 Hello, so Richard Thaler is considered one of the founders of behavioral economics a new field in economics Which takes into account human psychology like biases and lack of willpower While determining their decision-making process However, there was a time when his attempts of including human psychology in the highly mathematical field of economics Economics was considered so radical that his book would not get published Now he is a professor of behavioral science and economics at the University of Chicago So come again. What is behavioral economics? Behavioral economics uses the effect of psychological emotional and cognitive factors on the economic decisions of humans Now what is economics? Well, as you all know economics deals with money But not only that it studies how we make decisions of resources that satisfy our needs Let's consider one example to all the men sitting here in the room Is it true that when you go to the restroom you pee all over the bowl? Because that's so yes But then there was this one genius guy who pasted a fly picture in the urinal Where they are supposed to aim and of course all the men started aiming at the fly Yeah, and what do you know? spillage rates decreased by 80% In terms of behavioral economics, this is what we call a nudge and This will also be the focus of my talk today, but more on that later So now a quick quiz. I want you to all start thinking of it with me now Imagine the ship. There are 600 people on it and there's an emergency It's going down and you need to save them and you only have two options Option a with the one technology you save 200 people and with option B You save one-third probability of saving all 600 So you have 600 people you can save 200 or one-third probability of saving all 600 people So think about it and decide a or b now Thinking thinking thinking. Okay. Do you guys have your answers? Awesome. Okay. So now the same story, but now two different options Option C 400 people will die from 600 and option D one-third probability that no one will die So now decide C or D. You guys got your answers. Do you want to hear the result? Okay, so now let me ask a question who has a and C or B and D raise your hands A and C or B and D. Okay, cool. So Those are the rational decisions and I'll tell you why I Know it's limited So a and C are actually Identical save 200 people is the same as 400 people will die. We have 600 as a whole So it must only be logical if you chose a in the first round that you will choose C in the second round Because it's the same Same goes for option B and D. They're also the same, but they are just framed or worded differently one-third probability of saving all 600 people is The same as one-third probability that no people will die because they're saved you get that you catch it So it's basically the same, but why did you choose a and then you chose D? Well, that's what most people do instead of choosing a and C This is one of the few examples in behavioral economics that show we don't always choose rationally meaning Like in this sense, it's called bounded rationality and This is also called the framing effect what I also said Presentation of the choices have a big impact on the decision-making. They influence it completely So how did this all start and why is this so fascinating look at this? Neoclassical economics assumed that decisions are always rational, but no they're not This is how cellar proved with other researchers that it's incorrect like with the framing effect So now let me continue. These are two major Influences in our economic decisions. We've had one bounded rationality with the framing effect our example save the ship The second one is self-control the nudge that I explained earlier with the fly and the urinal so You see this This is called visible goals This technique makes you aim at a at a goal at a visible goal and makes you like because we all know that we when we see A fly it's so annoying. We just want to slap it and this is also like kind of similar to this Okay, so another nudging technique is defaults This is pretty interesting. You know why? Because the Spanish government made it mandatory that every Spanish person has to donate their organs Or if they want to opt out of it, they have to specifically say so they have to tick a box and say no I don't want to Donate my organs, but people just don't do it So net effect is Spain is the highest has the highest number of organ donors in the world Yeah, so let me let me explain again by definition what a nudge is a nudge uses positive reinforcement giving a non-forced push into achieving compliance and influencing motives incentives and decision-making Like a nudge is a gentle encouragement to make a person act a certain way Now my question to you Doesn't work doesn't work Okay Can you think of a reason why you would object to nudging? I've thought about this myself And I've came to the I've come to the conclusion that nudging can promote exploitation like for example when you go to the store There are a lot of sugary snacks right at the counter where it's so convenient to just take it and pay You don't have the time to think about your decision It also takes away freedom of choice because I did not say that I want my organs to be taken out so who assumed that I already decided that and A bad nudge overrides a good nudge This is very really interesting because if I like decide to eat healthy and I nudge myself into eating healthy but then there's like these all around these bad nudges that can seduce me into Doing what I don't want to do and they and they can override the good nudge and if this continues and I always nudge myself and I always nudge myself instead of critically thinking or having self-control then I will always and I will always have like I Can always be triggered by other nudges So if I don't practice critical thinking or self-control any kind of nudge will just be able to take over my system You guys understand that? Okay, cuz I explained it kind of weirdly, but yeah So all in all nudging is used consciously or unconsciously in everyday life And has such a big impact on human on human behavior. Thank you any questions Yes Yeah, yeah, that was yeah, that was a And Richard Teller like said that he He coined the term nudge Yet Yet, they were all at the same time. They all came out at the same time So they were all working on this on system one and system two on nudging. Yeah Any other questions? Yes This is a really good question, I mean, why do you actually specifically say it's advertising? Yes, but for example when a guy wants to seduce a girl he can also nudge her into it's everywhere It's not only an advertisement Was so is it not like something which was I Can't hear you Yes People to do something even if you don't want to like, you know something which is presented like like you said Yeah, the guy dresses well or does it yeah It was not known like you remember when I showed the ape picture with the new classical economics Yeah, it stated that we really thought that people decide always in their best interest. We really thought that but then Kanaman and Thaler Proved them wrong with this with this example with the ship example They specifically pointed out what what the problem was and they proved it, you know, so It's proven now Can you give us an example of where nudging is used for exploitation like not for advertisement Like we are all in the bubble, but like Human rights or like something like that like killing people You mean an extreme it's extreme form of exploitation for example Yeah, Apple Donald Trump like I mean why why is it like it's it doesn't it doesn't like just because it's It's it's in every detail you can nudge somebody so it doesn't like a little nudge has a big Impact and effect so it's not like the extremes are or you know to be like taken so seriously because it's everywhere Yeah Yeah, yeah, yeah, sure like of course everybody what it's it's it's just human nature, you know, yeah I think the Exploitation is just a very negative side effect of a nudge Like if you can see I just saw video on YouTube where one guy said why it's easy to stay slim in Japan And he just compared the amount of fast food restaurants To USA and Japan and how easy it is to access like healthy food So basically he said that the nudge from that is in Japan You can get a healthy meal a fast and healthy meal very easily than compared to USA So what are your choices when you go for a business lunch? You can go to McDonald's or Burger King or something very unhealthy rather than in Japan you have other Restaurant change where you can eat healthy food for a very low price So basically and the other thing is also Does it serve our capitalistic economic machine Yeah, we can talk about that later. Yeah, thank you so much. He can say an interesting and our guests some sort of questions Thank you very much