the nudging state

Hanging around like Brian Adams's '(Everything I Do) I Do It For You', this week's number one Big Idea is... still behavioural economics! Perhaps a slushy single called '(Everything I Do) I Do It For You Without Even Meaning to' might also spend seventeen weeks at the top of the charts.

For those who haven't been paying attention, or wanted to pay attention but were distracted by some psychological law they weren't aware of, there is a book out called Nudge, by Cass  Sunstein and Richard Thaler. You can find out why George Osborne loves it, what Matthew Taylor thinks of it, which restaurant Sunstein and Thaler discuss it in, and why we need more pictures of flies in urinals. Between policies which force us to act in the public interest (e.g. a smoking ban) and those which free us to act in our own interests (i.e. markets) is the third option of 'soft paternalism' - policy interventions that frame choices in ways that lead us to act voluntarily in the public interest.

It seems immediately obvious that, while intellectually interesting, this cannot be much more than a gloss placed upon existing policy machinery. This is not to discredit it. There is often a gap between the clumsy rule-making apparatus of state bureaucracies and the potentially disorientating arena of markets. A while back I wrote in this Renewal article [doc] about how New Labour was operating with a conflicted notion of the self, in which crude constraints and erratic freedoms were constantly pulling in opposite directions. Perhaps nudges can act as a buffer zone between the two, like that expanding foam you inject into the gaps around windows as insulation. But taken to any greater extent, 'soft paternalism' implies too much freedom to be compatible with the political needs of the state, and not enough to be compatible with the economic commitment to self-regulating markets. As I wrote here, if behavioural economics were taken too literally, a great deal of the current policy-making apparatus would become redundant. Which is why it won't be taken too literally.

But what is far more perplexing about this new Big Idea is its apparent selling point - the insight that 'free' choices can be strategically affected, for better or worse, without being constrained. If this is news to government wonks, this suggests that government thinking lags behind business thinking by approximately forty years.

Out in the big bad world of business, homo economicus is kept on a very tight leash indeed. Investors are, for the most part, vicious examples of homo economicus, impersonal buyers and sellers who - as Donald MacKenzie has shown - actually employ neo-classical economics in their day-to-day calculations. This isn't to say that stock markets behave 'rationally' (one of the most famous works of behavioural economics has shown that they don't) or that there aren't meta-narratives at work. But the aspiration to calculate in an asocial, rational fashion exists, and this aspiration exerts constant pressure upon business management.

This makes it all the more important that other 'stakeholders' such as customers and employees do not behave in this fashion, switching allegiances and calculating at every turn. This explains two of the most important forms of expertise in the economy today, namely Human Resource Management (HRM) and Advertising. Neither of these is based upon a model of a rational, self-interested self, but builds upon empirical studies of the emotional, social person as they exist in actual economic situations, in order to draw individuals into non-price-based relationships. Admittedly, HRM might be built upon a plausible body of social psychology, while Kevin Roberts et al prefer to get five people pissed then ask them which car most reminds  them of a penis, but neither assumes that people know what is best for them. For a great case of 'nudging' in action, see Eddie Izzard's depiction of advertising.

Is it actually news that people voluntarily take bad decisions? When economists go and buy household cleaning products in the supermarket, do they think they select Mr Muscle on the basis of calculation? (I sometimes try and select cleaning products with my eyes closed, but when I open them, I'm usually disappointed to discover I haven't selected Mr Muscle and so I buy it anyway). And what about HR? Is this considered too 'soft' to be real, or not part of the economy?

So there already exist sophisticated forms of expertise, dedicated to alligning 'my' interests with those of companies. And not a decade too soon, we now see the emergence of a body of expertise dedicated to alligning 'my' interests with those of the public (or the government, depending on how you prefer to see it). There must surely be opportunities for governments to use the expertise that is already out there, as it does with advertising against smoking or drink driving. Couldn't the advertising industry 'nudge' us to recycle or pick up litter? Couldn't HR experts 'nudge' parents to restrain their children? These people actually specialise in understanding irrationality, as opposed to discovering it as an amusing economic after-thought.

