Deciding by default

University of Pennsylvania Law Review

Volumn 162, Issue 1, 2013, Pages 1-57

  Sunstein, Cass R ^a  

^a HARVARD UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

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EID: 84896534469     PISSN: 00419907     EISSN: 19428537     Source Type: Journal    
DOI: None     Document Type: Review

References (71)

1. Daniel Pichert & Konstantinos V. Katsikopoulos, Green Defaults: Information Presentation and Pro-environmental Behaviour, 28 J. Envtl. Psychol. 63, 64 (2008)
2. Id; see also Cass R. Sunstein & Lucia A. Reisch, Automatically Green: Behavioral Economics and Environmental Protection, Harv. Envtl. L. Rev. (forthcoming 2013), available at http://papers.ssrn.com/id=2245657 (discussing green defaults in Germany).
3. Eric J. Johnson & Daniel Goldstein, Do Defaults Save Lives?, 302 Sciences 1338, 1338 (2003) (bottom figure)
4. DUNCAN J. WATTS, EVERYTHING IS OBVIOUS: ONCE YOU KNOW The ANSWER 30-31 (2011)
5. see also Eric J. Johnson & Daniel G. Goldstein, Decisions by Default (discussing various European opt-in organ donor programs), in The BEHAVIORAL FOUNDATIONS Of POLICY 417, 417-18 (Eldar Shafir ed., 2013)
6. See, e.g., Steven Greenhouse, In and Out, Off and On, N.Y. Times, Mar. 13, 2013
7. See, e.g., SHLOMO BENARTZI, SAVE MORE TOMORROW 42-45 (2012) (highlighting the impact of employer-implemented "Auto-Takeoff" programs on employee participation in retirement plans)
8. Raj Chetty et al., Active vs. Passive Decisions and Crowdout in Retirement Savings Accounts: Evidence from Denmark 38 (Nat'l Bureau of Econ. Research, Working Paper No. 18565, 2012), available at http://www.nber.org/ papers/w18565
9. see also Shlomo Benartzi & Richard H. Thaler, Behavioral Economics and the Retirement Savings Crisis, 339 Sciences 1152, 1152 (2013)(offering a valuable discussion of retirement savings rates and the effect of auto-enrollment).
10. Id. at 6; see also Stefano DellaVigna & Ulrike Malmendier, Paying Not to Go to the Gym, 96 Am. Econ. Rev. 694, 716 (2006)(offering an illuminating example of how nudges and default rules can be used in the domain of exercise).
11. See Cass R. Sunstein, The Storrs Lectures: Behavioral Economics and Paternalism, 122 Yale L.J. 1826, 1855, 1866 (2013) (detailing how GPS systems and disclosure requirements act as nudges by informing people's choices)
12. See Eric J. Johnson & Daniel G. Goldstein, Defaults and Donation Decisions, 78 TRANSPLANTATION 1713, 1714 (2004) ("[D]ecision makers might believe that defaults are suggestions by the policy maker, implying a recommended action.")
13. Cf. Andrew Caplin & Daniel J. Martin, Defaults and Attention: The Drop Out Effect 16-19 (Nat'l Bureau of Econ. Research, Working Paper No. 17988, 2012), available at http://www.nber.org/papers/w17988 (positing that informative defaults lead individuals to "drop out" and pay less attention to the choices they make)
14. See, e.g., Liz Gannes, Pinterest Now Tracks Everybody by Default, but You Can Opt Out, ALL THINGS D ( July 26, 2013), http://allthingsd.com/20130726/ pinterest-now-tracks-everybodyby-default-but-you-can-opt-out (highlighting a social media site's recently implemented tracking system that allows the site to track the preferences of both site users and nonusers to create a more user-friendly experience)
15. See Ian Ayres & Robert Gertner, Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules, 99 Yale L.J. 87, 87-88 (1989) (noting the pervasiveness of default rules like the warranty of merchantability and straight voting under corporate statutes)
16. See Russell Korobkin, The Status Quo Bias and Contract Default Rules, 83 CORNELL L. Rev. 608, 625-30 (1998) (discussing how preexisting defaults alter personal preferences)
17. see also Samuel Issacharoff, Contracting for Employment: The Limited Return of the Common Law, 74 Tex. L. Rev. 1783, 1789-90 (1996) (discussing how the common law intervened when parties failed to specify the bases for which an employer could terminate the employer-employee relationship)
