Join Cass Sunstein for an IAI LIVE event this Monday, February 6th, exploring the causes of inflation and the economic crisis, alongside a stellar line-up of Peter Schiff, Gillian Tett, Carmen Reinhart and Brad De Long. Book your place now.
Just over 10 years ago, nudge theory was introduced to the world by Cass Sunstein and Richard Thaler. Their radical argument was that the government could preserve the freedom of citizens whilst at the same time helping them make better financial, health and happiness choices. The initial success in the USA and UK led to over 500 nudge units across the globe, including institutions like the World Bank and the UN. However, critics challenge its effectiveness and even the main claim that nudges by the government are freedom-promoting. In this exclusive interview, Cass Sunstein defends the ideology and effectiveness of his theory.
How can governments help us make decisions whilst keeping our liberty and autonomy? “Choosers are human, so designers should make life as easy as possible, according to Cass Sunstein, the most cited Law Professor in the world, on how government can encourage better and easier decisions. Sunstein has written a huge number of books addressing how we can all make better decisions without having to think about it. In this interview with IAI News, he talks about the impact of his work and the philosophy which underpins it. He also addressed criticisms from colleagues who argue that his theory fundamentally misses structural problems, such as climate change and poverty - problems that can’t be addressed by individuals alone.
SUGGESTED READINGThe fantasy economics of the Nobel PrizeBy Steve Keen
Sunstein’s work is inspired by his liberalism, arguing that the freedom to make choices is essential for a free society. But at the same time, he isn’t afraid of the government helping people make those choices. He terms his distinctive brand of philosophy of government Liberal Paternalism. Like any good parent, governments should give citizens all the tools they need to navigate the world, but at the same time, they should let us make our own individual choices and our own mistakes.
Sunstein, along with Noble Prize winner Richard Thaler, fundamentally changed the way policymakers think about their power to influence people’s decision-making. Their book Nudge detailed the ways that you could encourage citizens by using behavioral economics to encourage them to make better choices in health, wealth, and happiness. So hos is “nudging” people not the same as manipulating them? How is freedom preserves here? “A nudge is any aspect of the choice architecture that alters people's behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting fruit at eye level counts as a nudge. Banning junk food does not.”
Despite the non-intrusive philosophy of nudges, they have been shown to be incredibly effective. Imperial College London recently showed that health-related nudges were responsible for a 15.3% increase in a healthier diet and nutritional choices. Sunstein has also shown that opt-out systems let people not stress about decisions they support, or miss out on making those decisions in the first place. From organ donation to saving for retirement, by using this new science of choice architecture, more people are able to think less and still make positive choices for society and themselves. And in more humorous examples, Amsterdam’s Schiphol international Airport have been able to use the theory of nudges to get men to aim better at the urinal. By placing fly-shaped sticks in urinals, men focused on more on where they were aiming, bringing down the costs of cleaning by 80%!
Your work has revolutionised the way governments and institutions think about how to influence people’s behavior. At the same time, you're a self-described liberal. Is liberalism compatible with governments using the nudge theory to influence how people act? Does it not assume that the government knows what's best for its citizens?
The whole point of nudging is to maintain freedom of choice. A GPS device nudges people, but it preserves freedom in two different ways: You get to tell it where you want to go, and you can ignore the route it suggests. It’s your choice. A doctor might nudge you by saying that you should lose weight, and by telling you how. Even if so, you retain freedom; you can ignore the nudge. Many nudges from governments are educative: disclosure of information (for example, of the contents of food); warnings (about, say, cigarette smoking); and reminders (say, that a bill is due). There is nothing illiberal about that. A government might know a lot about the fuel economy of motor vehicles or the energy efficiency of refrigerators, and disclosure of information about fuel economy and energy efficiency, to help consumers to make informed choices, is hardly inconsistent with freedom.
SUGGESTED VIEWINGEconomics mattersWith David D. Friedman
You previously stated “I don't think it's very important that people support the idea of nudging in the abstract. I think it's important that policies be helpful and sensible”. Shouldn’t the aim of a liberal state be to educate the populace to the point that nudging, steering behavior in a certain direction, is unnecessary?
