www.the-actuary.org.uk
Your book Nudge seems to have
caught the mood of the moment.
That is mostly luck. The book is based on
30 years of research, and now seemed like a
good time to aim at a larger audience.
Beneath your theory lies the
assumption that there are experts
who are best able to understand good
choices. Is that a feature of an
increasingly complex society?
Yes. Just consider telephones. In our
grandparents' generation there was only one
kind of phone, and one colour: black. Now,
choosing a phone is a complex problem
worthy of a Masters thesis, so a group of
experts might design a programme to help
you find the right package.
What do you think defines an expert?
Take one illustration. There was a recent
study about when men should stop
being tested for prostate cancer. A small
interdisciplinary team collectively brought
the required knowledge to act as a good
`nudge'. They suggested that men stop being
tested at 75 but allowing them and their
physicians to overrule that guideline. Notice
that there is a strong actuarial component in
the right decision here. Since prostate cancer
is usually slow, men should avoid treatments
with a high risk of bad side effects if they are
likely to die of something else first.
Are journalists a help or a hindrance
in telling the public what to think of
the experts?
We all think that everything in a news story
is completely right until we read one about
a subject in which we are an expert, and
then we realise there can be errors. Still,
most journalists I talk to try hard to give an
accurate picture.
Do you think actuaries do enough to
educate others about the merits of
long-term financial planning?
My father and uncle were both actuaries,
so I know full well that actuaries think
they understand everything better than
anyone! Still, you could probably be doing
more to explain the importance of saving.
Certainly the `downside' of increasing life
expectancies is a message you are uniquely
qualified to deliver.
Where do you see the boundaries for
libertarian paternalism? In
particular, why do you think the
State is reluctant to leave pension
saving to individual choice?
In some domains, making things
compulsory is quite popular. Here in the US,
the social security system is wildly popular.
If societies want to decide collectively to
tie themselves to the mast, then libertarian
paternalists have to shrug and say `okay'.
Where do you think the balance
should be between something that is
good (and needs a nudge) and
something that is less so? How do you
apply this to pensions?
It is important to make sure that the costs of
opting out are small. We strive for policies we
call `one-click' paternalism, because someone
can opt out with one mouse click. It is also
important to give advice to people for whom
the default might not be a good choice.
You have described the world as
consisting of `humans' and `econs', a
rational creature that is half-actuary.
What do you like best about
actuaries today?
Actuaries have a rare mix of skills and
knowledge. In many situations they can be
just the `experts' we are looking for. I hope
they take the idea of choice architecture
seriously, and go into that line of work!
Did you ever think of being an actuary
yourself � and if not, why not?
I didn't think I had the self-control to take
all those exams so I did something easier
-- a PhD in economics!
A nudge in the right direction
Richard Thaler and his colleague Cass Sunstein have taken the business world by storm with
their new book Nudge. Peter Tompkins caught up with Professor Thaler to get the inside view
Richard Thaler
is a professor of
behavioural science
and economics at
Chicago University's
Graduate School
of Business
Richard Thaler Interview
Reader offer
Readers wishing to purchase a copy of Nudge
at the special price of �16.20 (RRP �18), with
free postage (UK only), should contact the
sales department at Yale University Press on
+44 (0)20 7079 4900, or send a cheque made
payable to `Yale University Press' to: Sales
Department, Yale University Press, 47 Bedford
Square, London WC1B 3DP.
October 2008 41
You can read Peter Tompkins'
review of Nudge by Richard H
Thaler and Cass R Sunstein at
www.the-actuary.org.uk/814232
BOOK REVIEW
Peter Tompkins chairs
the Editorial Advisory
Panel of The Actuary.
kind of phone, and one colour: black. Now,
choosing a phone is a complex problem
worthy of a Masters thesis, so a group of
experts might design a programme to help
you find the right package.
What do you think defines an expert?
Take one illustration. There was a recent
study about when men should stop
being tested for prostate cancer. A small
interdisciplinary team collectively brought
the required knowledge to act as a good
`nudge'. They suggested that men stop being
tested at 75 but allowing them and their
physicians to overrule that guideline. Notice
that there is a strong actuarial component in
the right decision here. Since prostate cancer
is usually slow, men should avoid treatments
with a high risk of bad side effects if they are
likely to die of something else first.
Are journalists a help or a hindrance
in telling the public what to think of
the experts?
We all think that everything in a news story
is completely right until we read one aboutReader offer

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