The policy-maker might respond that advertisers and HR exist to prevent me taking a good decision, while the state wants to help me take a good one. In this respect, perhaps the 'nudging state' is necessary as the corrective to a society polluted with bad incentives. Richard Layard's criticisms of advertising and OfCom's commitment to raise media literacy are in line with such a view.

But good in whose eyes? In an Aristotelian paradigm, my greatest happiness consists in behaving virtuously, and I simply need to learn this. But it strikes me that behavioural economics remains in the paradigm that views virtue (the will of all) and autonomy (the will of the individual) as at war with one another, with capitalism (the will of capital) as a third aggressor to be taken into account. Nudging then becomes a means of optimising the level of individual autonomy in society, to achieve an uneasy balance between the three. I suspect that one set always gets squeezed in the process, and it aint capitalism.

Comments

[John]

Richard Layard is the perfect nudger. His ideas on depression
http://cep.lse.ac.uk/layard/psych_treatment_centres.pdf

not only nudges people to have therapy if they are depressed but at the same time advertises the heavily branded therapy (CBT) thus promoting a industry based on one single type of therapy (probably not to the liking of the Pharmacutical companies). Of course this is done under the umbrella of NICE guidelines to fit into a language of state rationality.

Layard's nudging fits nicely into Nikolas Rose's Foucauldian critique of the over use, or mass creation of mental illness'(ie Post tramatic stress disorder - PTSD). Rose explains that we become accustomed to living in a confessional society. Although Rose's negativity is central to this concept (and actually to most of his other work), he does have a point.

[Will Davies]

I think Rose would probably plead that there was nothing normative about his analysis at all. Critical, maybe, but in the sense of 'critique', not in the sense of 'negative'.

[max]

I went to one of the many seminars in last week's Nudge-athon. Afterwards I wrote down the following:

1) Prohibition
2) Regulation
3) Incentives
4) Information
5) Direct and indirect provision

This is a basic typology of government intervention from any Public Economics textbook. If we start here, Thaler and Sunstein are basically saying: 1) and 5) are bad ways of structuring behaviour. 2), 3) and 4) are good. It then provides some helpful hints on the detail of policy design - defaults matter, give feedback, expect error etc.

As you say, we already know a lot of this from other disciplines (and common sense). Nudging is new in economics, though. And economists would say that because economics is good at building robust models and generating measurable outcomes, a better economics is good for policy.

The bigger problem with Nudging as a policy instrument is that we actually don't know what nudges work in most cases. In the seminar, Thaler claimed that the costs of finding out are pretty cheap, compared to (say) the Supercollider at CERN. But if you think about it, the financial, political and moral costs of experimenting with nudging (say) public health policies in different directions could be pretty high.

Nudge is a great meme. And because it's largely based on lab experiments it feels pretty clean and neat. But back in the real world I'm not sure how far it can or should take us.

[Will Davies]

Yes, all sounds sensible.

So maybe the issue is that, while there are plenty of areas of society that involve altering behaviour via irrational instincts, that none of these are currently of great socio-political significance. If an advertising strategy or HR policy fails, the worst that can happen is that someone doesn't buy a car or they quit their job. Whereas, like you say, the responsibilities of the state are a lot weightier than that, and hard, statistical modelling becomes necessary. Lab experiments aren't up to the job.

I've never studied stats in my life, but I presume it's pretty hard to imagine NHS statistics having data about how groups 'tend' to behave pumped into them...

[John]

Not sure about Rose. Foucault brilliantly used the critique without being negatative, sadly many use Foucault, including Rose, to see society primarily from a negative slant.

[Wendy Ragiste]

I dread to think what the competing parties will get up to with this at the centre of their advertising campaigns for the forthcoming election.