How useful has Thaler and Sunstein's nudge theory proved to be as a policy tool? Is it finding its way into the culture of public policy design?
We all know how hard it is for us to modify our behaviour, whether it is to quit smoking or hit the gym more. Yet while most of us would agree that taking better care of ourselves is a good thing, the execution will come later, thanks. So what happens when the need to make better choices is a societal imperative? Save more for pensions? Drink less soda to cut fat and keep our health care costs down? All good aims. The question is, how to get there.
Five years ago, behavioural economists Richard Thaler and Cass Sunstein tossed an intellectual stone into the policy waters by proposing that policies could be designed to nudge people towards doing what’s best for us all. Their 2008 book, Nudge: Improving Decisions about Health, Wealth, and Happiness, challenged the classical assumption that people can be counted on to make rational choices in their best interests. That belief missed the reality that we often live our lives in ways that don’t lead to optimal outcomes.
The prescription Thaler and Sunstein proposed is to design public policies with an eye to the way people really live, susceptible to the human impulses of procrastination, shame, cheating, peer pressure and a host of other characteristics. Want people to pay their back taxes? Tell them that their neighbours paid theirs on time. Our herd mentality and desire to not be an outlier will do the rest.
You can see the backlash building. Will the technocrats of the nanny state decide what constitutes our best interests? Isn’t nudge just another name for manipulation (no more than we are already manipulated by advertising, say the evangelists for nudge)? And is it not, ask those looking at the British government’s current use of nudge to chase laggards who owe back taxes, simply another tool for cash-strapped governments to separate us from our money?
This issue of Policy Options looks at what we have learned about nudge five years after Thaler and Sunstein published their theory. We look at how much traction the theory has gained and where it has hit speed bumps. We ask how useful nudge has proved to be as a policy tool, and if it is finding its way into the culture of public policy design. Or will it be just another fad, soon to surrender to the old policy hammers of laws and regulation, those classical ways to get us to behave the way we know we really should?