Sludge in behavioral economics refers to any form of design, administrative, or policy-related friction that systematically impedes individuals' actions or decisions. [1] [2] [3] It encompasses a range of frictions such as complex forms, hidden fees, and manipulative defaults that increase the effort, time, or cost required to make a choice, often benefiting the designer at the expense of the user's interest. [1] [4] [5]
The concept of sludge highlights the importance of transparent and user-friendly design in promoting welfare, efficiency, and equity in decision-making processes. [1]
Sludge was popularized by behavioral economist Richard Thaler and legal scholar Cass Sunstein. They introduced it as the "dark cousin" of nudging in their book Nudge: Improving Decisions About Health, Wealth, and Happiness.
Bounded rationality is the idea that rationality is limited when individuals make decisions, and under these limitations, rational individuals will select a decision that is satisfactory rather than optimal.
Energy economics is a broad scientific subject area which includes topics related to supply and use of energy in societies. Considering the cost of energy services and associated value gives economic meaning to the efficiency at which energy can be produced. Energy services can be defined as functions that generate and provide energy to the “desired end services or states”. The efficiency of energy services is dependent on the engineered technology used to produce and supply energy. The goal is to minimise energy input required to produce the energy service, such as lighting (lumens), heating (temperature) and fuel. The main sectors considered in energy economics are transportation and building, although it is relevant to a broad scale of human activities, including households and businesses at a microeconomic level and resource management and environmental impacts at a macroeconomic level.
Behavioral economics is the study of the psychological, cognitive, emotional, cultural and social factors involved in the decisions of individuals or institutions, and how these decisions deviate from those implied by classical economic theory.
Cass Robert Sunstein is an American legal scholar known for his work in constitutional law, administrative law, environmental law, and behavioral economics. He is also The New York Times best-selling author of The World According to Star Wars (2016) and Nudge (2008). He was the administrator of the White House Office of Information and Regulatory Affairs in the Obama administration from 2009 to 2012.
Richard H. Thaler is an American economist and the Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago Booth School of Business. In 2015, Thaler was president of the American Economic Association.
Mental accounting is a model of consumer behaviour developed by Richard Thaler that attempts to describe the process whereby people code, categorize and evaluate economic outcomes. Mental accounting incorporates the economic concepts of prospect theory and transactional utility theory to evaluate how people create distinctions between their financial resources in the form of mental accounts, which in turn impacts the buyer decision process and reaction to economic outcomes. People are presumed to make mental accounts as a self control strategy to manage and keep track of their spending and resources. People budget money into mental accounts for savings or expense categories. People also are assumed to make mental accounts to facilitate savings for larger purposes. Mental accounting can result in people demonstrating greater loss aversion for certain mental accounts, resulting in cognitive bias that incentivizes systematic departures from consumer rationality. Through increased understanding of mental accounting differences in decision making based on different resources, and different reactions based on similar outcomes can be greater understood.
Libertarian paternalism is the idea that it is both possible and legitimate for private and public institutions to affect behavior while also respecting freedom of choice, as well as the implementation of that idea. The term was coined by behavioral economist Richard Thaler and legal scholar Cass Sunstein in a 2003 article in the American Economic Review. The authors further elaborated upon their ideas in a more in-depth article published in the University of Chicago Law Review that same year. They propose that libertarian paternalism is paternalism in the sense that "it tries to influence choices in a way that will make choosers better off, as judged by themselves" ; note and consider, the concept paternalism specifically requires a restriction of choice. It is libertarian in the sense that it aims to ensure that "people should be free to opt out of specified arrangements if they choose to do so". The possibility to opt out is said to "preserve freedom of choice". Thaler and Sunstein published Nudge, a book-length defense of this political doctrine, in 2008.
Christine M. Jolls is the Gordon Bradford Tweedy Professor of Law and Organization at Yale Law School, where she has been since 2006. She is known for her work in the emerging theory of behavioral economics and law. Her areas of research include employment law and contracts.
Culture change is a term used in public policy making and in workplaces that emphasizes the influence of cultural capital on individual and community behavior. It has been sometimes called repositioning of culture, which means the reconstruction of the cultural concept of a society. It places stress on the social and cultural capital determinants of decision making and the manner in which these interact with other factors like the availability of information or the financial incentives facing individuals to drive behavior.
Daniel Bruce Klein is an American professor of economics at George Mason University and an Associate Fellow of the Swedish Ratio Institute. Much of his research examines the works of Adam Smith, public policy questions, libertarian political philosophy, and the sociology of academia. He is the chief editor of Econ Journal Watch.
Choice architecture is the design of different ways in which choices can be presented to decision makers, and the impact of that presentation on decision-making. For example, each of the following:
Nudge: Improving Decisions about Health, Wealth, and Happiness is a book written by University of Chicago economist and Nobel Laureate Richard H. Thaler and Harvard Law School Professor Cass R. Sunstein, first published in 2008. In 2021, a revised edition was released, subtitled The Final Edition.
Dean Karlan is an American development economist and social entrepreneur currently serving as chief economist of the United States Agency for International Development. Alongside his role at USAID, he is the Frederic Esser Nemmers Distinguished Professor of Economics and Finance at Northwestern University where, alongside Christopher Udry, he co-directs the Globe Poverty Research Lab at the Kellogg School of Management.
Nudge theory is a concept in behavioral economics, decision making, behavioral policy, social psychology, consumer behavior, and related behavioral sciences that proposes adaptive designs of the decision environment as ways to influence the behavior and decision-making of groups or individuals. Nudging contrasts with other ways to achieve compliance, such as education, legislation or enforcement.
The Behavioural Insights Team (BIT), also known unofficially as the "Nudge Unit", is a UK-based global social purpose organisation that generates and applies behavioural insights to inform policy and improve public services, following nudge theory. Using social engineering, as well as techniques in psychology, behavioral economics, and marketing, the purpose of the organisation is to influence public thinking and decision making in order to improve compliance with government policy and thereby decrease social and government costs related to inaction and poor compliance with policy and regulation. The Behavioural Insights Team has been headed by British psychologist David Halpern since its formation.
Lucia A. Reisch is a German behavioural economist and social scientist by training and the El-Erian Professor of Behavioural Economics and Policy at the University of Cambridge since September 2021. Since April 2022 the Professorship is located at the Cambridge Judge Business School. She is a Professorial Fellow and the Deputy Dean of Queens’ College, Cambridge.
Justine Hastings is an American economist, academic, and policy advisor. She is currently a vice president and chief of people-centered science at Amazon and an affiliate professor of economics at the University of Washington. Previously, she served as professor of economics and international and public affairs at Brown University, and as an associate professor of economics at Yale University. Her research focuses on combining economics and big data to solve social problems, spanning topics across education policy, retirement policy, household finance, marketing, competition, antitrust, and environmental regulation.
Katherine L. Milkman is an American economist who is the James G. Dinan endowed Professor at The Wharton School of the University of Pennsylvania. She was previously the President of the Society for Judgment and Decision Making.
Humu is a software company that uses machine learning to send "nudges," small recommendations based in nudge theory, to employees at work. Since August 2023, it is a subsidiary of Perceptyx.
A urinal target, sometimes known by the specific types urinal fly or urinal bee, is an image or mark placed inside a urinal to encourage users to aim in a particular place so as to avoid messes and reduce cleaning costs.