May 4, 2014 6:43 pm

‘Why Nudge?’, by Cass R Sunstein

If governments want to maintain the well being of society, some loss of liberty is a small price

Why Nudge? The Politics of Libertarian Paternalism, by Cass R. Sunstein, Yale University Press, RRP$25/£16.99

With their groundbreaking book Nudge, Richard Thaler and Cass Sunstein claimed that governments may be better able to achieve results using less intrusive techniques borrowed from the world of psychology. These “nudges” influence us in subtle ways, often using cues, to help us choose better how to act. Examples include automatic enrolment into saving schemes, placing fruit nearer than sweets and telling late payers how other people have paid already.

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Sunstein is back with Why Nudge? to further defend these techniques. He insists the state has the right to meddle with individuals’ choices if doing so increases our well being.

Most of us locked into extortionate phone contracts, retiring with inadequate pensions or unable to stick to diets know we are not “rational maximisers”, as the economists would have us. But Nudge helped by explaining how the short-term decisions made by the automatic parts of our brains, better suited to stone age dangers, often cause us long-term regret. We really do act first and think later.

This excited politicians and civil servants, who accepted Thaler and Sunstein’s claim that nudging can “maintain freedom of choice while steering people’s decisions”. More importantly, governments felt this gave them legitimacy not only to protect us from the ravages of the market, but also to protect us from ourselves. To some, the idea nudges could change minds while maintaining freedom of choice was snake oil: so-called “libertarian paternalism” was pure oxymoron.

Sunstein starts his defence by challenging the doyen of liberal theory, John Stuart Mill. In his 1859 essay On Liberty, Mill stated “the only purpose for which power can be rightfully exercised [over an individual] against his will, is to prevent harm to others”. For many liberals, this harm principle defines the state’s limits.

But even Mill cast enough doubt to leave his harm principle seriously weakened. He permits the warning of those harming themselves, and in some cases permits stopping them. So while Sunstein does an admirable job countering Mill, it is not clear he needs to. Perversely, this risks giving too much credit to what remains an extreme position. Furthermore, we know today that very few of our actions have no impact on others. For example, while obesity might be a personal choice, the resulting healthcare costs make it everyone’s problem.

Five other critiques against paternalism are presented and defeated. These include an argument that we always know better than government what is best for us. Evidence shows this is not always true. In particular, we are too ambitious at predicting our own enjoyment. Another complaint is that we benefit from learning by our mistakes. Sometimes, perhaps – but learning you wish you had a pension once retired helps nobody.

 

Why Nudge? recognises these arguments will not convince everyone. For the unpersuaded, Sunstein trumps by explaining so-called “choice architecture” – the government-designed environment which frames our decisions – is inescapable. This makes every choice we take open to manipulation whether or not government intends it. Not automatically enrolling us into a pension scheme is as much a decision as doing so. This said, Sunstein claims it is morally better for the state to try to shape positively how we take decisions rather than leave it to chance.

Opponents have their own trump card: the inviolable primacy of one’s right to choose, even if harmful. Former New York mayor Michael Bloomberg’s attempt to reduce the intake of sugary drinks led to an outcry. The view is hard to contest. Sunstein responds with practicability. We cannot, and would not wish to, take every decision affecting us (it would ironically leave us with less freedom). Instead, let democracy delegate the burden. If politicians over-reach, voters are free to punish them.

Economists will rejoice with Sunstein’s conclusion that what ultimately matters are the costs and benefits of individual nudges. While he notes the irrational, pleasure-seeking part of our brains may have rights to be satiated, we care most about long- term success. Some loss of liberty is a small price to pay. How to value this loss is not explained.

Although a US legal scholar, Sunstein is brief in answering the question: “Why nudge?” Little space is given to the question of which nudges are best. Although governments worldwide have been keen to claim they are deploying these approaches, they are still a marginal activity. It would also have been useful to hear how we can guard against the state’s misuse of nudging.

If you believe governments ought transparently to help us overcome our urges, then you can at least admire Sunstein’s thoroughness. If you think government has no right meddling in your life, and you should be free to get fat, smoke and retire poor – he wants you to read this book.

The writer is the FT’s 2014 Peter Martin fellow

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