Nudge part 1

Thaler and Sunstein draw on psychological research that seems to show our minds have two decision making centers: a fast, intuitive one that they call the Human and a slower, deliberative one that they call the Econ. (The kind of thinking done in the deliberative part is the basis for the idealized, fully rational deciders in economic models.)

The research seems to show that the Econ does not make nearly as many decisions as we think it does and that the Human can be influenced to make decisions in ways that we do not appreciate. In short, we are influenced to make decisions in ways that we do not appreciate.

On the face of it, this is bad news. Our behavior is not fully rational and we are susceptible to manipulation.

However the news is not all bad. The other side of the coin is that benevolent policy makers in both political and private institutions have levers that can be pulled to influence people’s choices in the right way, either for their own benefit or in order to achieve the goals that they have for themselves. Thaler and Sunstein’s libertarian paternalism claims that this is what these so-called choice architects should do: they should deliberately influence others decisions in ways that nudge them to better achieve their aims than they would do if they were left on their own.

Libertarian Paternalism?

Sunstein and Thaler call themselves libertarian paternalists. On the face of it, that is a paradoxical label. Libertarians generally favor liberty and paternalists usually favor restricting it.

Sunstein and Thaler’s point is that our preferences are pervasively structured by factors outside of our appreciation and control. The sorts of interventions they favor are supposed to offset these influences to help us make decisions that we would want to make if our slow, reflective decision making center were more fully in charge. So the position is less paradoxical than it sounds: our choices were never fully free to begin with and the interference is aimed at making them reflect what we really want. That’s their story, in any event.

Specifically, according to Thaler and Sunstein, libertarian paternalism means that (1) “in general, people should be free to do what they like—and to opt out of undesirable arrangements if they want to do so”; choices should not be “blocked, fenced off, or significantly burdened.” And (2) “it is legitimate for choice architects to try to influence people’s behavior in order to make their lives longer, healthier, and better. … a policy is ‘paternalistic’ if it tries to influence choices in a way that will make choosers better off, as judged by themselves.” (p. 5)

They call the sorts of interference that they advocate “nudges.” A nudge is defined as “any factor that significantly alters the behavior of Humans, even though it would be ignored by Econs” (p. 8). (The terms “humans” and “econs” are discussed in the early parts of the book.)

Everyone’s a Critic

The loose, almost conversational writing style is surely a big reason why this book is so popular. That’s a good thing. However, there are parts where the argument is loose and, over the years, that has gotten on my nerves.

In particular, I am irked by the mis-match between the research about decision making in the first three chapters and the rules for nudges in the fourth chapter. For example, one rule for nudges is that they are needed for decisions that are difficult and rare, such as pre-nuptual agreements or mortgages (72). But they did not cite any research about difficult and rare decisions. Instead, they gave examples about how our decisions are lousy in easy everyday decisions, like eating soup or picking food at the cafeteria.

Does that matter? Maybe! Perhaps we pay attention to the rare and difficult choices in a way that we don’t for the mundane ones.

I would think the relevant research would involve procrastination and avoidance: people don’t want to confront a big, intimidating choice so they avoid thinking about it until they have to and then they make their decisions in a rush. But that’s just a guess. You need research to say whether these decisions are generally good or bad and, if they are bad, to identify the reasons why. Otherwise, you’re just guessing when you make your nudges.