The Thaler-Sunstein Effect

The Thaler-Sunstein Effect describes how people tend to make better decisions when they are given clear, easy-to-understand choices, especially involving savings or health. Named after behavioral economists Richard Thaler and Cass Sunstein, it emphasizes that designing choice environments—like default options or simple comparisons—can nudge individuals toward beneficial behaviors without restricting freedom. For example, automatically enrolling employees in a retirement plan encourages savings since the default is set in their favor, making it easier to save without requiring active decision-making. Overall, the effect highlights the power of well-structured choices to promote smarter, healthier decisions.