Education is important, and countless nudges are educative. Consider energy efficiency labels for appliances, calorie labels, and information about the nutritional content of food. Educative nudges are all around us. Some nudges are architectural rather than educative; consider automatic enrollment in pension plans. But many people do not want to spend their days studying the differences between actively managed and passively managed funds, or the right balance between equities and bonds; automatic enrollment can be a blessing (and note that if people want to study plans, they can). Life is hard and a nudge can make it easier!
Behavioral economics seemed to have influenced how governments approached lockdown measures during the pandemic. In the UK, for example, the government argued that enforcing measures too quickly would lead to fatigue and less compliance. That turned out to be false. If behavioural economics isn't a precise science, isn't it dangerous for governments to base policy decisions on it?
The idea to which you point in the UK was supported by exactly no behavioral scientists. I do not know where it came from. All over the world, behavioral economics has led to massive economic savings, and also massive savings in terms of reduced deaths, accidents, and illnesses. One example involves road safety, where many nations have used behavioral findings to life-saving effect. Another involves smoking cessation. Another involves poverty reduction, where just one automatic enrollment policy, in the United States, is helping millions of poor children to receive free school meals. Another involves the reduction of “sludge,” understood as administrative burdens that make it hard for people to get access to money, services, or opportunities. Sciences do not tend to be “exact,” but behavioural economists know a lot, and policymakers do better to rely on empirical findings than just to toss a coin, or to guess.
SUGGESTED READINGThe real problem of economic policyBy Charles Goodhart
Advisors to the UK’s behavioural insight group, Nick Chater and George Loewenstein, have published an academic working paper suggesting that the movement has lost its way. They argue that behavioural scientists fall into the habit of seeing problems as simply the result of the poor choices of individuals. Is there something to this critique, and if so, does that mean behavioural economics has a complete blind spot when it comes to structural problems rather than ones to do with individuals?
Chater and Loewenstein are terrific academics, but this particular paper badly misses the mark, because the premise is wrong. In policy circles, behavioural scientists have spent most of their time on structural problems. For example, fuel economy mandates and energy efficiency mandates, addressing structural problems, have been explicitly justified by reference to behavioral findings about present bias (leading consumers to focus on the short-term) and limited attention. Safety requirements imposed on motor vehicle manufacturers address a structural problem; they have been justified by reference to behavioral findings about limited attention. Cigarette taxes and soda taxes address structural problems; they seek to reduce “internalities” (harms that people impose on their future selves). On February 1, 2023, President Joe Biden announced a new initiative to combat “junk fees” imposed on consumers, targeting a large structural problem. The President’s top economic adviser, Brian Deese, describes the initiative as “a milestone for behavioral economics – decades of scholarship bearing fruit in policies that make a difference.” There are many such milestones, and there will be many more. We’re just gotten started.
Join Cass Sunstein for an IAI LIVE event this Monday, February 6th, exploring the causes of inflation and the economic crisis, alongside a stellar line-up of Peter Schiff, Gillian Tett, Carmen Reinhart and Brad De Long.Book your place now.
What does the nudge theory explain? ›
Nudge Theory is based upon the idea that by shaping the environment, also known as the choice architecture, one can influence the likelihood that one option is chosen over another by individuals.Who came up with the nudge theory? ›
Nudge theory was named and popularized by the 2008 book, 'Nudge: Improving Decisions About Health, Wealth, and Happiness', written by American academics Richard H Thaler and Cass R Sunstein.What is an example of nudge theory? ›
Nudges aim to influence people to make better decisions. For example, authorities may set a “better” choice, such as donating your organs, as a default. Or they could make a healthy food option more attractive through labelling.What are 3 types of nudging? ›
Common types of nudges include setting a default option, creating a psychological anchor, changing the ease of choosing certain options, changing the salience of certain options, informing people of something, reminding people of information they already know, reminding people to do something, and getting people to ...How effective is nudge theory? ›
Analysis reveals that only 62% of nudging treatments are statistically significant. Nudges have a median effect size of 21% which depends on the category and context. Defaults are most effective while precommitment strategies are least effective.How do Thaler and Sunstein define a nudge? ›
For Thaler and Sunstein, a nudge is “any aspect of the choice architecture that alters people's behavior in a predictable way without  forbidding any options or  significantly changing their economic incentives.Who is the father of nudges? ›
Weaving the irrational “human factor” into economics has earned Richard Thaler of the University of Chicago this year's Nobel Prize in Economic Sciences. Thaler is most famous for describing a phenomenon called “nudging” in 2008.Is nudge theory ethical? ›
Because nudging preserves freedom of choice and fits within the proper roles and responsibilities of government, nudges are ethical when transparent and beneficial to the public interest.What is the history of nudging? ›
The idea of nudge was developed by Professor Cass Sunstein and Richard Thaler in 2008 in their book entitled Nudge. Nudge is a system of gentle encouragements, based on advanced knowledge of the decision-making process. The benefits of nudge have the remarkable power to change behaviors through cost-effective actions.What is nudge theory in personal life? ›
Nudge theory is the concept that you can trick yourself into changing your habits through positive reinforcement and gentle suggestions. Rather than restricting your behaviors, you limit your exposure to bad influences or temptations, and overexpose yourself to positive ones.
