# Nudge by Richard Thaler, Cass Sunstein

Choice architecture: libertarian paternalism. Nudging without taking
away freedom of choice.

Core idea: people are predictably irrational. Small changes in the
choice design can nudge them in a helpful (or harmful) direction.

- Anchoring
  - What: People rely heavily on the first number or reference point they see
  - Example: Seeing €500 first makes €300 feel cheap, even if it isn’t
  - Impact: Initial values strongly influence decisions, even when irrelevant

- Availability Heuristic
  - What: People judge probability based on how easily examples come to mind
  - Example: News about plane crashes makes flying seem more dangerous
  - Impact: Leads to distorted perception of risk

- Representativeness
  - What: People judge based on stereotypes rather than actual probability
  - Example: Someone who “looks like a librarian” is assumed to be one
  - Impact: Ignores statistical reality and base rates

- Status Quo Bias (Inertia)
  - What: People tend to stick with default options
  - Example: Employees remain in default pension plans
  - Impact: Defaults strongly influence outcomes

- Loss Aversion
  - What: Losses feel stronger than equivalent gains
  - Example: Losing €100 feels worse than gaining €100 feels good
  - Impact: People avoid change, even when beneficial

- Framing Effect
  - What: Decisions depend on how information is presented
  - Example: “90% survival” vs “10% mortality”
  - Impact: Same facts can lead to different choices

- Present Bias (Time Inconsistency)
  - What: Immediate rewards are valued more than future benefits
  - Example: Choosing junk food over long-term health
  - Impact: Poor long-term decision-making

- Self-Control Problems
  - What: Conflict between long-term goals and short-term impulses
  - Example: Wanting to save but choosing to spend
  - Impact: Leads to inconsistent behavior over time

- Overconfidence
  - What: People overestimate their knowledge or ability
  - Example: Investors believing they can beat the market
  - Impact: Risky or suboptimal decisions

- Optimism Bias
  - What: People believe negative events are less likely to affect them
  - Example: Ignoring health risks or insurance needs
  - Impact: Under-preparation for risks

- Social Proof (Herd Behavior)
  - What: People follow the behavior of others
  - Example: “Most people pay taxes on time” increases compliance
  - Impact: Strong influence on group-driven behavior

- Mental Accounting
  - What: Money is treated differently depending on context
  - Example: Spending a tax refund more freely than salary
  - Impact: Leads to inconsistent financial decisions

- Narrow Framing
  - What: Decisions are evaluated in isolation
  - Example: Looking at one investment instead of the whole portfolio
  - Impact: Misses broader context and trade-offs

- Probability Neglect
  - What: People ignore probabilities when emotions are strong
  - Example: Overreacting to rare but dramatic risks
  - Impact: Poor risk assessment

- Default Effect
  - What: Defaults are seen as implicit recommendations
  - Example: Pre-selected organ donation increases participation
  - Impact: One of the most powerful tools in decision design

- Key Takeaway
  - What: Humans are predictably irrational
  - Example: Systematic biases appear across decisions
  - Impact: Enables designing better “nudges” without restricting freedom