Tuesday, March 21, 2017

Reflections: Nudge

Nudge by R. H. Thaler & C. R. Sunstein
Nudge has been on my list to read for literally years. In fact, I think I added it to my list shortly after it was published. I have finally gotten around to reading it, and I'm glad I can be a part of a very important conversation.

To begin with, the main thrust of the book requires the reader to accept certain assumptions about human thinking and nature. The authors insist we are not, regardless of how many Economists say otherwise, purely economic creatures which make decisions within a nicely defined and enlightened definition of self-interest but are instead vexed with all sorts of irrationality and injudicious decision-making. Due to this, humans (vs. econs) would benefit from "nudges" from third-partiespublic or privatein a variety of arenas, such as savings, investments, health, etc. I was already familiar with much of the psychology and behavioral economics which support the authors' conclusions and recommendations (Thinking, Fast and Slow delineates quite a bit of it in much more detail), and there is, no doubt, plenty to debate in the science that constitutes the foundation of Nudge.

Nudge presents "libertarian paternalism," which at first glance seems to be a concept that is an oxymoron. Linked with this concept are some additional conundrums, such as someone having the role of a "choice architect." To be honest, much of it makes me feel uncomfortable, albeit I am not repulsed by it. The authors' arguments are at times persuasive, especially when dealing with default choices. A choice has to be made; individuals are already being influenced (realized or not) in one or way or another, why not attempt to nudge them toward the most beneficial choices? This sounds completely reasonable, of course, when dealing with what seem like obvious choices, such as smoking or saving more for retirement. However, the nudge concept quickly becomes more paternalistic and less libertarian the more it's applied and the broader its reach. (The authors deal briefly with objections at the end of the book and the "slippery slope" argument is addressed; yet, it is, as is often the case, underestimated by the authors. The slippery slope argument often sticks because it is often true!) Especially when starting with the premise that human beings are in many ways bad decision makers and need help from more enlightened intellectuals, the technique of nudging can so very, very quickly turn into pulls, pushes, and shoves.

Furthermore, I feel the authors understate the difference between a public and a private institution. Although corporations can be powerful, they can never be as powerful as a government entity, which holds the monopoly over the use of force. This isn't to say that government can't do some good and can even improve the way it presents choices to its citizens, it is a mistake, in my opinion, to equate a corporate board with a congressional chamber. One can use the force of law and another cannot. Harm can be done by both, yes, but the power of one can always dominate the influence of the other. The most useful and safest kind of nudges are those implemented and perpetuated by private institutions and citizens that attempt to nudge others in a social way.

Nudges are everywhere, and this I think is one of the most important lessons I learned from the book. As human beings, we can be overwhelmed by inertia or by loss aversion or by a multitude of other factors when making decisions. Knowing this will hopefully make us better decision makers, regardless of the nudges we're receiving. As this cannot be expected to happen for many, I can be persuaded to incorporate nudges in a variety of areas, but my libertarian guard will always be up against any paternalistic plotting.

Nudge does present some valuable ideas. Yet, I wonder how far "libertarian paternalism" can extend and into what areas without the paternalistic side of the equation tipping the scales in its favor. Having said that, there are some very simple applications of the nudge concept, such as making certain decisions easier to make and breaking down barriers, which could easily be implemented without any significant moral, ethical, and ideological concerns being raised. Those "choice architects" (shiver) just have to get it right, and maybe that's where I lose most of my faith.

Other Topics of Interest:
Reflections: Thinking, Fast and Slow
Reflections: Life at the Bottom
Reflections: Utilitarianism

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