What are the principles of nudge? ›
These principles are organized into the acrostic NUDGES: iNcentives, Understanding mappings, Defaults,Give feedback, Expect error, and Structure complex choices.What are nudges in real life? ›
Consider these other common examples of Nudges: emails that remind you its time to refill a prescription at the pharmacy, the rumble strip on the highway that lets you know if you're drifting out of the lane, the second text “chirp” noise that rings if you didn't open the initial text within a minute or so.What is a good nudge example? ›
Nudge: Make fruit and other snacks easily accessible and put them where they are clearly visible. Put the unhealthy snacks high or low in the cupboard. People still have a choice, but there is a friendly nudge in the desired direction.What does being a nudge mean? ›
The OED, an etymological dictionary based on historical evidence, defines the noun “noodge” as “a person who persistently complains or nags; a pest, a bore,” and the verb as “to pester, to nag at,” or “to whine, to complain persistently.” It describes both as “slang (chiefly U.S.).”Why is nudge not enough? ›
The effectiveness of nudging as a means of bringing about lasting behaviour change is questioned and it is argued that evidence for its success ignores the facts that many successful nudges are not in fact nudges; that there are instances when nudges backfire; and that there may be ethical concerns associated with ...What is the problem with nudge theory? ›
One of the reasons why nudging is difficult to implement is that its outcomes are not always easy to predict. Even in cases where the behavioural effects of an intervention seem obvious, nudging can backfire and even lead to entirely opposite outcomes.What is the criticism of nudges? ›
Critics identify nudges as negative influences because they do not engage rationality. Rationality appears to be the crucial element of autonomous choice within this approach; individuals are expected to engage in rational thinking, process all the relevant information and act according to their consistent preferences.What are Thaler's three principles of nudging? ›
Thaler gave three principles to guide the use of nudges. The nudges should be transparent and clear. Deceptive nudges should not be used. An individual should be allowed to walk out of a nudge whenever he/she feels like.What term do Thaler and Sunstein give for someone who organizes the context in which other people make decisions? ›
Carolyn is what Thaler and Sunstein call a “choice architect”. A choice architect has the responsibility for organizing the context in which people make decisions. Other examples: the person designing a voting ballot.What is a nudge message? ›
Nudges gives you 2 types of alerts: Reply reminders to follow up after a certain time to a message you sent or received. Birthday reminders to wish a contact a Happy Birthday.
Who is Thaler Sunstein? ›
Nobel laureate Richard Thaler and Cass R. Sunstein have published a new and definitive version of their pioneering behavioral science book, Nudge, which brought behavioral economics to the masses a decade ago and reshaped the policy landscape through the use of behavioral insights.Who is the founder of Human Behaviour? ›
Pavlov's “classical conditioning” is only one form of learning behavior studied by behaviorists. Figure 1. John B. Watson is known as the father of behaviorism within psychology.Who is the father of behavior? ›
John Broadus Watson: The Father of Behavioral Psychology.What are the ethical problems with nudging? ›
the unconscious mind and alters human behaviour predictably. Nudging has been criticised for entailing numerous practical and ethical problems, including manipulation, elitism and cultural insensitivity.What is the strongest ethical theory? ›
Utilitarianism is one of the best known and most influential moral theories. Like other forms of consequentialism, its core idea is that whether actions are morally right or wrong depends on their effects. More specifically, the only effects of actions that are relevant are the good and bad results that they produce.Are nudges manipulative? ›
Nudges, so the argument goes, are problematic because they are manipulative. Whenever we are nudged, our behaviour is steered by someone else in directions and in ways we did not necessarily approve of. This is why such manipulation is said to undermine our autonomy.What are examples of nudge policies? ›
- Up-sell. ...
