Sunday, August 11, 2013

Keep your “nudges” to yourself thank you….

There is more than a bit of “nudging” goes on in NZ. Nudging is based on the idea that a little gentle persuasion – for instance enrolling people in KiwiSaver “as the default” and into a “default provider” is “ok” since they can “get out” or change (in the case of a disliked default provider).

Various behavioural economists have used the research to justify this “with a gentle push” approach as being sound (on paternalistic grounds – mother still knows best, she’s just more gentle these days so that’s ok).

Leaving aside the questionable ethics of this sort of arrogance, Prof Don Boudreaux of George Mason University explains below why the policy process involved is flawed and dangerous…..

I don’t have the book readily at hand, but in Cass Sunstein’s 2013 volume Simpler– which I reviewed here – he uses his “libertarian paternalist” thesis to justify Uncle Sam’s resort to ever-stronger “nudges” to prevent people from smoking cigarettes.  The increasingly large and explicit warning labels, the significant restrictions on advertising, and the extraordinarily high ‘sin’ taxes on cigarettes have not – in the view of Sunstein and most other “Progressives” – worked sufficiently to prevent smoking.  So stronger “nudges” are justified.

It’s fair to point out that even within “nudge” theory a particular real-world nudge can be insufficiently strong.  But what are the criteria for deciding whether or not a “nudge” is sufficiently strong?  Sunstein’s happy justification for ever-stronger government efforts to “nudge” us away from using tobacco use reveal – to me, at least – one of the weaknesses of “nudge” theory. 

That weakness is that the only practical criterion for judging whether or not the strength of the nudge is adequate is whether or not the activity sought to be reduced has in fact been significantly reduced by the nudge.  If that activity hasn’t been significantly reduced, the libertarian paternalist would say, “Ok, in this instance people in fact exercise their freedom to ignore our nudges; so although these choices are not the ones that we planners wish people would make, we must accept these revealed preferences as reality and leave people be.  No nudging people any further on this front.”  In contrast, the libertarian paternalist would say, “Our nudging must get stronger because people are still behaving in ways that we disapprove of.”

At least with plain dictate we can see transparently who is pushing who around.

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