In an article entitled “When Words Decide,” Barry Schwartz (writing in the August/September 2007 edition of Scientific American Mind [not available online]) gives some good examples demonstrating the great power of default choices. These examples add more fuel for a long burning fire-that people are not the rational careful-thinking beings (homo economicus [1]) economists have traditionally portrayed them to be.
One example is that 90% of the people in most European countries are organ donors. Compare that number to the lowly 25% of Americans who agree to donate their organs. Why the difference? As reported by Eric Johnson and Daniel Goldstein of the London business school (in 2003), one is deemed to be an organ donor in Europe. In the United States, to be an organ donor, you have to sign the back of your driver’s license. In the U.S., if you don’t sign the back of the driver’s license, you cannot be considered to be an organ donor.
Schwartz gives another good example. When employers switch their 401(k) plans from opt-in (where you have to sign a form to contribute) to opt-out (or you have to sign a form to decline participation) “initial enrollment jumped from 49 to 86%. This was according to a 2001 study by University of Pennsylvania economist Brigitte Madrian.
No-fault insurance provides yet another example. No-fault is the default in New Jersey. In Pennsylvania, however, citizens must opt-in. As reported in the Journal of Risk and Uncertainty in 1993, 80% of car owners in the states ended up with the default choice (which cost Pennsylvanians millions of dollars.
Defaults have great power, and Schwartz suggests that it may come from lack of human attention.
Life is busy and complicated and it is not possible to pay attention to everything. That is why most of us keep our cell phone plan whether or not it is the best one for us. Researching alternatives is time-consuming and we do not want to be bothered.
I am a big believer in limited human attentional capacities as explanatory causes for much human behavior. See here, for example. [2]
But there’s more. University of California psychologist Craig McKenzie conducted a study on which found that most people simply infer that the default choice is the best option.
Given this power of defaults, politicians might well be tempted to nudge people in various directions based upon the use of default choices, a technique that economist Richard Thaler terms “libertarian paternalism.”
I’m wondering the extent to which this principle might apply in the political realm. Are we so accepting of the our financially corrupted election system, for example, because it is handed to us as the default system (one alternative being the write in ballot and another being revolution)?
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