- If you buy a coffee, and a barista offers a pastry as well – we are more likely to buy the pasty when it is offered as a suggestion.
- Product placement. ...
- Default options. ...
- Save more tomorrow™ Economists Richard Thaler and Shlomo Benartzi developed a programme called: Save More Tomorrow™.
- Establish the behaviour you want to change.
- Give people a reason to change.
- Plant alternative behaviours.
- Encourage people to practice new behaviours.
- Support adoption of new behaviours with regular feedback.
Social cognitive theory (SCT), the cognitive formulation of social learning theory that has been best articulated by Bandura, explains human behavior in terms of a three-way, dynamic, reciprocal model in which personal factors, environmental influences, and behavior continually interact (See Figure 3).What is an example of nudge theory in health? ›
Nudging behaviours in healthcare: improving hand hygiene
A good example is a study on reducing healthcare associated infections by improving hand hygiene compliance.
How many types of nudges are there? ›
They identified 23 distinct mechanisms of nudging which they grouped into six categories: facilitate, confront, deceive, social influence, fear, and reinforce. ...What kind of person is a nudge? ›
Other definitions for nudge (2 of 2)
to annoy with persistent complaints, criticisms, or pleas; nag: He was always nudging his son to move to a better neighborhood. verb (used without object), nudged, nudg·ing. to nag, whine, or carp. a person who nudges; pest.
Nudges can be unethical. Nudges may also present ethical concerns. For instance, nudging is now combined with genetics, dubbed “nudgeomics”, meaning DNA is used to tailor nudges that can improve people's health. This is so new that there's little evidence to assess effectiveness.What are four reasons to be cautious about nudges? ›
Nudges: Four reasons to doubt popular technique to shape people's behavior
- Nudges can be limited and fragile. ...
- Nudges can be unethical. ...
- Nudges can backfire. ...
- Nudges lack theoretical backing.
The default effect, a concept within the study of nudge theory, explains the tendency for an agent to generally accept the default option in a strategic interaction. The default option is the course of action that the agent, or chooser, will obtain if he or she does not specify a particular course of action.Can nudges have unintended consequences? ›
There are various reasons why nudges may lead to unanticipated consequences as well. In some cases, a nudge may produce reactance. For example, defaults may reduce perceived choice autonomy among consumers, who then react negatively to the attempt to steer their choice.
Within the workplace, a nudge can simply help your people to make better decisions more quickly. Bringing about positive change more effectively. Your team may subsequently have higher levels of employee engagement, employee wellbeing and better employee relations, all leading to a healthier work environment.What is the opposite of nudge? ›
Sludge is essentially the opposite of a nudge.What is the best definition of nudge? ›
nudge. verb [ T ] /nʌdʒ/ to push someone or something gently, sometimes to get someone's attention: My wife nudged me to tell me to get off the phone so that she could use it.What are examples of nudges in public policy? ›
For example, a fast food restaurant may reduce their standard soft drinks due to national nudges to reduce sugar intake, but counternudge by making upsizing more attractive—increasing sugar consumption overall.
What is the origin of nudge theory? ›
Nudge theory was introduced in 2008 by economist Richard Thaler to explain how to “nudge” people to take decisions that can be difficult but benefit them in the long term.Is nudging ethical? ›
A popular idea with proponents of nudging is “means paternalism.” Nudging should not be used to impose what ends people should pursue—which would be “ends paternalism”—but instead improve the means to help people achieve the ends they themselves want to pursue (Sunstein, 2016, pp.What happens when you nudge someone? ›
If you nudge someone, you push them gently, usually with your elbow, in order to draw their attention to something.What are the benefits of nudging? ›
In addition to improving the choices of individuals, nudging can have positive outcomes for society. For instance, it could be used to encourage more people to become organ donors, reducing the wait for people who require organ donations and thus saving more lives.