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Nudges — their dark side

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By Maria Alejandra Madi

The concept of nudge became popular after the publication of the 2008 book Nudge: Improving decisions about health, wealth, and happiness, written by Cass Sunstein and the most recent Nobel Laureate, Richard Thaler.  According to the authors, nudge refers to “any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting fruit at eye level counts as a nudge. Banning junk food does not” (Thaler and Sunstein, 2008).

In a previous paper, Thaler and Sunstien (2003) highlighted the paternalistic intention and the libertarian tone that overwhelm the concept. As a result, while policymakers shape contexts of individual choice towards optimal policy goals, individuals are free to choose.

Currently, nudges are used to foster social policy goals, such as the so called consumer protection. The aim of the nudge approach is both to test non-coercive alternatives to traditional regulation and to enhance cooperation between the public and the private sector.  Indeed, after 2008, a Behavioural Insights Team (BIT) was created in the UK and in many others countries – like Australia, Canada, the Netherlands, Germany, U.S. and Qatar. Since 2010, the Behavioural Insights Team (BIT) in the UK has been exploring and testing policy options by means of randomised controlled trials (RCTs). Taking into account the American experience, the Obama’s administration stimulated the introduction of nudges in new regulations to generate welfare with cost effectiveness.

Considering this background, the relevant question is: which are the reasons that explain the increasing acceptance of the nudge approach to public policy?

First, the use of nudges in public policy seems to be associated to the broader processes of deregulation and privatization in the context of financialization.

Second, the focus on individual behaviour is consistent with a neoliberal agenda where the new approach to public policy enhances the illusion of free individual choice. In this respect, Ramsey (2012) highlights the real burden on individuals that actually result from labor market flexibility and increasing indebtedness. In his own words: “Deregulation and privatisation often imposed greater choices on individuals (e.g. pensions). Forced to make choices, individuals were invited to regulate themselves according to particular norms of behaviour. Thus in consumer finance markets individuals must learn the appropriate norms of credit and savings behaviour and become financially literate. More recently insights from behavioural economics have been harnessed to ‘nudge’ individuals to change their behaviour

Third, behind the partnerships between the public and the private sectors that aim at developing new forms of non-coercive regulations, there is, in truth, a set of economic and political interrelations that shape the financialization of corporate strategies in sectors that used to be related to public services. For example, in relation to the health sector, Maryon-Davis (2016) addresses: “Today’s most liberal governments tend to resist calls for regulatory approaches to health behaviour. They are averse to regulating industries such as the tobacco, alcohol and food industries for fear of interfering with companies’ rights to sell their legal products and their legal obligation to shareholders to maximise profits. They tend to be even more reluctant to pass laws directly curtailing the personal freedoms and behaviour of individuals.”

Following the nudge approach, the responsibility for public welfare is shifted to individuals. In spite of encouraging active civic engagement, this approach to public policies seems to neglect the social constraints that restrain individual autonomy. Finally, it is worth noting that, while putting emphasis on individual behaviors and choices, the nudge approach dismisses the global increasing economic, social and political challenges at national, state and local levels.

References

Goodwin, T. (2012) Why we should reject ‘nudge’. Politics, 32(2), pp. 85-92.

Maryon-Davis, A. (2016) Government legislation and the restriction of personal freedom. In F. Spotswood (Ed.) Beyond behaviour change: Key issues, interdisciplinary approaches and future directions. UK: University of Bristol Policy Press.

OECD (2015) OECD Regulatory Policy Outlook 2015. Geneve.

Ramsay, I. (2012) Consumer law and policy: Text and materials on regulating consumer markets. Bloomsbury Publishing.

Thaler, R. H., and Sunstein, C. R. (2008) Nudge: Improving decisions about health, wealth, and happiness. U.S.:Yale University Press.

Thaler, R. H., & Sunstein, C. R. (2003a). Libertarian paternalism. The American Economic Review, 93(2), pp.175-179.

From: p.7 of WEA Commentaries 7(5), October 2017
http://www.worldeconomicsassociation.org/files/Issue7-5.pdf

Download WEA newsletter Volume 7, Issue No. 5, October 2017 ›

3 responses

  • Rhonda Kovac says:

    Important point well made. This illustrates the deepening political problem of science overall being marginalized, manipulated, or blatantly ignored — so as to best serve the corrupt interests of politicians and of the wealthy who prop them up..

  • Ronalf Goossens says:

    I largely agree, but is nudging not one of many possible economic policies IF it is framed in a democratic and a real social policy?

  • Carl Southwell says:

    Well said. Nudging the consumer should be balanced with budging the producer.

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