The Limitations of a Nudge

I usually review books on my Goodreads account, but I’m kind of pleased with how this one turned out. So here are my thoughts on Nudge, a book I’ve been aware of for years but finally got a chance to read for myself. As it turned out, he said hoity-toitily, the timing was fortuitous.

Over the last seven years, Richard Thaler and Cass Sunstein’s Nudge has become a classic of behavioral economics. Which means some of it is familiar, most of it is still very much relevant, and then there are the bits that make you raise your eyebrows and ask the book, “Really?”

It’s more fun to poke at the embarrassing bits, so we’ll do that first. Thaler and Sunstein were writing in 2007, and they almost suss out the oncoming storm of the financial crisis. They spot the beginning of the collapse in subprime mortgages, but assume it will damp itself out in a correction. It’s understandable that they were unaware of the interlocking commitments that made the financial markets a bomb waiting to explode — most of us were — but in hindsight they look a little naive.

Their chapter on marriage is especially amusing. In an effort to reconcile religious institutions and marriage equality advocates, Thaler and Sunstein hammer out a long, tortured argument for removing the state from marriage and using private contracts to define the rights and obligations of long-term couples. (Presumably Rand Paul is cribbing from these arguments in his recent speeches.) Marriage would cease to be a broad social endorsement of a relationship and more like joining the Hair Club for Men.

Which is all very well and good, and I suppose back in the Dark Ages of 2008 looked at least as likely as any other solution. OR you could do what five members of the Supreme Court did last week, which is to recognize that marriage is a beloved tradition with significant legal and financial benefits, that the people dedicated to keeping marriage heterosexual-only are a bunch of bigots, and that anyone with a working toolkit of adult life skills should be able to marry the person that he or she loves.

Problem. Solved.

So What’s Wrong with a Nudge?

I bring all this up not just to be snarky, but because it highlights the limitations of nudging in behavioral economics. Thaler and Sunstein had an important insight in this book, which is that how you present information and choices can have a huge (and often beneficial) effect on outcomes. That’s an immensely useful idea, especially when you apply it to user experiences and game economies.

But nudging can only do so much. It can’t determine what’s right and wrong. It can’t help you make the right choice if all the proposed choices are bad. And sometimes looking for a nudge is just fiddling around with complications when the problem is better solved with a big damn hammer of incentives or law.

Thaler and Sunstein give lip service to this fact, but then ignore it in their efforts to show how useful their way of seeing the world is. (In fairness, that’s pretty typical for this kind of book.) As they say themselves, a nudge can do a lot of good when a non-expert is trying to choose between several non-obvious outcomes. But there are also a lot of issues — corruption and freedom chief among them — where someone rational needs to say, “This is right, that is dumb, and I’m not moving until we make some serious changes.”