Question

(a)name couple of efficient usage of Nudge concept as an economic tool, in financial and economic spheres

(b)whta real world examples of it can you name, , related to economics and financial sphere

Answer 1

Question - 1  

Answer -

Nudge is a concept in behavioral science, political theory and behavioral economics which proposes positive reinforcement and indirect suggestions as ways to influence the behavior and decision making of groups or individuals. Nudging contrasts with other ways to achieve compliance, such as education, legislation or enforcement.

The nudge concept was popularized in the 2008 book Nudge: Improving Decisions About Health, Wealth, and Happiness, by two American scholars at the University of Chicago: economist Richard Thaler and legal scholar Cass Sunstein. It has influenced British and American politicians. Several nudge units exist around the world at the national level (UK, Germany, Japan and others) as well as at the international level (e.g. World Bank, UN, and the European Commission[). It is disputed whether "nudge theory" is a recent novel development in behavioral science or merely a new term for one of many methods for influencing behavior, investigated in the science of behavior analysis.

he concept is a relatively subtle policy shift that encourages people to make decisions that are in their broad self-interest.

It’s not about penalising people financially if they don’t act in certain way.

It’s about making it easier for them to make a certain decision.

Question-2

Answer- Economics may feel we are promoting selfish ends – firms maximise profits, consumers maximise their personal utility. Adam Smith claimed pursuing selfish goals ended up in improving the greater good. But, in economics, we also try to consider the impact of our actions on other people. If a firm produces chemicals, it may make a profit, but cause an external cost of pollution. To ignore this external cost would be to create an inefficient outcome. We should make the firm pay the cost of its pollution so that it has the incentive to minimise or halt external costs. Externalities are everywhere. Even your decision to study economics could have positive externalities in the future. For example, you could end up being an economics teacher helping others learn all about economics.