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Nagging misconceptions about nudge theory

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Nudges are private or public initiatives that steer people in particular directions but that also allow them to go their own way.

A reminder is a nudge; so is a warning. A GPS device nudges; a default rule, automatically enrolling people in some program, is a nudge.

{mosads}To qualify as a nudge, an initiative must not impose significant economic incentives. A subsidy is not a nudge; a tax is not a nudge; a fine or a jail sentence is not a nudge. To count as such, a nudge must fully preserve freedom of choice.

In 2009, University of Chicago economist Richard Thaler and I co-wrote a book that drew on research in psychology and behavioral economics to help people and institutions, both public and private, improve their decision-making.

In the 10 years since “Nudge” was published, there has been an extraordinary outpouring of new thought and action, with particular reference to public policy.

Behavioral insight teams, or “nudge units” of various sorts, can be found in many nations, including Australia, Canada, Denmark, United Kingdom, the United States, the Netherlands, Germany, Singapore, Japan and Qatar.

Those teams are delivering. By making government more efficient, and by improving safety and health, they are helping to save a lot of money and a lot of lives. And in many countries, including the U.S., they don’t raise partisan hackles; both Democrats and Republicans have enthusiastically embraced them.   

Still, there are a lot of mistakes and misconceptions out there, and they are diverting attention and hence stalling progress. Here are the three big ones:

1. Nudges do not respect freedom. In democracies, people are treated with respect. They are usually allowed to go their own way. You might object that nudges are troublesome because they invade liberty and treat people as mere objects for official control.

The objection is wildly off the mark. One of the main points of nudging is precisely to preserve freedom of choice — and thus to allow people to do as they like.

Many nudges are self-consciously educative, and hence they strengthen people’s capacity for agency; consider reminders that bills are due, calorie labels or warnings about risks associated with certain products. With information, warnings and reminders, people are in a far better position to choose their own way. 

Like a GPS device, good nudges help people to navigate their lives. That is indispensable for freedom.

2. Nudges are based on excessive trust in government. The most temping objection to nudging is rooted in fear of government. To put that objection in its sharpest form: Suppose that public officials are incompetent or corrupt. Would you want them to nudge?

If interest groups are able to push government in their preferred directions, and if public officials lack crucial information, then you might insist: Do not nudge!

There are legitimate concerns here; we need to constrain (and to nudge) the nudgers. But the objections run into a serious logical problem: A great deal of nudging is inevitable. So long as government has offices and websites and so long as it runs some kind of legal system, it will be nudging. For that reason, it is pointless to exclaim, “Do not nudge!,” — at least if one does not embrace anarchy. 

A further answer to those who distrust government is that because nudges maintain freedom of choice, they insist on a safety valve against official error. Those who favor nudges are keenly alert to the possibility that public officials will err.

If you really distrust government, your main focus should be on mandates, bans, subsidies and taxes. Nudges ought to be a relatively lower priority. 

To be sure, nudges should be constrained by democratic requirements, including transparency, public debate and independent monitoring (including evaluation of how they work in practice). Such constraints can reduce the risks. The fundamental point is that those risks are far larger with other tools, above all mandates and bans. 

3. Nudges cannot achieve a whole lot. If experts are asked to catalogue the world’s major problems, many of them would single out poverty, insufficient economic growth, hunger, a lack of educational opportunity, unemployment, corruption, premature deaths, terrorism and climate change.

On one view, nudges are an unfortunate distraction from what might actually help. Shouldn’t we focus on much more important matters? Aren’t there better tools?

Maybe so. But by any measure, the consequences of some nudges are not properly described as modest. As a result of automatic enrollment in free school meals programs — a little nudge — millions of poor American children are now receiving free breakfast and lunch during the school year. 

Credit card legislation, enacted in 2010, is saving American consumers more than $10 billion annually; significant portions of those savings come from nudges and nudge-like interventions.

With respect to savings, automatic enrollment in pension programs has produced massive increases in participation rates. The TSA PreCheck program is a nudge, and over 5 million Americans are now benefiting from it.

Far too many Americans die from smoking, but educational campaigns and graphic warnings of various sorts are saving a lot of lives. 

{mossecondads}New nudges, now in early stages or under discussion, could also have a major impact on countless problems — whatever your political affiliation. The Earned Income Tax Credit ranks among the most effective anti-poverty program in the United States, but many eligible people do not take advantage of it.

Automatic enrollment would have large consequences for the lives of millions of people. If the goal is to reduce greenhouse gas emissions, automatic enrollment in green energy can have large effects.

It is true, of course, that for countless problems, nudges are hardly enough. They cannot eliminate poverty, economic stagnation, a lack of educational opportunity, unemployment and corruption.

But by itself, any individual initiative — whether it is a tax, a subsidy, a mandate or a ban — is unlikely to solve large problems. Denting them counts as a real achievement.

Cass R. Sunstein is the co-author, with Nobel Prize-winning economist Richard Thaler, of “Nudge: Improving Decisions about Health, Wealth, and Happiness” (Yale, 2008). He is the Robert Walmsley University professor at Harvard University. He was formerly administrator of the White House Office of Information and Regulatory Affairs under President Barack Obama. His new book, “How Change Happens” (MIT Press), is available now.

Tags Applied psychology Barack Obama behavioral economics Behavioral finance Cass Sunstein Libertarianism in the United States Nudge Richard Thaler

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