This week’s New York Times/CBS poll, which showed Americans more pessimistic about their country’s prospects than they have been in decades, yielded a puzzling figure. In the midst of a spreading credit crisis, barely a quarter of Americans (28 per cent) blame the banks that made bad loans and even fewer (14 per cent) blame borrowers. A big plurality (40 per cent) blame government. It is hard to know how to read this sentiment. Maybe regulatory activism has come back into vogue. Maybe Americans are clinging to their view that there is no social predicament so dire that government intervention will not make it worse.

Freedom is held to go hand-in-hand with efficiency in the business world, but few Americans think this about government. In government matters people tend to believe that efficiency exacts a price in freedom. In an ambitious attempt to break this impasse, the economist Richard Thaler and the law professor Cass Sunstein, both of the University of Chicago and both informal advisers to Barack Obama’s presidential campaign, have just published a book, Nudge (Yale University Press, $26/£18). They argue that “choice architecture” – like the architecture of a well-designed public space – can coax (or herd) people in desirable directions at little or no cost to their autonomy and freedom.

Nudge applies behavioural economics – a field in which Mr Thaler is a pioneer – to government and business leadership. Behavioural economists study the ways human agents predictably violate textbook assumptions about maximising utility. People misjudge and mis-choose. Part of the problem is that economic decisions have grown so complex that rational action requires a sophisticated grasp of probability. Bringing clarity to these decisions is essential. The authors’ proposal that prices for various mortgages and mobile phone plans be tallied up for consumers at year’s end, so they can more easily compare costs, is the best idea in the book.

But Mr Thaler and Mr Sunstein are also interested in a bigger problem: the jumble of biases and heuristics that used to be called “human nature”. People misjudge their best interest even in simple decisions where all the information is available. For instance, the candidate in a multi-candidate election whose name is listed first generally gains about 3.5 per cent more votes from the location of his name. People are irrationally loss-averse. They are twice as upset over the loss of something as they are elated over the attainment of it. People tend also to be present-oriented. They have a bias in favour of the status quo.

This powerful inertia, the authors argue, can be productively harnessed. By “specifying the kinds of situations in which people are least likely to make good choices” (eg, school cafeterias where they choose desserts over fruit) and structuring choices so as to counteract biases (eg, placing fruit more prominently than desserts), government and business can entice people to choose things that are better for them. Thus, Mr Thaler designed a pension plan called “Save More Tomorrow” that gets employees to commit, early on, to pension contributions that escalate as time passes, so the “status quo” favours the employee’s economic security. That is only the beginning. The authors would like to raise the rate of organ donation by changing the present US requirement for “explicit consent” (opt-in) to a rule of “presumed consent” (opt-out). In Germany, which has opt-in rules, only 12 per cent of citizens are potential organ donors. In Austria, which has opt-out, the figure is 99 per cent.

The basic insight here concerns what we would call, in a technological context, “default options” – the way software runs if you do not modify it. As technologies change, “choice architects” have been able to rewrite rules so that one party can, without formal assent, do things that used to require assent. The “default option” of the pre-internet age is that it is wrong to read other people’s mail. But Google now scans the letters of its gmail subscribers for clues that make them susceptible to advertising.

Mr Sunstein and Mr Thaler are calling for corporate and political leaders to put their thumb on the scales when ignorant, passionate people are making decisions. The authors call their system “libertarian paternalism” – an accurate enough description. It may make people more free and happy, but there are potential problems. Choice architects, even if well motivated, will often be wrong, because their rationality, too, is “bounded” and fallible. The authors, for instance, are unduly present-oriented when they applaud as a “small miracle” the fact that “in many cities, including ours, dog owners now carry plastic bags when they walk their dogs” and scoop up their waste, making it more pleasant to walk through public parks. This solves a transitory inconvenience (dog waste) at the price of ongoing environmental damage by creating a need for tens of billions of plastic bags a year.

More seriously, to detect a “status quo bias” in all human minds is to grant oneself a licence to overturn almost any institutional arrangement. “Social practices, and the laws that reflect them,” the authors write, “often persist not because they are wise but because Humans, often suffering from self-control problems, are simply following other Humans. Inertia, procrastination and imitation often drive our behaviour.” When you postulate a gap between people’s wishes and their “real” requirements, you delegitimise the former. But you do not invalidate Lord Acton’s adage about power corrupting. There are superb insights in Nudge. But they need to be applied with an understanding that, the more power you give “choice architects”, the less public-spirited their constructions are likely to be.

The writer is a senior editor at The Weekly Standard