Classical economics went wrong at its first turn, say Cass Sunstein and Richard Thaler. Man is not homo economicus, the rationally calculating actor that the dismal scientists from Adam Smith down through Milton Friedman supposed our species to be. No, we are emotionally driven, contextually influenced, socially conditioned: Humans, not Econs.
Sunstein and Thaler famously lay out their Human vs. Econ divide in Nudge, their 2008 bestseller that popularized a new sub-discipline, behavioral economics. Behavioral economists recognize that people make hasty decisions for non-rational reasons, relying on rules of thumb, heuristics, and past experiences that bias their judgment and prevent them from maximizing their gains. “Unlike Econs,” say Sunstein and Thaler, “Humans predictably err.” And if you can predict what errors they will make, you can wall off temptations and set Humans up to succeed.
What predictable mistakes do we Humans make? We procrastinate on important decisions such as enrolling in retirement accounts, hate losses more than we love comparable gains, fall for cravings like sweets even when we know they’re unhealthy, and stick with default settings. Nudgers can exploit these systematic flaws in our thinking, automatically enrolling us in retirement accounts until we say otherwise, imposing fees that discourage bad behavior, hiding desserts in the back of the cafeteria and prominently displaying salads at the front, and setting organ donation as the default unless we opt out. By “nudging” people towards the best outcomes, “choice architects” massage the social atmospheres in which we decide to make it easier for people to make the right, rational choice.
Thaler and Sunstein call this “libertarian paternalism”—libertarian because “choice architects” never take away choices, but simply rearrange the buffet of options, making the good ones easier to select and the bad ones harder to find. That makes nudging paternalistic, they acknowledge, because it influences people’s choices, but it’s worth it, because people’s lives are improved. Who wouldn’t want to outsource the hard work of analyzing the data and still come to the same optimal Econ-like behavior?
Not many—at least when Thaler and Sunstein first proposed the idea. While finishing his Ph.D. in economics at the University of Rochester in the 1970s, Thaler started keeping a list of common irrational behaviors that defied economic models, eventually writing a column “Anomalies” for The Journal of Economic Perspectives. Initially he struggled to find an audience; his first paper on behavioral economics was rejected by five journals. Thaler’s breakthrough came in 1976, when he found the work of psychologist Daniel Kahneman, who categorized common biases that shaded people’s judgments (a task that years later in 2002 earned him a Nobel prize in economic science). A 1974 paper, “Judgment Under Uncertainty: Heuristics and Biases,” co-authored by Kahneman and the cognitive scientist Amos Tversky, gave Thaler the key to fit psychology into economics: people regularly misunderstand, misjudge, and miscalculate because they fail to recognize their susceptibility to context and emotion.
Thaler’s synthesis of behavioral psychology with economics alarmed many. When in 1995 Thaler arrived at the University of Chicago as director of the Center for Decision Research, Nobel Prize-winning economist Merton Miller shunned conversation. But Sunstein, then the Karl N. Llewellyn Distinguished Service Professor of Jurisprudence at Chicago, struck up a friendship, and soon they co-wrote, with a Harvard law professor, “A Behavioral Approach to Law and Economics” for the Stanford Law Review, a kind of technical precursor to the layman’s guide ten years later in Nudge.
Since then the nudge tactic has grown immensely popular. Thaler and Sunstein’s manual became a bestseller. In 2009, shortly after the book’s release, President Obama made Sunstein his “regulatory czar,” and in preparation for the 2012 election he added Thaler and Sunstein to his “dream team” of behavioral economist advisors. Sunstein followed up Nudge with a sequel, Why Nudge? that sent the concept into the public view once more. Michelle Obama’s crusade to make school lunches fresher, less starchy, and healthier takes a page from Nudge by fiddling with the “default” options. The New York City subway ad campaign advising parents to stay proactively involved in their kids’ lives takes down over-optimism and the status quo bias, two of the faulty thought patterns Thaler and Sunstein warn against.
Why Not Nudge?
One counter-solution to the emotional-Human problem is to make people more perceptive and knowledgeable—a bit more like Econs. Teach them to think rationally, point out their biases, build up their self-restraint to help them avoid indulgence. And, giving proper deference to the heart, teach them to turn their desires in the right direction, so they naturally love and respond to what is good, no matter the roadblocks that stand in between. This is traditionally the job of education, which arms students with the rational knowledge and moral character to live upstanding, free, and independent lives.
