Although politics has always been the art of the possible, one of the sadder aspects of modern life has been the gradual narrowing of our ambitions for public policy, a resignation to the idea that governments can only do so much to help their citizens. After a certain point, says our conventional wisdom, free people will resist the state’s attempts at reform and the ignorance of crowds will prevail. Even sophisticated and prosperous democracies have largely failed to improve the way the average person eats, drinks, exercises and manages money. Despite large budgets and careful planning, the most modest public health campaigns inevitably cost more, take longer and achieve less than their initial projections. We have become so accustomed to high rates of alcoholism, drug abuse, smoking, obesity and teen pregnancy that many policy makers have given up on long term solutions and have set their hopes no higher than crisis management.
Last year, the economist Richard Thaler and legal scholar Cass Sunstein responded to this counsel of despair with Nudge a fascinating and influential book idea which popularized the idea of “libertarian paternalism.” The book’s main proposition was that ingenious alterations to the context in which people make decisions – what Sunstein and Thaler call the “choice architecture” − can painlessly encourage, or “nudge,” large numbers of people towards desirable outcomes. Instead of mandating change through traditional regulation, systems are redesigned and simplified so that consumers find it easier to make sensible choices.
Consider, as a trivial example, the choice architecture of the standard alarm clock. Many people have learned either to switch it off or to hit the “snooze” button repeatedly until they have overslept. A simple innovation solves the problem. There are now alarm clocks that come equipped with wheels and a computer programme that makes them jump off the bedside table at the appropriate moment and scurry around the room. This forces the would-be sleeper to get out of bed, and by the time he has chased down the clock he is usually fully awake. The clocks are very effective.
As with little things, so with large ones. Sunstein and Thaler accept that most of us prefer mindless routine rather than a thoughtful deviation from the norm, no matter how beneficial. We generally accept default choices on our computers and cellphones and it turns out that this mental inertia is no different in the way we choose pension plans, health insurance and mortgages. But instead of reading this as a weakness, Sunstein and Thaler turn it into an opportunity. They argue that governments can often produce substantially better outcomes simply by changing the system’s default setting. The average American hardly saves any of his income for retirement, even though nearly every financial planner believes that this is desirable. The situation is exacerbated by the fact that the current default for most savings plans must be actively chosen by those eligible for them. Sunstein and Thaler show, repeatedly, that simply by inverting this arrangement, so that people must actively choose to opt out of savings plans, the US government could painlessly nudge millions of citizens towards sensible saving schemes.
Organ donations are another good example of the power of small changes. Although a large majority of the population are in favour of donating their organs posthumously, relatively few complete the necessary paperwork. If consent were presumed, but could easily be withdrawn (all nudges must be easily refusable) then the shortfall of donors for thousands of lifesaving operations each year would be solved practically overnight.
Sunstein and Thaler go to great lengths to point out the need for informed choices. Having as many choices as possible – the libertarian ideal – can often prove to be a recipe for disaster. When the Swedish government encouraged its citizens to invest their retirement savings in the stock market, there was a sudden proliferation of investment options. A large number of new investors ended up choosing a technology heavy fund – heartened by its recent gains – that lost much of its value in the dotcom collapse. By contrast, investors who stuck with the government’s carefully chosen default fund, netted considerably higher returns than their more adventurous compatriots.
On their blog, Sunstein and Thaler record some of the more creative nudges that have been used all over the world. Last year a local health authority in Dundee offered smokers in the poorest parts of the city £150 worth of groceries, providing they gave up smoking. In the US, hundreds of cafeterias have changed the way they display (and describe) food, to nudge diners towards healthier diets. In one school the consumption of vegetable soup recently increased by 28 per cent just because its name was changed to “Rich Vegetable Medley Soup.” In Tulsa, the mayor’s department now saves more than $40,000 a year by switching the default on its printers to double-sided printing. The possibilities for refinement are literally endless.
Whatever its limitations, the central thesis of Nudge is surely correct − in many cases the conventional wisdom is wrong. Ingenious choice architects, especially those with the resources available to governments, can have huge positive impacts on our daily lives − not through large budgets and the application of unwieldy bureaucracies, but through a better grasp of human nature, ingenuity and innovation. People cannot be forced to make wise choices, but we should be far more willing to accept that they can be nudged towards them.
