Think about the last decision you made. Are you sure you made it? We like to think we're in control, that we're the decision maker, but how often are we really? Many of the choices we make on a daily basis are, at least in part, made for us. Sure, we have the ultimate power to decide, but we're lazy.
On an evolutionary level, we are programmed to conserve energy, and the brain uses a lot of it. Particularly the pre-frontal cortex, which is primarily responsible for our decision-making. Lucky for us, human beings have developed behavioral adaptations to help us make decisions faster in order to conserve energy. System 1, our automatic response system, helps us make decisions on autopilot using memory and emotion rather than reason. These decisions are made using our limbic system which requires less energy. However, this type of decision-making is also a bit lazy and so the decisions are not always the best.
What is Choice Architecture
Governments, companies, and even regular people like you and me use choice architecture on a regular basis to elicit desired behavior in the name of public health, consumers' buying decisions, and overall better choices. Choice architecture is simply how options are designed and presented to influence how decisions are made or create behavior change.
Choice Architecture and Behavioral Economics
Behavioral science recognizes how cognitive bias plays into complex decisions and habit formation leading to questions about how these biases might be used to help people make better choices. Behavioral economist Richard Thaler, in his book Nudge, explores the idea of Libertarian Paternalism.
The term, coined by Thaler and Cass Sunstein, Thaler's co-author, is their self-proclaimed movement to make the decision-making process simpler for people while nudging them to make better decisions, and at the same time, preserving their freedom to choose.
Heuristics and Biases Used in Decision-Making
The reason choice architecture works is because, in general, people's behavior is dictated by practical systems for decision-making. A behavioral scientist might call them cognitive bias and heuristics. Here is a handful that plays into our daily decisions.
Status Quo Bias
We tend to want to leave things the way they are. There are a lot of reasons for this such as loss-aversion or laziness, but whatever the reasons, we are often slaves to inertia. A choice architect might use the Status Quo Bias by creating a default choice that a person then has to opt out of. The default option is theoretically the better decision and nudges the decision maker to make the right choice.
When you make a judgment about a piece of information based on a different, unrelated piece of information that you are given or perhaps already know, this is called anchoring. I used anchoring a lot when I worked in logistics. If I wanted to spend $800 on a particular freight movement, I might start by offering $600. In this scenario $600 is the anchor. We would negotiate and usually end up landing somewhere in the middle, often getting me an even better rate than the $800 I was willing to spend.
When we are forced to make a decision based on new information or a new experience, we tend to call on past experiences for a representation of the new experience to give us information on which to base our decision. Unfortunately, this often leads us astray. Representativeness is one of the major reasons that stereotypes exist. Like with any other heuristic, we do this in order to make quick, easy decisions without expending too much energy. However, not without some major flaws.
We also seem to favor choice options that support information currently available to us. The availability bias is also known as the recency bias because recent experiences color our choices. For instance, after the attack on 9/11, the number of people refusing to fly for fear of hijacking went up significantly even though the chances of having your flight hijacked are minuscule.
We don't like to lose things. It feels so much worse for us to lose something that we already have, even if it's meaningless. On average, we attribute much more value to items we already own than ones we don't. Even if they are the same exact item. Loss aversion can keep us from making better choices when those choices might result in a loss that will hurt us psychologically.
When you choose different options based on how the information is presented to you instead of the information itself, this is an example of framing. Consumers are influenced by framing constantly. You're probably more likely to trust a disinfectant that kills 99% of germs over one that tells you that 1% of germs will survive. The information is the same, but the way we perceive it is different.
Examples of Choice Architecture
We see choice architecture interventions everywhere. Public policy that you are affected by on a daily basis was likely set by a choice architect. On a walk through the grocery store consumers are hit with a barrage of nudges to buy one product over another. Choice architects are all around us, nudging us to make complex decisions easier and protecting us from choice overload. So what are some common nudges that you've probably encountered?
When you were hired by your employer you were likely automatically enrolled in your 401k or another retirement plan. And more than likely, you stayed in the retirement plan. This default choice is determined to be the best for you, and you are fully capable of opting out, however, the onus is on you to do so. And because of the inertia of the status quo, you are likely to stick with the default.
Likewise, countries that have presumed consent for organ donation when they register for their driver's licenses have significantly higher participation than those countries that do not have presumed consent as public policy.
Save More Tomorrow
In the book Nudge, Thaler writes about a policy that he and a fellow behavioral economist came up with called Save More Tomorrow. Combining the default choice of automatic enrollment in a savings plan and automatic savings increases each time the employee receives a raise, avoids loss aversion by saving additional money that the employee is not used to seeing on their check.
Shelf Item Placement
Items that are at eye level in stores are more likely to be purchased. They are easier to see and reach than products that are hidden away on the bottom shelf. Stores are aware of this and nudge you to buy items that they want to sell for whatever reason. Perhaps they provide higher profit margins or perhaps they are a part of a current promotion. Brands even pay money for prime shelf space on end caps in order to sell more products. This is only one example of how consumers are influenced by choice architecture.
Ethical Dilemma of Nudges
Even though Libertarian Paternalism is designed to promote interventions that nudge folks to make better, healthier decisions, there are naysayers. These folks claim that nudging behavior change and pushing people one way or another when faced with complex choices creates an ethical dilemma.
There are some who claim that nudges actually reduce autonomy and force people to behave one specific way under the influence of nudges. Even though they are technically free to decide for themselves, taking advantage of what we know about how humans make decisions is manipulative.
There is also, of course, the consideration of those choice architects who do not have well-being in mind. Those who have ill intent can use choice architecture for their own gain. Cass Sunstein argues that choice architecture is all around us, even in nature, and is inevitable. You can read Sunstein's entire defense here.
You Are Free to Decide
The truth is, you are ultimately in control of your decisions but that doesn't mean you are always making your own choices. Your cognitive biases are constantly being used to nudge you in a certain direction and you acquiesce. Developments in behavioral economics will continue to shape the way that decisions are presented to us. Understanding how our behavior influences the way we see the different options presented to us can at least arm you with the tools needed to know when you are better off making a thoughtful decision and when it's better to consent to choice architecture interventions.