Sunstein, author of 'Nudge,' displays power of default rules

Cass Sunstein, President Barack Obama’s former chief regulator and the author of the award-winning “Nudge: Improving Decisions about Health, Wealth, and Happiness,” highlighted the influence of default rules, or how existing norms and regulations can impact people’s behavior, in a lecture on Monday afternoon. Sunstein, now a professor at Harvard Law School, partially oversaw the implementation of the Affordable Care Act and financial regulatory reform during his time as the administrator of the White House Office of Information and Regulatory Affairs.

Sunstein began by discussing how default rules can change outcomes. As an example, he compared the rate of organ donation in Germany and Austria. Just 12 percent of Germans are registered organ donors, he said, while 99 percent of Austrians are. Sunstein attributed the disparity to different default rules.

“There is nothing involving culture, altruism or anything, but the default rule in Austria is that you have to opt out of organ donation,” Sunstein said.

He pointed to three reasons that default rules are so powerful. First of all, natural inertia and procrastination prevent people from actively changing their behavior.

“If a default rule requires effort [and] attention to shift, people will often say, ‘Yeah, whatever’ and go about their business,” Sunstein explained.

He continued with an example of changing the television channel. If a television program receives a 10 percent bump in popularity, the following program will also receive a 2 to 3 percent bump, since people are simply too lazy to change the channel.

Secondly, default rules are influential because people assume an expert has selected the default for a reason. Especially in technical matters, people often stick to the default and trust what they view as the “expert” choice, since they don’t have a complete understanding of the matter.

Finally, Sunstein said the power of default rules stems from people's desire to avert a perceived loss. Sunstein noted that if people are given a salary by default and have the option to put $200 into savings, they choose not to because they don’t want to “lose” take-home pay.

However, when the $200 automatically goes into savings and they have the option to convert that to take-home pay, they don’t want to because they fear losing their savings.

In terms of the applications of this theory to public policy, Sunstein recommended, “selecting the default rule that reflects what most people would choose if they are adequately informed.”

He noted that this can be difficult at times, as officials would have to put a lot of effort into figuring out what choice people would make under this ideal condition.

One alternative to default rules is “active choosing,” or requiring people to make a choice where there is no default rule set. Sunstein explained that while this promotes free choice, it can lead to “pointless red tape” and place “unwelcome big burdens on choosers” because they need to weigh a lot of different information before making a choice.

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Sunstein said the future of default rules in society is trending toward personalized defaults based on individuals’ past choices, rather than impersonal, uniform defaults.

“As technology evolves and information accumulates, it should be increasingly possible to design default rules based on individual situations,” Sunstein said.

Many companies are already using these techniques, Sunstein said, noting that certain airlines assign people default seats based on where they have chosen to sit in the past. Sunstein argued that if the group that is choosing is relatively diverse and institutions can be trusted, personal default rules are the best route to take.

The lecture took place in a full Dodds Auditorum.