This year has seen a glut of books on topics in that strange area occupied awkwardly by behavioural economics, cognitive psychology, and experimental philosophy. Some fail to distinguish themselves, merely rehashing the many ways in which we aren’t perfectly rational creatures. Others, however, find an original angle to tack the last 30 years of work since Daniel Kahneman first thought “but wait, real people don’t make rational choices”. Nudge (Thaler and Sunnstein, Yale University Press, 2008) is from two leading University of Chicago economists and takes a public policy angle that has been rewarded in the bestseller lists.
The authors (who refer to each other by their last names, even in the blog that accompanies the book, an awkward affectation that makes me picture two 1950s men in suits at a work cocktail party) have coined a new term: libertarian paternalism. By this they mean that policy makers can use your brain’s decision-making shortcuts to steer you towards good behaviour while still leaving you free to choose bad. It’s opt-out public policy.
Libertarian Paternalism is a brilliant phrase because it has something for everything: libertarianism for the Small Government suit, paternalism for the Smug Liberal. Nudge has been required reading in the halls of English and US power, because it promises that you can have your cake and eat it. You can make decisions for other people, but not be hated by the people who don’t like you making decisions for other people! What’s not to love?
The book has a simple structure: first the authors walk us through our cognitive biases, the flaws in our decision-making apparatus; then they take us through different real-world scenarios such as social security, healthcare, and education; and finally they deal with objections and suggest future avenues of exploration. In each subject area, the authors suggest “nudges” (the authors endow the word with the same near-religious air that accompanies “social graph” and “RoR” in Web 2.0 circles) that will gently encourage people to do the right thing. For example, we tend to fear losing things more than we anticipate gaining things, so the authors suggest we not immediately deduct money from salaries to increase retirement savings (which would be perceived as a loss) but instead reduce future raises and put the reduction towards retirement. Then backing out would require losing the retirement saving you were doing (a loss, felt more keenly than the gain of the spending money).
Inherent in this structure is the danger that the middle chapters become wishful fantasies divorced from reality (“I, an unbloodied economist, Know How To Solve All The World’s Problems Without Pissing Anyone Off”). The authors attempt to avoid this by citing situations in which nudge-like techniques have worked, for example San Marcos, TX, solved the low college enrolment rate by requiring high schoolers to complete an application form to their local community college before they could graduate (in addition to this, kids were sold hard on the personal advantages of college, such as the earning potential to afford a flash car). See, nudges work! Despite these efforts, this reader was left dissatisfied—perhaps by the authors’ advocacy of “our proposals” instead of a humble presentation of “what has worked for others”.
I also remain dissatisfied with the authors’ blithe dismissal of the dangers of bad nudges. After all, the same techniques could steer someone towards an action that’s not in their self-interest. The authors shrug and say “sure, but transparency will help this” and provide two paragraphs of boil-the-ocean political reforms to encourage this. I’d be interested to see how many dubious nudges come about as a result of this book. Perhaps it’s because of my time on the Internet, my first-hand appreciation of the very real difference between opt-in marketing and opt-out marketing, that I fear bad nudging is all-to-easy and transparency all-too-hard.
In short, Nudge is an interesting take on cognitive biases and behavioural economics but the long, detailed, and ever-optimistic unveiling of the authors’ plans to solve the burning questions in money, health, and even same-sex marriages, turn the work into a study of hubris. And that’s before it falls into the hands of someone whose political ends you don’t agree with ….