Against Nudge

Some preliminary arguments against Nudge, adapted from some of my correspondence with a friend:

I had a couple of problems with [Nudge].

The first – an objection I’ve seen made elsewhere – is that Sunstein and Thaler don’t take public choice problems seriously. Government interventions tend to favor special interests and especially incumbents because these interests derive known and concentrated benefits from certain laws. [Special interests] are better able to organize political and lobbying power to capture their desired interventions than the general public, whose interests are diffuse and often unknown. A common example is agricultural subsidies. By advocating the expansion of interventions, Sunstein and Thaler are inevitably enabling special interests power to capture government regulation.

The most direct response I can find in Nudge to this objection is on p. 243 where they say, “But if private-sector interests are just following the invisible hand in furthering the interests of their customers, what’s the problem?”

I can’t tell if that response is intended to be a serious or just a humorous rebuttal. Obviously, private lobbying for government mandates is not a market interaction, and no economist would expect it to serve the “public interest”. So either they don’t really understand public choice problems, or they aren’t interested in addressing them.

[ed: In retrospect, I’ve decided the latter is true]

The second, and more fundamental, for me, objection is that Sunstein and Thaler don’t take seriously the ultimate subjectivity of ends. Throughout the book we hear them complain that consumers haven’t “rationally” shifted their behavior to the ends that government thinks they should [have] (investing for retirement, buying certain types of health insurance, donating their organs). Obviously the authors want very much for their interesting psychological and economic findings to be relevant and prescriptive. But science can never be anything more than descriptive.

The problem is not that consumers have failed to respond to government manipulations of retirement markets, health care, etc. The problem is that government has, in the first place, arbitrarily privileged decisions to save for retirement, buy health insurance, and donate organs. These decisions don’t make consumers “better off” in some objective sense. They simply further some government official’s preconceived notion of how other people should spend their money.

I’ve been meaning to write at length about the second part on my blog. I’ll let you know if/when I do.

I should note that I don’t find the private sector nudging at all controversial. And of course, part of the problem with government nudges is that they can supersede the market equilibrium [in nudges]. As Sowell says of markets, “The degree of rationality in the process is by no means limited to the degree of rationality of the individuals”. The reverse is true of government.

More to come.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.