong. The social incentive is how the public views the person; wanting to look good in front others. Economic incentive, however, would relate to monetary benefit. While all three incentives can affect people’s decisions, economic

When it comes to inspiring behavioral changes positive reinforcement is more effective than punishment in terms of changing the behavior in the long term. How effectively positive reinforcement affects behavioral changes is closely tied to how behavioral changes are incentivized and rewards bestowed. The case is similar for the application of negative reinforcement. However, rewards and punishments must significantly affect a person’s current situation--for better or worse--in order to inspire change. Let’s look at how positive reinforcement typically results in long-term behavioral change more effectively than punishment overall.

In this article, Drevitch insists that economic incentive can change people’s behavior by putting aside their morality for “financial calculation.” This type of behavior is called extrinsic motivation or referred to as “crowding out” and it is a powerful social reaction that’s been influenced by society. Based on

Firstly, our example illustrates how people respond to incentive. In economics, an incentive is defined as any factor that provides a motive for a particular course of action. This example is exemplified in our first customer. Perhaps, the promotion encourages her to purchase an extra bottle of X shampoo now instead of later. By doing so, the BOGO 1.5 promotion can be classified as an incentive which ensures her decision. As she rationalizes her decision to purchase an extra shampoo, she demonstrates that everyone do respond to incentives. In contrast, the promotion does not have the effect on the second consumer because it does not provide incentive therefore not applicable to him and his choice as a consumer.

Incentives are seen everywhere in daily life and they appear in a variety of ways. Whether a person is making a choice between what to eat for lunch or when to go to bed, they are being influence by incentives. For example, images of an appealing lunch meal in a TV commercial may make someone choose Subway over Mcdonalds. However, the same thought process can motivate someone to prefer a meal at McDonalds because of the company’s constant promotion of their “dollar menu” (Mcdonalds, 2013). Either of these incentives can appeal to a person, depending on what they are motivated by, in this case, either health or money.

Conformity is utilized frequently to promote positive change in many aspects of communal life. For example, environmentalists, utilities, and green businesses often use peer pressure to influence people to adopt more environmentally friendly practices. In one study, researchers asked four groups of utility customers to reduce their energy use for a different reason — the health of the planet, the economic savings, the welfare of future generations, or because their neighbors were doing it. By comparing electric meter readings, the researchers found that only the final statement made an impact, inducing a 10 percent drop in consumption (Conniff, Richard). Researchers of behavioral economics - a field of study examining the application of human nature into economic decision-making - have studied how to influence people with peer pressure, and have found that it is likely the most powerful way to change the actions of people to benefit the environment. In 2008, a study published in the Journal of Consumer Research applied behavioral economics and social norms

For example, many people agree that shoplifting is wrong, because the effects from stealing from another cause more suffering than pleasure for all involved. Persuasion can be used to try and reason with the potential shoplifter so they change their mind and decide not to steal. However, persuasion

In my job, I also receive the incentive of money for working. Incentives also show up while driving; not getting a speeding ticket is the incentive for driving the speed limit. Tradeoffs and incentives are only two of the ten principles that I come across in my life at home.