In recent years, governments have become keenly interested in behavioral science; new findings in psychology and behavioral economics have led to bold initiatives in areas that involve poverty, consumer protection, savings, health, the environment, and much more. Private institutions have used behavioral findings as well. But there is a pervasive and insufficiently explored question: when is it best to ask people to make active choices, and when is it best to use a default rule, which means that people need not make any choice at all? The answer depends on a form of cost–benefit analysis, which means that it is necessary to investigate whether choosing is a burden or a pleasure, whether learning is important, and whether a default rule would satisfy the informed preferences or all of most people.
Default rules have major effects on social outcomes; whether the issue involves savings, electricity providers, or school meals, an opt-out design produces significantly higher participation rates than an opt-in design, even if it is easy for people to reject the default. The 'stickiness' of default rules is a product of identifiable factors, including the power of inertia, the power of suggestion, and loss aversion. Active choosing usually produces higher participation rates than does an opt-in design, but lower than an opt-out design. Default rules have important advantages over active choosing: among other things, they do not require people to devote their limited time and attention to a topic that might not engage or interest them. Active choosing may be better than default rules when people have diverse preferences and situations.
Link to publication