That’s a nice ideal, say the nudgers, but a dangerous assumption. How can you be sure that people know enough and are virtuous enough to withstand every difficulty? Novices lose out to experts—take chess as an example, write Thaler and Sunstein—and most of us are novices at most aspects of our lives. We’re almost always less knowledgeable than the expert professionals pushing their products on us. And nudging is inevitable: “In many situations,” aver Thaler and Sunstein, “some organization or agent must make a choice that will affect the behavior of some other people.” If we know the system is rigged no matter what, we’d be hurting humanity by not rigging it in a way that encourages us to make the right choice.
If Thaler and Sunstein are right, then education’s purpose dramatically changes, away from educating moral citizens and towards training Pavlovian disciples coached to respond to the right signals. A popular statistic has it that students’ brains do not fully mature until their mid-twenties, making them excellent candidates for nudging rather than lecturing.
In Nudge, Thaler and Sunstein spend only three of their 300-plus pages on higher education, remarking briefly that the federal financial aid process could be simplified and parents could be rewarded for starting a college savings account while their kids are young. But already administrators have copied a few plans from Thaler and Sunstein’s playbook. Loss-averse college students might be incentivized to graduate if they paid a fee during their freshman year that was refunded upon graduation. Floundering students could use an algorithm that suggests majors and courses based on their previous accomplishments and interests. The state of Minnesota has run a “Summer Nudging” program since 2012 to remind recent high school graduates to matriculate in the fall. Professors can rearrange students’ chairs to a U-shape to make conversations easier. One college, perhaps embracing the value of transparency, assigned Nudge as a summer common reading for all incoming freshmen. Are people who know they’re being nudged more or less nudgeable? Consumers of school lunches may vote “less.”
Some nudges are relatively benign, some even entrepreneurial. But others are more ideological. Identity studies departments and offices of diversity try to counter the “structural racism” that they see as built into society and into each person. “Implicit bias,” like Thaler and Sunstein’s rules of thumb and heuristics, supposedly prejudices people in ways they never realize, clouding their judgment and preventing them from coming to the rational, independent conclusion. The president’s office at the University of California offers employees a guide to the most common instances of “implicit bias” that mirrors some of the irrationalities that Thaler and Sunstein identify. The resultant micro-aggressions are seen as perpetuating cycles of racism by building up a social atmosphere that encourages stereotypes. The solution? Setting up safe spaces that nudge people to celebrate diversity, and policies of racial preferences meant to correct for instances of invisible racism.
Diversity is not the only college fad to climb the nudge bandwagon. In Sustainability: Higher Education’s New Fundamentalism, a recent report I co-wrote with Peter Wood, we recount some of sustainability-themed nudges at play on campuses across the country. Dozens of institutions have sidelined their cafeteria trays in an effort to make wastefulness a salient topic for students. Trying to juggle plates, cups, and cutlery sans tray won’t save that much dishing water, but it sure makes students think, three times every day, about the need to conserve. Many institutions hire student “eco-reps” to shame their peers into composting their corn-starch based disposable flatware, ride a bike to class, buy carbon offsets to make up for their flights home at Christmas, and quit drinking bottled water. And some sort through trash bins on the college quad to visually remind students that hastily trashing their plastic is turning up the heat on the planet.
But once you start nudging, there is no safe place to stop. A culture trained to respond to nudges becomes dependent on them. If you’re always nudged to take the pre-set easy path, what happens when the right thing to do is hard? Cultivating fortitude, love of honor, and a disposition to careful thought will get a man through trying temptations; a habit of trusting the default option will not. A society that presumes its citizens to be irrational inevitably tends towards heavy-handedness. Nudgers say they don’t take options off the table, only rearrange the context in which they’re presented. But fiddling with the milieu inevitably makes some options socially unacceptable, if not completely inaccessible. If Humans gravitate towards the default settings, nudges aren’t as “easy and cheap to avoid” as Thaler and Sunstein insist they are.
And who decides what’s right and rational? Mankind has historically been very clever at “rationalizing” his desires; self-confident choice architects are no different. Nudging is the nanny state dressed in its Sunday best. Thaler and Sunstein say nudges are only permissible if they “make choosers better off, as judged by themselves” (italics in original). But it’s impossible to know how every person will judge his state of being.
Adam Smith critiqued in his “Theory of Moral Sentiments” top-down attempts to meddle with human behavior: the “man of the system” errs when he assumes he can arrange society systematically as if on a chess board. Each man, he said, has “a principle of motion of its own altogether different from that which the legislature might choose to impress upon it.” That makes nudging bound to fail its promises of health, wealth and happiness. Thaler and Sunstein—and the administrators following their advice— would do well to take heed.