Nudge theory pioneer answers his critics

Reshaping the way governments govern

Just over 10 years ago, nudge theory was introduced to the world by Cass Sunstein and Richard Thaler. Their radical argument was that the government could preserve the freedom of citizens whilst at the same time helping them make better financial, health and happiness choices. The initial success in the USA and UK led to over 500 nudge units across the globe, including institutions like the World Bank and the UN. However, critics challenge its effectiveness and even the main claim that nudges by the government are freedom-promoting. In this exclusive interview, Cass Sunstein defends the ideology and effectiveness of his theory.


How can governments help us make decisions whilst keeping our liberty and autonomy? “Choosers are human, so designers should make life as easy as possible, according to Cass Sunstein, the most cited Law Professor in the world, on how government can encourage better and easier decisions. Sunstein has written a huge number of books addressing how we can all make better decisions without having to think about it. In this interview with IAI News, he talks about the impact of his work and the philosophy which underpins it. He also addressed criticisms from colleagues who argue that his theory fundamentally misses structural problems, such as climate change and poverty - problems that can’t be addressed by individuals alone.

How banks create money SUGGESTED READING The fantasy economics of the Nobel Prize By Steve Keen

Sunstein’s work is inspired by his liberalism, arguing that the freedom to make choices is essential for a free society. But at the same time, he isn’t afraid of the government helping people make those choices. He terms his distinctive brand of philosophy of government Liberal Paternalism. Like any good parent, governments should give citizens all the tools they need to navigate the world, but at the same time, they should let us make our own individual choices and our own mistakes.

Sunstein, along with Noble Prize winner Richard Thaler, fundamentally changed the way policymakers think about their power to influence people’s decision-making. Their book Nudge detailed the ways that you could encourage citizens by using behavioral economics to encourage them to make better choices in health, wealth, and happiness. So hos is “nudging” people not the same as manipulating them? How is freedom preserves here? “A nudge is any aspect of the choice architecture that alters people's behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting fruit at eye level counts as a nudge. Banning junk food does not.”

Despite the non-intrusive philosophy of nudges, they have been shown to be incredibly effective. Imperial College London recently showed that health-related nudges were responsible for a 15.3% increase in a healthier diet and nutritional choices. Sunstein has also shown that opt-out systems let people not stress about decisions they support, or miss out on making those decisions in the first place. From organ donation to saving for retirement, by using this new science of choice architecture, more people are able to think less and still make positive choices for society and themselves. And in more humorous examples, Amsterdam’s Schiphol international Airport have been able to use the theory of nudges to get men to aim better at the urinal. By placing fly-shaped sticks in urinals, men focused on more on where they were aiming, bringing down the costs of cleaning by 80%!

Your work has revolutionised the way governments and institutions think about how to influence people’s behavior. At the same time, you're a self-described liberal. Is liberalism compatible with governments using the nudge theory to influence how people act? Does it not assume that the government knows what's best for its citizens?

The whole point of nudging is to maintain freedom of choice. A GPS device nudges people, but it preserves freedom in two different ways: You get to tell it where you want to go, and you can ignore the route it suggests. It’s your choice. A doctor might nudge you by saying that you should lose weight, and by telling you how. Even if so, you retain freedom; you can ignore the nudge. Many nudges from governments are educative: disclosure of information (for example, of the contents of food); warnings (about, say, cigarette smoking); and reminders (say, that a bill is due). There is nothing illiberal about that. A government might know a lot about the fuel economy of motor vehicles or the energy efficiency of refrigerators, and disclosure of information about fuel economy and energy efficiency, to help consumers to make informed choices, is hardly inconsistent with freedom.

related-video-image SUGGESTED VIEWING Economics matters With David D. Friedman

You previously stated “I don't think it's very important that people support the idea of nudging in the abstract. I think it's important that policies be helpful and sensible”. Shouldn’t the aim of a liberal state be to educate the populace to the point that nudging, steering behavior in a certain direction, is unnecessary?

Education is important, and countless nudges are educative. Consider energy efficiency labels for appliances, calorie labels, and information about the nutritional content of food. Educative nudges are all around us. Some nudges are architectural rather than educative; consider automatic enrollment in pension plans. But many people do not want to spend their days studying the differences between actively managed and passively managed funds, or the right balance between equities and bonds; automatic enrollment can be a blessing (and note that if people want to study plans, they can). Life is hard and a nudge can make it easier!

Behavioral economics seemed to have influenced how governments approached lockdown measures during the pandemic. In the UK, for example, the government argued that enforcing measures too quickly would lead to fatigue and less compliance. That turned out to be false. If behavioural economics isn't a precise science, isn't it dangerous for governments to base policy decisions on it?

The idea to which you point in the UK was supported by exactly no behavioral scientists. I do not know where it came from. All over the world, behavioral economics has led to massive economic savings, and also massive savings in terms of reduced deaths, accidents, and illnesses. One example involves road safety, where many nations have used behavioral findings to life-saving effect. Another involves smoking cessation. Another involves poverty reduction, where just one automatic enrollment policy, in the United States, is helping millions of poor children to receive free school meals. Another involves the reduction of “sludge,” understood as administrative burdens that make it hard for people to get access to money, services, or opportunities. Sciences do not tend to be “exact,” but behavioural economists know a lot, and policymakers do better to rely on empirical findings than just to toss a coin, or to guess.

The real problem with economic policyMEDIUMresized SUGGESTED READING The real problem of economic policy By Charles Goodhart

Advisors to the UK’s behavioural insight group, Nick Chater and George Loewenstein, have published an academic working paper suggesting that the movement has lost its way. They argue that behavioural scientists fall into the habit of seeing problems as simply the result of the poor choices of individuals. Is there something to this critique, and if so, does that mean behavioural economics has a complete blind spot when it comes to structural problems rather than ones to do with individuals?

Chater and Loewenstein are terrific academics, but this particular paper badly misses the mark, because the premise is wrong. In policy circles, behavioural scientists have spent most of their time on structural problems. For example, fuel economy mandates and energy efficiency mandates, addressing structural problems, have been explicitly justified by reference to behavioral findings about present bias (leading consumers to focus on the short-term) and limited attention. Safety requirements imposed on motor vehicle manufacturers address a structural problem; they have been justified by reference to behavioral findings about limited attention. Cigarette taxes and soda taxes address structural problems; they seek to reduce “internalities” (harms that people impose on their future selves). On February 1, 2023, President Joe Biden announced a new initiative to combat “junk fees” imposed on consumers, targeting a large structural problem. The President’s top economic adviser, Brian Deese, describes the initiative as “a milestone for behavioral economics – decades of scholarship bearing fruit in policies that make a difference.” There are many such milestones, and there will be many more. We’ve just gotten started.

Latest Releases
Join the conversation