Here’s my Q&A column from the WSJ this week — and if you have any questions for me, you can tweet them to @danariely with the hashtag #askariely, post a comment on my Ask Ariely Facebook page, or email them to AskAriely@wsj.com.
I know that people are more likely to make smart decisions—about, say, contributing early and often to a retirement savings fund—if they’re nudged into it by default settings. How powerful is this effect? Do defaults push people a bit or change their choices dramatically?
You’ve put your finger on one of the key findings of behavioral economics. Shlomo Benartzi and Richard Thaler, among others, produced probably the field’s greatest success by encouraging employers to create retirement benefits packages whose default options are set for savings. Such packages used to require employees to enroll if they wanted to start saving. By switching the default, so that employees were automatically enrolled and had to act if they wanted to stop putting aside money, saving rates increased dramatically.
But what effect does changing the default setting have compared with other incentives to save? Take a recent study by Michael Callen, Joshua Blumenstock and Tarek Ghani. They worked with Roshan, a mobile communications provider in Afghanistan, to create a savings plan for its 1,000-person workforce. Half the participants were given a default of “opt in” (and had to call to leave the plan), and the other half was defaulted to “opt out” (and had to call to start saving).
The researchers wondered how much changing the company’s matching level and the employees’ default settings would increase savings. They found that automatic enrollment had about the same effect on participation as providing the pricey incentive of a 50% matching contribution from the firm. Default settings, they concluded, are powerful indeed—perhaps not enough to make businesses stop matching contributions for their workers, but more than enough to make them sweat the default details.
On vacation in Mexico, I saw a hardworking server waiting on guests at a resort—who didn’t leave a tip. I can’t imagine they would have behaved this way in our native Canada. Did the fact that they had purchased an “all-inclusive” vacation have anything to do with it?
Several forces were probably at work. First, some all-inclusive vacations aren’t clear about tips, which may incline us to think gratuities are covered. Second, remember the saying: “What happens in Vegas stays in Vegas.” When we travel, we become slightly different versions of ourselves—and can act more freely without tainting our own reputations, at least in our own eyes. Finally, immorality often stems from our ability to convince ourselves that we’re doing something OK—even if we know that we’d want people to behave better if we were on the receiving end.
I’m often flummoxed by long restaurant menus, so I’ll pick a familiar dish—and feel that I haven’t gotten the most out of my dining experience. Any dining advice?
Trying new things makes life more interesting, but the fear of making mistakes can drive us to play it safe. Restaurants are great places for a risk. The most you can lose is one meal, and you can always ask for something else if you hate your adventurous dish (just tip well). So I often ask the waiter for the most unusual dish on the menu.
See the original article in the Wall Street Journal here.