Workshop on Nudge Theory: Influencing Behaviour for Better Decisions

A guest lecture on nudge theory and behavioural economics was delivered by Dr. Savita Kulkarni, Assistant Professor and Coordinator, Centre for Behavioural Economics, Gokhale Institute of Politics and Economics. The session formed an important part of the academic programme and offered a clear introduction to the theoretical foundations and practical relevance of behavioural economics in policy, law, and institutional decision-making.

Dr. Kulkarni began by introducing the idea of nudge theory and explaining how subtle changes in the way choices are presented can influence human behaviour without limiting freedom of choice. She emphasized that nudges do not force individuals to act in a particular way; instead, they help people make better decisions by designing the choice environment more effectively. To explain the intellectual basis of this approach, she referred to the work of Professor Herbert Simon and his concept of bounded rationality. According to this idea, human beings do not always make fully rational decisions because their thinking is limited by cognitive constraints, time pressure, and incomplete information. This challenges the classical economic assumption that individuals are always perfectly rational decision-makers.

A major focus of the lecture was the dual-process model of thinking. Dr. Kulkarni explained the difference between System 1 and System 2 thinking. System 1 is fast, automatic, intuitive, and instinctive, while System 2 is slow, deliberate, analytical, and effortful. She pointed out that most everyday decisions are made through System 1, which often makes individuals vulnerable to biases and errors. This is precisely why nudges are useful: rather than expecting people to constantly engage in difficult, effortful reasoning, nudges work with natural patterns of thought and gently steer people toward better outcomes.

The lecture also explored several behavioural barriers that can prevent optimal decision-making. Dr. Kulkarni discussed status quo bias, loss aversion, and decision fatigue, explaining how each of these affects human choices in different contexts. Status quo bias leads individuals to prefer existing arrangements even when better alternatives are available. Loss aversion makes people more sensitive to losses than to equivalent gains. Decision fatigue reduces the quality of choices when people are required to make too many decisions. By identifying such barriers, policymakers and institutions can design targeted nudges such as default options, social norm messages, and loss-framed communication to promote beneficial behaviour without coercion.

Dr. Kulkarni also highlighted the broader significance of behavioural economics in practical fields such as public policy, consumer protection, and corporate governance. Her lecture showed that behavioural insights can improve institutional design and help address real-world problems more effectively. The session concluded with an engaging assignment in which participants were asked to design a nudge-based solution to a practical problem. This exercise helped reinforce the concepts discussed during the lecture and allowed participants to apply behavioural economics in a structured and creative way.