Do nudges toward better decisions narrow our personal freedom? Or do they expand it? (More)

Nudge, Part III – Personal Freedom (Non-Cynical Saturday)

This week Morning Feature has discussed Nudge, the 2008 award-winning bestseller by Richard Thaler and Cass Sunstein. Thursday we considered the difference between Econs, the perfectly informed and perfectly rational economic actors of theory, and actual Humans. Yesterday we saw how Humans can be nudged toward better decisions regarding money and health. Today we conclude with issues of personal freedom and objections to nudging.

Note: Richard Thaler is a Professor of Behavioral Science and Economics at the University of Chicago. Cass Sunstein was a Professor of Law at the University of Chicago when the book was written; in 2009, President Obama appointed Sunstein to be the Administrator of the Office of Information and Regulatory Affairs.

Let’s RECAP

Thaler and Sunstein offer dozens of existing and suggested nudges that do or would enable Humans to make better decisions. Several of their suggested nudges use involve a policy they call RECAP: Record, Evaluate, and Compare Alternative Prices. Because they suggest it so often – for cell phone plans, credit cards, mortgages, student loans, Medicare plans, among others – RECAP offers an excellent example of the principle behind Nudge.

RECAP is a mandatory disclosure policy, which Thaler and Sunstein argue can be one of the least intrusive and most effective forms of regulation. Indeed RECAP relies on market dynamics to regulate both individual and corporate behavior. If Humans get clearer information before and better feedback after their decisions – the kind of information and feedback presumed for Econs – then we Humans will make and markets will have to offer better choices.

A RECAP disclosure would come in a spreadsheet-like format, sent by mail and available at a business’ secure web site. Before purchasing or accepting a product for the first time, customers could enter how they expect to use that product and see what it should cost. More important, customers would get a yearly statement that shows their actual usage and costs. The regulations would also specify a standardized data format, so customers could save and import their usage data into other RECAP sites to compare prices.

RECAP would cost very little to implement, as businesses already save that data for billing. And it would make Humans’ decisions much easier, as we could compare apples to other apples. We could also see the worms businesses have in their apples, how much those worms cost us, and whether we can get less wormy apples somewhere else. Libertarians presume we do that anyway, because Econs would. So why do so many libertarians reject RECAP and other (government) nudges?

Objections to (government) nudges

Thaler and Sunstein discuss several libertarian objections to (government) nudges:

  • The Slippery Slope – Perhaps the most common and least defensible objection, this says that allowing (government) nudges is the first step down a slippery slope. What starts with mere education leads to fines and finally prison for those who don’t make the ‘correct’ decision as judged by bureaucrats. So no nudges, period. But as Thaler and Sunstein note, this ducks the question of whether a given nudge has merit on its own. If a nudge helps Humans make better choices based on our own goals, isn’t that good? If a given nudge won’t help us do that, we should reject it because it doesn’t work. And if the cost of avoiding a nudge is minimal – the authors suggest the ideal is a “one-click opt out” – there is a clear distinction between a ‘nudge’ and a ‘shove’ and we won’t slide on down that slope. Finally, they argue that we’re being nudged anyway, by businesses and others with an interest in our choices, so it makes sense to allow nudges that work in our interest.
  • Evil Nudgers and Bad Nudges – Thaler and Sunstein admit that “choice architects have incentives to nudge people in directions that benefit the architects (or their employers) rather than the users.” But they argue that danger exists for private nudges just as much as for government nudges. Indeed the authors note that those most suspicious of government usually say the only responsibility of private business is to maximize profits. And where Humans are easily confused, Econs can and do profit on that confusion. While Thaler and Sunstein admit that government actors may have ulterior motives – partisan and/or contributors’ interests – the solution is to make all nudges more transparent. Let us know when and why we’re being nudged, and we’ll reject the nudges and nudgers who act against our interests.
  • The Right to Be Wrong – This objection says we have a right to make mistakes, and mistakes are often helpful because that’s how we learn. Thaler and Sunstein agree on the right to make mistakes, and they say nudges should allow us to opt out at minimal cost. Students could still choose burgers and fries in the school cafeteria; they just have to step past the fruits and vegetables to get there. But the authors ask, “How much learning is good for people?” Pedestrian signs in London nudge tourists to look right, because traffic flows the opposite direction than in the U.S. and Europe. Is it better to let tourists ‘learn’ through getting hit by a bus? Is it better to let Humans ‘learn’ the risks of obscure mortgages through foreclosure and bankruptcy?
  • Punishment, Redistribution, and Choice – This objection says helpful government nudges redistribute resources and opportunity, as those nudges benefit Humans – especially the weak, poor, uneducated, and unsophisticated – at the expense of Econs. Thaler and Sunstein argue that “a good society makes tradeoffs between protecting the unfortunate and encouraging initiative and self-help – between giving everyone a decent share of the pie and increasing the size of the pie.” And they argue that good nudges help most those who need help, while imposing minimal costs on those who don’t. They admit that Econs would lose out, at least relatively, if ordinary Humans do better. “If Peter’s happiness depends, in part, on his being richer than Paul, then anything that pulls Paul up by his bootstraps makes Peter worse off.” But, they add, “As for those who feel miserable if their poorest neighbors close some of the gap, they have our sympathy, but not our empathy.”

Thaler and Sunstein discuss a few more objections, but those simply amplify points discussed above. Nudges should be transparent, so we know we’re being nudged, by whom, and to what end. And in most cases, they argue, government should offer nudges we can easily opt out of, rather than mandates we cannot escape except at great cost.

Nudges and freedom

Thus we return to the opening question: Do nudges toward better decisions narrow our freedom? Or do they expand it?

As implied in my parentheses above, libertarians only worry about government nudges. They’re fine with private nudges such as advertising (freedom of speech), suppliers paying for premium shelf space in retail stores (freedom of contract), and campaign contributions (freedom of contract that libertarians call freedom of speech). As long as you’re being nudged by someone with a profit motive, they argue, the free market and its invisible hand will make everything work out for the benefit of all. But that moral argument is premised on our making optimal choices, rewarding the best ideas and weeding out the worst. And as we’ve seen, Humans are not Econs. To make better choices, we need nudges that simplify and clarify complex and abstract options.

If freedom means Econs’ ability to profit by the predictable mistakes of Humans, then good nudges narrow freedom. But if freedom means more Humans able to make better choices – based on their own values and goals – then good nudges broaden freedom.

To make freedom better for everyone, government should nudge us … well.

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Happy Saturday!