18. See F.A. Hayek, The Uses of Knowledge in Society, 35 Am. Econ. Rev. 519, 524-25 (1945) (discussing the problems that incomplete information can pose for decisionmakers)
19. See, e.g., Anuj K. Shah et al., Some Consequences of Having Too Little, 338 Sciences 682, 682 (2012) (addressing the competition for an individual's attention and its impact on decisionmaking)
20. See ABHIJIT BANERJEE & ESTheR DUFLO, POOR ECONOMICS 64-68 (2011) (highlighting how nudges can start positive feedback loops in behavior that remain over time)
21. For a detailed discussion of default rules in the context of marriage, see generally Elizabeth F. Emens, Intimate Discrimination: The State's Role in the Accidents of Sex and Love, 122 Harv. L. Rev. 1307 (2009)
22. See Daniel G. Goldstein et al., Nudge Your Customers Toward Better Choices, Harv. Bus. Rev., Dec. 2008, at 99, 99-100 (providing real-world examples where the selection of specific default rules by businesses improved the customer experience)
23. See Emir Kamenica et al., Helping Consumers Know Themselves, 101 Am. Econ. Rev. 417, 422 (2011) (highlighting how improvements in technologies allow companies to learn more about their customers and institute default rules to match customer habits)
24. Richard Thaler & Will Tucker, Smarter Information, Smarter Customers, Harv. Bus. Rev. Jan.-Feb. 2013, at 4 (describing the experiment)
25. See, e.g., Eric J. Johnson et al., Framing, Probability Distortions, and Insurance Decisions [hereinafter Framing], in CHOICES, VALUES, and FRAMES 224, 238 (Daniel Kahneman & Amos Tversky eds., 2000)
26. see also Colin F. Camerer, Prospect Theory in the Wild (asserting that default rules establish a "reference point" from which people do not like to move), in CHOICES, VALUES, and FRAMES, supra, at 288, 294-95
27. Cass R. Sunstein, Switching the Default Rule, 77 N.Y.U. L. Rev. 106, 113 (2002) (explaining the effect of default rules in employment law)
28. See Johan Egebark & Mathias Ekström, Can Indifference Make the World Greener? 3 (Research Inst. Of Ind. Econ., Working Paper No. 975, 2013), available at http://papers.ssrn.com/id=2324922
29. See Eric Johnson et al., Defaults, Framing and Privacy: Why Opting In-Opting Out, 13 MARKETING LETTERS 5, 9 (2002) (highlighting that rates of participation in online studies were drastically different depending on whether participation was framed as an opt-in or opt-out)
30. see also Rebecca Balebako et al., Nudging Users Towards Privacy on Mobile Devices (2011) (unpublished manuscript), available at http://www.andrew.cmu. edu/user/pgl/paper6.pdf (reviewing the literature on nudges in privacy decisionmaking)
31. see Lauren Willis, Why Not Privacy by Default?, Berkeley Tech. L.J. (forthcoming 2014), available at http://papers.ssrn.com/id=2349766
32. See Incognito Mode (Browse in Private), GOOGLE, https://support.google. com/chrome/answer/95464?hl=en (last visited Oct. 28, 2013) (explaining what Incognito mode is and how to use it).
33. See, e.g., Benjamin R. Freed, Credit Card Readers Are Actually Being Installed in D.C. Taxis, DCIST ( July 3, 2013, 10:35 AM), http://dcist.com/2013/ 07/credit-card-readers-are-actually-be.php (discussing the gradual introduction of these screens in the nation's capital)
34. See Michael M. Grynbaum, City's Cabbies Like Plastic. Who Knew? N.Y. Times, NoV. 8, 2009, at A1 (discussing how credit cards have been good for business)
35. Alex Tabarrok, Taxi Tip Nudge, MARGINAL REVOLUTION (Dec. 6, 2012), http://marginalrevolution.com/marginalrevolution/2012/12/taxi-tip-nudge.html (discussing the taxi tip nudge and providing an example of a credit card touchscreen)
36. Kareen Haggag & Giovanni Paci, Default Tips 2 (Columbia Dep't of Econ. Discussion Paper Series, Paper No. 1213-1, 2013), available at http://academiccommons.columbia.edu/catalog/ac:157853
37. See, e.g., Gabriel D. Carroll et al., Optimal Defaults and Active Decisions, 124 Q.J. Econ. 1639, 1641-43 (2009) (studying the effect on outcomes when a firm switched to an auto-enrollment 401(k) plan)
38. William G. Gale, J. Mark Iwry & Spencer Walters, Retirement Savings for Middle- and Lower-Income Households: The Pension Protection Act of 2006 and the Unfinished Agenda (exploring the effects of default rules on 401(k) plans), in AUTOMATIC 11, 13-14 (William G. Gale et al. eds., 2009)
