Archive for July 31st, 2008

Nudge is a book which, in the 24 hours since I purchased it, has transformed how I think about the world. Co-authored by two University of Chicago professors, behavioral economist Richard Thaler and lawyer Cass Sunstein, Nudge brings a superb policy approach to the table. Although the name is unwieldy, “libertarian paternalism” has solved a major internal debate of mine.

Representative democracy is great. The devolution of power allows for freedoms which are often restricted in other forms of government. People’s ability to choose and influence government allows impersonal institutions to respond to personal needs. I’m a fervent believer in personal choice and support many civil libertarian causes.

At the same time, people can make some really dumb choices. Often, when I hear or witness some particularly uniformed opinions or decision, I’ll catch myself snottily thinking “…and these people get to vote? Great.” I’ll frequently voice support of a technocracy where the most skilled and brightest make decisions, insulated from the ignorant masses.

Yet, these two approaches are opposed to each other and I’ve struggled to make sense of my dual support. Luckily, Thaler and Sunstein have lent their considerable intellect to this problem and brought resolution in the form of libertarian paternalism which uses “architects of choice” to “nudge” people towards better decisions. The bad decisions people make are often the result of conditions outside their control: time restraints, financial limitations and a host of psychological phenomena which foster poor choices. Libertarian paternalism aims to create situations where it is easier to make the best choice while not limiting other options (as mandates would do).

Nudging recognizes that people respond to much more than incentives, as traditional economics would have you believe. Nudges recognize the complex array of options which make simple tax cuts or prison penalties unlikely to create the best outcomes. Nudges come down to designing systems which help people reach the best outcome. Full of examples, the book shows that seemingly innocent differences in order or defaults can have profound differences in outcomes.

Nudge is divided into three parts: an explanation of the theory, a series of policy recommendations, and responses to critics. The first portion is definitely my favorite as it lays the intellectual foundation for this idea which can play a part in many policy debates. Perhaps since I fall prey to a number of the blunders they outline (I’m young, I’ve got nothing to worry about!), I was not as enthralled with their discussions of how to improve credit markets or pharmaceutical plans, but I certainly hope that the right people do read those parts because the plans outlined to help millions are incredibly important additions to the national debate on issues as broad as environmental protection to investing to school choices.

Libertarian paternalism recognizes that humans are fallible and need help. It knows that experts have the experience to help. But it contrast to traditional paternalism, it recognizes the failings of government mandate and that knowledge is dispersed and people, if given appropriate settings, can make the best decisions for themselves.  So, allow me to nudge you towards their website or Amazon page where you can purchase it for yourself.

[Also by Sunstein is Infotopia.]