Nudge in hindsight

I’m reading through a design book that speaks highly of nudges and behavior economics. Published in 2017, it already feels dated.

The foundational work of behavior economics has been hit hard by the replication crisis.

A more recent and thoughtful piece from Tim Harford is worth a read.

Another problem is that empirically tested, behaviourally rigorous bad policy can be bad policy nonetheless. For example, it has become fashionable to argue that people should be placed on an organ donor registry by default, because this dramatically expands the number of people registered as donors. But, as Thaler and Sunstein themselves keep having to explain, this is a bad idea. Most organ donation happens only after consultation with a grieving family — and default-bloated donor registries do not help families work out what their loved one might have wanted.

Behavioural science is a great way of finding small tweaks that can make a substantial difference to behaviour. Such tweaks help if the behaviour change itself solves a problem, but that cannot be taken for granted. It is easy to take a perfectly sound behavioural insight and turn it into a botched piece of policy.

The most successful behavioural public policy has been auto-enrolment into retirement savings plans, which in the UK has dramatically boosted participation in workplace pensions. In the hotel and restaurant business, participation is up from 5 per cent in 2012 to over 50 per cent last year. This is a triumph. Yet huge problems remain in the pension system as a whole. Pension participation among the self-employed has collapsed over the past quarter century. Pensions are a clear demonstration of the strengths of behavioural policy — and also of its weaknesses.

Nudging has fooled us into thinking the world’s major problems all have a painless, albeit clever solution.