39. Isaac M. Dinner et al., Partitioning Default Effects: Why People Choose Not to Choose 3 (NoV. 28, 2010) (unpublished manuscript), available at http://papers.ssrn.com/id=1352488 (examining "no-action" defaults)
40. see also Jeffrey R. Brown et al., The Downside of Defaults 20-21 (Sept. 16, 2011) (unpublished manuscript), available at http://www.nber.org/programs/ ag/rrc/NB1101%20Brown,%20Farrell,%20Weisbenner%20FINAL.pdf (citing procrastination as one reason for default)
41. Constança Esteves-Sorenson & Fabrizio Perretti, Micro-Costs: Inertia in Television Viewing, 122 Econ. J. 867, 868 (2012)
42. Stephen M. Fleming et al., Overcoming Status Quo Bias in the Human Brain, 107 PROC. NAT'L ACAD. Sci. 6005, 6005 (2010)
43. See John Beshears et al., The Importance of Default Options for Retirement Saving Outcomes: Evidence from the USA (arguing that lower participation in opt-in savings plans is a result of the complexity of making an optimal savings plan decision), in LESSONS FROM PENSION REFORMS IN The AMERICAS 59, 74-75 (Stephen Kay & Tapen Sinha eds. 2008)
44. See Jonathan Levav et al., Order in Product Customization Decisions: Evidence from Field Experiments, 118 J. Pol. Econ. 274, 277 (2010)
45. See Zachary Brown et al., Testing the Effects of Defaults on the Thermostat Settings of OECD Employees, 39 ENERGY Econ. 128 (2013)
46. See Brigitte C. Madrian & Dennis F. Shea, The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior, 116 Q.J. Econ. 1149, 1182 (2001)
47. Craig R.M. McKenzie, Michael J. Liersch & Stacey R. Finkelstein, Recommendations Implicit in Policy Defaults, 17 Psychol. Sci. 414, 418-19 (2006)
48. Åsa Löfgren et al., Are Experienced People Affected by a Pre-Set Default Option-Results From a Field Experiment, 63 J. Envtl. Econ. & MGMT. 66 (2012)
49. See David Tannenbaum & Peter H. Ditto, Information Asymmetries in Default Options 11-17 (unpublished manuscript), available at https://webfiles.uci.edu/dtannenb/www/documents/ default%20information%20asymmetries.pdf (describing a study in university classrooms that found a positive correlation between students' trust in their instructor and their decision to stick with a default scheme of assignment due dates)
50. Roland G. Fryer, Jr. et al., Enhancing the Efficacy of Teacher Incentives Through Loss Aversion: A Field Experiment 2-3 (Nat'l Bureau of Econ. Research, Working Paper No. 18237, 2012), available at http://www.nber.org/papers/w18237. pdf
51. See, e.g., Edward L. Glaeser, Paternalism and Psychology, 73 U. Chi. L. Rev. 133, 136-39 (2006) (offering examples of how individuals' beliefs and opinions can be manipulated)
52. Joshua D. Wright & Douglas H. Ginsburg, Behavioral Law and Economics: Its Origins, Fatal Flaws, and Implications for Liberty, 106 Nw. U. L. Rev. 1033, 1049 & n.71 (2012) (citing literature studying how companies exploit cognitive biases)
53. For a full discussion of defaults in the context of marital names, see generally Elizabeth F. Emens, Changing Name Changing: Framing Rules and the Future of Marital Names, 74 U. Chi. L. Rev. 761 (2007)
54. John Beshears et al., The Limitations of Defaults (Sept. 15, 2010) (unpublished manuscript), available at http://www.nber.org/programs/ag/rrc/NB10- 02,%20Beshears,%20Choi,%20Laibson,%20Madrian.pdf
55. Jacob Goldin & Tatiana Homonoff, Smoke Gets in Your Eyes: Cigarette Tax Salience and Regressivity, 5 Am. Econ. J.: Econ. POL'Y, Feb. 2013
56. See Erin Todd Bronchetti et al., When a Nudge Isn't Enough: Defaults and Saving Among Low-Income Tax Filers 28-29 (Nat'l Bureau of Econ. Research, Working Paper No. 16887, 2011), available at http://www.nber.org/papers/w16887
57. See Lauren E. Willis, When Nudges Fail: Slippery Defaults, 80 U. Chi. L. Rev. 1155, 1174-75 (explaining the regulation)
58. See, e.g., Automatic Enrollment, NATIONWIDE, http://www.nationwide.com/ automaticenrollment.jsp (last visited Oct. 28, 2013) (noting that "the Pension Protection Act of 2006 made provisions for companies to automatically enroll [their] employees in[to] defined-contribution [retirement] plans")
