Consumers Abused by Default Choices

At some point the business sector realized the best way to take advantage of consumers was to use default options that make them spend money. A default option works because it creates an automatic decision by the consumer doing nothing. And doing nothing is the path of least resistance for time-poor consumers struggling to balance the many difficult responsibilities associated with work, family, maintaining financial security, and coping with stresses on their health.

Consider, for example, the endless advertisements that offer a free sample or trial for a product, such as some nonprescription medication or vitamin supplement. It may be a free week’s or month’s worth of product. But the fine print is that you will automatically be enrolled in a program that mails you a monthly supply and bills your credit card. There probably will be some opportunity for you to cancel or opt out of this program, but doing so will require some significant effort by mail or phone that most consumers will not find the time or energy to execute. No, the easy way is to just let the default option control your cost, even if you were not especially impressed with the trial use of the product. The same thing often happens with free trials for a magazine or some email publication.

If consumers were given a truly free choice they would have the opportunity to explicitly decide to buy a product that they tried or do nothing and have no future cost. This is the way it used to be before companies discovered the tyranny of coercive default options. Even today, when you are in a store and take a sample of food or some other product you have the freedom to walk away with no future cost or to decide to buy the product. Not so, however, with almost all “free” offers coming by way of newspaper and magazine ads, or the mail or Internet.

We should be sensitive to the ugly reality that there are many consumers who simply do not comprehend all the consequences of product default options. The principal example being elderly and ill Americans that may have some reduced intellectual or cognitive capabilities. Younger consumers and overly busy ones can also fail to appreciate default options. Millions of people are vulnerable to slick “free” offers that cleverly hide or disguise costly default options.

Governments can also use default options. The power of default options was recently illustrated by a study of how the rates of organ donation consent vary among nations. In the US where the default option is a negative decision (you must positively declare your organ donation consent), the rate is 28 percent and is somewhat similar in other countries using that default option, including 17 percent in the United Kingdom and 12 percent in Germany. But in nations where the default option is a positive decision for organ donation the rates are consistently very high, including nearly 100 percent in France, Austria and Hungry. This huge national difference was explained by University of Chicago behavioral economist Richard Thaler: “God made us lazy and busy and prone to inertia.”

Another example pertains to employers. When new workers are told that retirement accounts will automatically be started for them, unless they intentionally opt out (a positive default option), most gladly sign up. In contrast, if new hires are informed that such accounts will not be started unless they opt in (a negative default option), most do not sign up.

These two examples show the positive use of default options for the good of people and society.

This is not the case for consumer products.

People should always question “free” offers. Always ask yourself “Is there a costly default choice that will hit me?” Such a default choice is really no choice at all. Companies should not be free to deny us of real free choice when it comes to purchases.

I would like to see a federal consumer protection law that makes it illegal for all companies to use no-action default options that obligate consumers for future purchase. And so should you.

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and it's the reason I never respond to even potentially 'attractive' unsolicitied junk mail if it's able to get past my 'chuck-it' junk mail reflex.

I hate the default 'opt-in after trial' and would suggest that, if starting a 'free trial' requires your credit card number, THAT's the signal to bail out of that 'free trial offer' immediately.

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"I hope we shall crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our government in a trial of strength, and bid defiance to the laws of our country." - Thomas Jefferson

free is not free if they want your credit card number.

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{{{ We should be sensitive to the ugly reality that there are many consumers who simply do not comprehend all the consequences of product default options. }}}

"All warfare is based on deception." - Sun Tzu

Never give a sucker an even break.

There is no peace time in European culture. There is economic wartime and there is military wartime. When the economic wargame gets out of hand then ...

If this society wanted economic competence from most people then accounting should have been mandatory in our schools for decades. Double entry accounting is 700 yars old. How hard can it be? Why don't economists think it is easy and want everyone to know it? Economists are some of the most useless idiots on the planet.

They haven't talked about or kept track of the default depreciation option we have gotten from the automobile industry for the last 50 years.

Kill an economist for Karl