Choice Architecture, Decision Making, and the Attorney-Client Relationship

November 10th, 2017

Most people recognize Richard Thaler from his cameo alongside pop star Selena Gomez in the recent film adaption of Michael Lewis’s book on the causes of the Great Recession, The Big Short. Fortunately, Mr. Thaler’s resume received an upgrade this fall when he was awarded the Nobel Memorial Prize in Economic Studies. What separates Mr. Thaler’s work from the vast majority of previous winners of the same prize is his focus on the characteristics of the decision makers we see in the real world, rather than the perfectly rational actor of traditional economic models.

I am not enough of an economist (read that please as, “I am not an economist in any way, shape, or form”) to debate whether what Mr. Thaler has helped develop should or should not fall within economics (apparently, there is a substantial body of economists who view Mr. Thaler’s work as more closely aligned with psychology than economics). I am more interested in the premise of the idea; why don’t people make decisions rationally? One of Thaler’s key principles in trying to explain this, and I’m going to oversimplify this more than I should, is called “choice architecture,” or the way a choice or decision is framed.

The area where choice architecture has been most prevalent is automatic enrollment for retirement savings (i.e. 401(k) plans, IRAs, etc.). In most instances, the default rule is that participants must elect to enter the program and then decide what their contributions will be. Thaler would partially credit this choice architecture with the woefully inadequate state of retirement savings in this country. Rather than the default being an opt-in, Thaler would set a default rule (perhaps 1% of someone’s income being contributed) of opting-in, but then allow the participant to increase contributions or opt-out. The element of choice hasn’t changed, but the choice architecture has, and many studies show that this simple change in the default yields substantial results (one study saw enrollment increase by 33% after just three months of changing the default).

What does this have to do with practicing law? Well, it may depend on the type of services and information you expect from your attorney.

Some people simply view attorneys as document drafters. They think that if they give you names and dates we will plug them into form documents and spit them out. Similar to a commodity one may purchase at a retailer, the attorney is viewed as a merchant where any purchaser can obtain any form legal document their heart so desires. The issue that is either ignored or willed away by sheer force is if that form document encapsulates the purchaser’s needs.

For those people who want their attorneys to be more than document merchants—who desire a level of analysis, critical thinking, personalization, and sophistication—the primary role of the attorney is not producing a document, but rather identifying choices.

At Bray & Long, we view our role as identifying and explaining choices, but as Mr. Thaler has argued, the choice architecture could be just as important as the substance of the information. Perfectly rational decision makers wouldn’t be faced with this unknown conundrum, but who amongst us is a perfectly rational decision maker all the time? This is why we all ask for experienced, independent people to help us when we are forced to make choices in areas we have no or limited knowledge of.

And this really gets to the heart of the matter as it relates to an attorney-client relationship— communication. We need to communicate with our clients, and we need them to communicate with us. We need to understand the goals, concerns, risks, and nuances of each client’s particular situation. Our clients need to understand who we are and how we provide and frame information and choices. At the end of the day, this is what ultimately defines the success of an attorney-client relationship— communication and understanding.

We understand this dynamic, and this is why we want to talk to and understand who our clients are as much as possible. It is only through understanding the goals and nuances that can we do our best to properly frame the choices in a way where clients have the best chance of making informed and rational decisions. If we get past this hurdle, then we focus on implementation!