Naughty Nudgers6. March 2013 by Joachim Goldberg
Economists continue to rail against the kind of libertarian or ‘soft’ paternalism pioneered by Richard Thaler and Cass Sunstein in their 2008 book, ‘Nudge’. A nudge is essentially a method of persuading people to act in a given way by modifying the way the information on which the decisions are to be made, or the alternatives, are presented. The nudgers justify the manipulation with appeals to the individual’s ‘best interests’ or to the ‘greater good’. For instance, encouraging people to reuse towels in hotel rooms, to pay their taxes on time, or to save more for their retirement, have been among the triumphs of the behavioural intervention. However, it is precisely this that riles economists like Dr Britta Kuhn, who recently expressed her opposition in a blog post. Nudging, she argues, has an impact on the entire population, not just on the ‘bad’ decision-makers, so it might not be in everyone’s best interests. A retirement-savings initiative, for example, impacts not only those who save too little, but also those who are already saving enough. Excess saving by the latter would be a drag on present consumption, economic growth, employment, etc. This is hardly the greater good. In addition, the permanent ‘guidance’ by paternalistic policymakers also has the effect of dumbing down the population. Where is the best interest or greater good in that?
Nudging doesn’t directly take away an individual’s freedom; there is no constraint or ban. The individual maintains the possibility to do the opposite of what the nudgers prefer; she is just less likely to want to. For instance, the recognition that people are generally reluctant to move away from the default options they are presented with, e.g., opted out of a pension scheme, provides an opportunity for nudgers to influence behaviour. By resetting the default to ‘opted-in, it is likely a substantial swathe of the population will suddenly want to save more. The default in this case is crucial for determining the preferences of retirement savers. However, banishing the nudgers would not mean that no default exists. With retirement savings, and a great number of other consumer choices, there is no default-free possibility; employees are either in or out. Those who oppose libertarian paternalism must accept that the debate is not about whether nudging is good or bad, but about deciding who gets to set the default: tradition, chance, Providence, marketing departments, or policymakers.