Mastering the Gentle Nudge: Simple Tweaks for Better Living

Understanding the power of libertarian paternalism.

Imagine that you've just started a new job at a big corporation. It’s your first day and you are going through a pile of paperwork. In among the forms is one about the company's retirement savings plan and there are two options:

• Option A: "I want to enroll in the company's 401(k) plan. I choose to contribute 5% of my salary, which the company will match."

• Option B: "I do not want to enroll in the company's 401(k) plan at this time."

It’s been a long day and you are tired from all that orienting. Perhaps you’ve signed your name a thousand times on things you don’t fully understand and you're pretty sure you've forgotten half the names of your new coworkers already. You're about to check Option B because it seems easier and hey, who needs to think about retirement when you've barely started your job, right?

But then you notice that Option A is already pre-checked. And you know instinctively that if you do nothing, you'll automatically be enrolled in the retirement plan. You can obviously choose Option B if you want, but it would require an active decision on your part. It takes some degree of effort. So you leave it be and go with Option A. 

This my friends, is what is known as libertarian paternalism.

The company has set a default option that nudges you towards a choice they believe is in your best interest (saving for retirement). They haven't taken away your freedom to choose differently; they've simply made the "better" choice easier to make.

So this week, let’s talk about libertarian paternalism. What it is, why it matters, and what you can do in your life with this knowledge.

What is libertarian paternalism?

Libertarian paternalism is about letting people make their own choices (like a libertarian), but also gently guiding them to make better choices for themselves (like a parent would do). It’s not about forcing you to do something, but more about setting things up so you might choose what’s best for you.

The concept was developed by economist Richard Thaler and legal scholar Cass Sunstein that they introduced in their 2008 book, Nudge: Improving Decisions About Health, Wealth, and Happiness. Their idea was that people often make decisions that aren’t the best for them, like eating too much junk food or not saving money. So, by designing systems or "nudges" that make the better choice easier to pick, it might help people make healthier or smarter decisions (while still letting them choose for themselves).

The core tenets of libertarian paternalism revolve around balancing freedom of choice along with gentle guidance toward better decisions. Here are the key principles:

1. Freedom to Choose (Libertarian aspect): People should always have the right to make their own choices. There’s no force or mandate. The goal is to preserve individual freedom while encouraging better outcomes.

2. Nudges, Not Commands (Paternalism aspect): Instead of giving strict rules, a decision architecture sets up the environment in a way that nudges people toward better decisions.

3. Improving Welfare: The aim here is to help people make choices that improve their lives—whether it's about health, finances, or safety—without restricting their options. This approach assumes that people sometimes make decisions that aren't in their best interest due to lack of information, biases, or habits.

4. Default Options Matter: People tend to stick with the choice that happens if they do nothing (aka the default option). So, libertarian paternalism often involves setting defaults that are in the person’s best interest. Like say, automatically enrolling employees in a retirement savings plan, but giving them the option to opt out.

5. Transparency: The nudges should be clear and not manipulative. People should be able to understand the choice setup and opt out if they wish. It’s not about tricking or manipulating people, but instead presenting choices in a way that helps people make better decisions, while keeping their freedom intact.

So why does this matter?

Knowing about libertarian paternalism matters because knowing about it gives you insight into how your environment shapes your decisions and helps you make more informed, thoughtful choices—while also providing tools for helping others do the same.

Here’s why it is good to know about:

1. Making Better Decisions: When you understand the idea behind libertarian paternalism, you realize how small changes in your environment can push you toward better choices. For example, automatic enrollment in a retirement savings plan helps you save for the future without thinking too hard about it. Recognizing these nudges can make it easier to stick with decisions that benefit your health, finances, or well-being.

2. Becoming Aware of Influence: It’s useful to know when you’re being nudged. Whether it's a healthier default meal on a menu or an option designed to make you save more, knowing about this concept lets you recognize when someone is guiding your choices. This helps you stay more in control of your decisions.

3. Designing Better Systems for Others: If you're in a position where you make choices for others—whether as a parent, teacher, manager, policymaker, etc—understanding libertarian paternalism lets you design environments that encourage positive outcomes. You can create systems that help people make good decisions without forcing them to.

4. Reducing Decision Fatigue: We all get overwhelmed by too many choices. Libertarian paternalism can simplify decision-making by giving you options that make the better choice easier and more accessible.

How can you apply this to your life?

Ready to put libertarian paternalism to work in your day-to-day life? No need for grand gestures or complete lifestyle overhauls. It's all about those small tweaks that can make a big difference. Here are some easy ways to nudge yourself towards better habits:

• Automate savings: Set up automatic transfers to your savings account each payday. You can always transfer money back if needed, but the default is to save.

• Invest spare change: Try Acorns, a micro-investing app that rounds up your purchases to the nearest dollar and invests the spare change. I’ve been using this service all year and I really like it. If you want to sign up, you could use my referral link.

• Downsize dinnerware: Use smaller plates to nudge yourself towards smaller portion sizes without restricting how much you can eat.

• Question purchases: Place a sticker on your credit card with a reminder like "Do you need this?" to create a small friction point before spending.

• Prioritize productivity: Set your phone to automatically enter "Do Not Disturb" mode during your core productive time each day.

• Hydrate strategically: Place water bottles or glasses of water at key locations to encourage regular hydration throughout the day.

• Streamline bill payments: Set up automatic payments for regular bills to avoid late fees, while retaining the option to adjust or cancel if needed.

• Defer distractions: Create a "read later" folder for interesting articles, nudging you away from immediate distractions and towards focused work.

In conclusion

In the end, libertarian paternalism isn't about manipulating choices—it's about designing smarter defaults. It's the middle ground between complete freedom and strict rules, acknowledging that sometimes we all need a little help making decisions that align with our long-term goals.

Libertarian paternalism is about making the smart choice the lazy choice, without taking away your rights. It's the art of building a world where your best intentions don't crumble at the first sight of temptation. So go ahead, sprinkle some strategic nudges into your life. After all, free will is a lot more fun when it's not constantly arm-wrestling with your worst impulses.

Ever forward.
— Derek (aka Chief Rabbit)

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