59. Aneel Karnani, The Case Against Corporate Social Responsibility, WALL St. J. (June 14, 2012), http://online.wsj.com/article/ SB10001424052748703338004575230112664504890.html (arguing that companies only pursue social welfare goals where this pursuit maximizes profits)
60. See N. Craig Smith et al., Smart Defaults: From Hidden Persuaders to Adaptive Helpers 15-16 (INSEAD, Working Paper No. 2009/03/ISIC, 2009), available at https://flora.insead.edu/fichiersti-wp/inseadwp2009/2009-03.pdf (noting that the greatest number benefit when the "default is set to the preference most people would make when faced with making an active choice")
61. The domain of marital names overlaps in this regard with that of racially based adoption policies. See R. Richard Banks, The Color of Desire: Fulfilling Adoptive Parents' Racial Preferences Through Discriminatory State Action, 107 Yale L.J. 875, 877-82 (1998) (discussing deeply divided views over "race matching" in adoptions)
62. See Punam Anand Keller et al., Enhanced Active Choice: A New Method to Motivate Behavior Change, 21 J. CONSUMER Psychol. 376, 378 (2011) (arguing that "enhanced active choice," which communicates the preferred choice by highlighting the losses incumbent in the nonpreferred alternative, will result in more compliance than "basic active choice").
63. A growing literature explores, or has implications for, the topic of active choosing. See Carroll et al., supra note 62, at 1670-72 (asserting that an active decision framework may be particularly attractive in 401(k) enrollment); see also Bruce Carlin et al., Libertarian Paternalism, Information Sharing, and Financial Decision-Making 5 (Mar. 12, 2013) (unpublished manuscript), available at http://faculty.haas.berkeley.edu/manso/liberty.pdf (arguing for a judicious use of libertarian paternalism so as not to stifle social learning and the development of self-corrective behavior)
64. See, e.g., L. Lynne Kiesling, Knowledge Problem (manuscript at 15-16), available at http://papers.ssrn.com/id=2001633
65. See, e.g., James J. Choi et al., Defined Contribution Pensions: Plan Rules, Participant Decisions, and the Path of Least Resistance, 16 Tax Pol'Y & Econ. 67, 70 (2002) (finding that in the case of savings plans, employees followed the plan of least resistance and did not opt out even when they had the opportunity to do so)
66. Susan Parker, Esther Duflo Explains Why She Believes Randomized Controlled Trials Are So Vital, The CTR. FOR EFFECTIVE PHILANTHROPY BLOG (June 23, 2011), http://www.effectivephilanthropy.org/blog/2011/06/esther-duflo- explains-why-she-believes-randomizedcontrolled-trials-are-so-vital
67. See generally Gokul Chittaranjan et al., Mining Large-Scale Smartphone Data for Personality Studies (Oct. 14, 2011) (unpublished manuscript), available at http://publications.idiap.ch/downloads/papers/2011/Chittaranjan-PUC-2012.pdf (analyzing the relationship between behavioral characteristics derived from smartphone data and certain self-reported personality traits)
68. See Benedict Carey, Academic 'Dream Team' Helped Obama's Effort, N.Y. Times, NoV. 13, 2012, at D1 (exploring defaults in the context of voting and politics)
69. See Amazon Advertising Preferences, AMAZON.COM, http://www.amazon.com/gp/ dra/info?ie=UTF8&ref-=ya-advertising-preferences (last visited Oct. 28, 2013)
70. See Gopi Shah Goda & Coleen Flaherty Manchester, Incorporating Employee Heterogeneity into Default Rules for Retirement Plan Selection 29 (Nat'l Bureau of Econ. Research, Working Paper No. 16099, 2010), available at http://www.nber.org/papers/w16099 (studying the effects on retirement plan choices when the default plan is altered based on participant age)
71. See Steffen Altmann et al., Abstract to Incentives and Information As Driving Forces of Default Effects (Apr. 4, 2012) (unpublished manuscript), available at http://www.ewi-ssl.pitt.edu/econ/files/seminars/120404-sem924- Steffen%20Altman.pdf (providing a valuable theoretical framework for when "decision makers should rationally follow default options instead of making active choices")