Default option
Also called: Default effect · Topic: Schools of Economic Thought and Economic Laws · NCERT: Beyond NCERT
Meaning
A default option is the choice that applies automatically if a person does nothing. People tend to stay with the default because of status quo bias, a preference for leaving things as they are, and because of simple inertia. This is why a well-chosen default is one of the strongest nudges. The Economic Survey 2018-19 named "changing the default option" as one of three principles for behavioural policy in India.
Example
Contributions to the Atal Pension Yojana, and the yearly premiums for PMJJBY and PMSBY, are auto-debited from the subscriber's bank account. The subscriber does not have to act each year, so inertia keeps them saving and insured. Outside India, opt-out organ donation (as in Spain) raises donor rates. Under this system everyone is a donor unless they say no.
Don't confuse with
- Status quo bias: this is the human tendency to prefer the current state. A default option is a policy tool that uses this tendency.