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What’s a urinal fly, and what does it have to with winning a Nobel Prize?

If you want to understand why the University of Chicago's Richard Thaler won the Nobel Prize in economics this year, look no further than the urinal fly.

In the early 1990s, the story goes, the cleaning manager at Amsterdam's Schiphol Airport was trying to reduce “spillage” around urinals. He settled on etching small, photorealistic images of flies on the urinals, right near the drain. The idea was to give people something to aim at.

Why a fly? Flies are small and annoying and a little gross but they're not scary like say, a spider, which might discourage people from using the urinal at all. As Aad Kieboom, the Schiphol Airport manager who oversaw the introduction of urinal flies, told Works that Work magazine in 2013, “a fly may have unsanitary connotations, but that is exactly why nobody feels guilty aiming at it!”

And aim they did. Kieboom reported an astonishing 80 percent reduction in urinal spillage after introducing the flies. He estimated this resulted in an 8 percent reduction in total bathroom cleaning costs at the airport. Since then, urinal flies have begun showing up in restrooms all over the world.

Thaler calls the urinal fly his “favorite illustration” of a nudge. What's a nudge? In their 2008 book on the topic, Thaler and co-author Cass Sunstein define it as a choice “that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives.”

The important thing about nudges? They're not mandates. Nudges don't attempt to make it impossible to do the wrong thing, but rather they make it easier to do the right thing.

Take the case of airport urinals. If you're looking to reduce spillage you could, say, institute a policy prohibiting bad aim, and hire attendants to enforce the policy by handing out fines to violators. But this would be expensive and contentious, was well as hugely intrusive into one's bathroom time.

The flies do the same work as overbearing restroom attendants without any element of forced coercion. They make it easier for people using the urinals to make the right choice.

This same principle can be applied to any number of other choices, big and small, that people make in the course of their lives. To nudge people to save for retirement, you can automatically enroll them in a 401(k) plan when they start a new job. To nudge people into using less energy, you can show them how much electricity they consume relative to their neighbors. To nudge them toward better eating habits, make the healthy food options easier to reach in cafeterias.

These insights have all arisen from the field of behavioral economics, which Thaler is now considered one of the founders of. “By exploring the consequences of limited rationality, social preferences, and lack of self-control, [Thaler] has shown how these human traits systematically affect individual decisions as well as market outcomes,” the Royal Swedish Academy wrote in awarding Thaler the prize.