The term libertarian paternalism sounds like an oxymoron. Libertarians are concerned about ensuring people are free to do as they wish. Paternalists, on the other hand, argue that we ought to prevent people from suffering harm, even if doing so involves interfering with their freedom. Libertarian paternalism aims to square this circle. In their influential 2008 book, Cass Sunstein and Richard Thaler argue that we can have both freedom and paternalism if we limit ourselves to ‘nudging’ people towards the right option, without preventing them from doing it.
The Power of Nudging: What is Libertarian Paternalism?
In this article, we will explore libertarian paternalism, the meaning of nudging, as well as how nudging has come to be used in public policy.
The term libertarian paternalism was first coined by Cass Sunstein and Richard Thaler in their 2008 book Nudge: Improving Decisions About Health, Wealth, and Happiness.
Drawing on recent insights from behavioral science showing that our cognitive capacities are flawed and lead us to make bad decisions, Sunstein and Thaler argue that we ought to design public policy interventions that shape the environment in ways that nudge people toward making better choices.
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The goal is to help us overcome the fact that we are often distracted, unmotivated, busy, and tired; all of which make us make bad decisions. We will all be familiar with the idea of buying fatty, sweet food because we are too tired, busy, or unmotivated to cook when we could have cooked ourselves a balanced, nutritious meal. The goal of nudging is to make these changes writ large.
Unlike traditional forms of paternalism which focus on prohibiting particular choices (e.g. prohibiting recreational drugs) or making them more costly (e.g. imposing high taxes on cigarettes), nudges aim to change behavior in more subtle ways.
The idea is that simply presenting choices in a different way is sometimes enough to change people’s behavior.
In the libertarian paternalist literature, this is known as altering the ‘choice architecture’. Choice architecture ‘is the design of different ways in which choices can be presented to an agent. Examples include the number of choices, whether the choice is opt-in or opt-out, the way in which alternatives are described or presented, the incentives attached to the choices, etc.’ (Dworkin, 2020)
To illustrate: imagine you, as a public policy professional, want to help people save for their retirement. You have lots of options available to you. You could make retirement plans compulsory in that all employees under the age of 65 have to put some money away into a pension plan to provide for their future (i.e. forced opting-in).
Or, you could encourage people to save by running adverts on TV explaining how important it is to opt in (i.e. voluntary opting-in).
The libertarian paternalist would choose a third option: employers should automatically opt their employees in to their retirement plan, but would allow them to automatically opt out if they really wanted to. Automatic opt-in schemes such as this have shown real promise in increasing savings rates (Shah et al, 2019).
Arguments For Nudging
Perhaps the most straightforward argument in favor of the kind of nudging that libertarian paternalists advocate is that nudging is beneficial to the people who are nudged.
The goal of nudging is to help people overcome their cognitive biases by helping them make the choices they “would make if they had unbounded cognitive abilities and no self-control problems” (Shah et al., 2019).
If we can get people to eat healthier food simply by putting the healthier foods in a more visible place than the unhealthy foods, what is wrong with that? After all, people are eating healthier food (which will increase their well-being).
These arguments about benefits are generally bolstered by an argument about the costs of nudging. Unlike other forms of paternalistic interference, nudging does not impose heavy burdens on those it aims to help.
Whereas prohibiting drugs requires imposing penalties on people (e.g., for possession or dealing), which detract from the benefits we are trying to achieve, nudging simply re-arranges people’s choices.
It is thus much more liberal than alternative approaches. In Dworkin’s words: ‘No choice is eliminated or made more difficult. Nobody is coerced. The choice set remains the same. No significant costs or incentives are attached to the choices the agent faces.’ (Dworkin, 2020).
Arguments Against Nudging
Nonetheless, some concerns remain. One important concern is that often nudging, even if beneficial, is not transparent. When people are auto-enrolled into pensions, they are not necessarily aware that this has been done in order to increase the rates of savings. Nor do people necessarily know why the nudges work.
For instance, people aren’t necessarily aware that the opt-out pension saving nudge works by exploiting people’s status quo bias (i.e., the potentially irrational preference for preserving one’s current situation instead of acting so as to change it). But why would transparency matter?
Opponents of nudging tend to argue that non-transparent nudges can be a threat to our autonomy, especially in situations where, had we known about their existence, we would have chosen otherwise.
A second major objection to the use of nudging in public policy is that it involves exploiting our bad reasoning abilities. We are, in a sense, being manipulated when our cognitive biases are used to get us to act in a particular way.
For example, altering the food placements in a cafeteria exploits our tendency to eat the things we come across first (or are at eye level). Given that we object to this when it is done to maximize profit (e.g. when supermarkets place expensive branded products in more obvious places than their cheaper, non-branded products), why shouldn’t we object to doing so when the goal is to get us to eat healthier food?
The problem in cases such as these is that, instead of being rationally persuaded to do the right thing, we are being manipulated by policymakers who have a better understanding of behavioral and psychological science. Even Richard Thaler, the co-author of Nudge, is aware of this problem, given that he reportedly autographs copies of Nudge with the phrase ‘Nudge for Good!’ under his name.
Nudging in Real-World Policy Making: The Behavioral Insights Team
Since the nudge-theories popularization by Thaler and Sunstein in 2008, nudging has slowly become more and more central to government decision-making. In the UK, the coalition government led by David Cameron created the Behavioral Insights Team, unofficially known as the ‘Nudge Unit’ (Halpern 2015, Shah et al., 2019). Originally part of the government, the Behavioral Insights Team has since been privatized, allowing it to work on policy projects all around the world.
The goal of the behavioral insights team is to use social engineering, psychology, and behavioral economics to increase compliance with government policy and thereby decrease social and governmental costs related to inaction and poor performance.
Since its inception, the nudge unit has been involved in a number of projects. For example, BIT helped the British Government increase the number of people who pay their taxes on time by informing people of social norms. BIT introduced statements on tax bills detailing what percentage of citizens pay their taxes in full and on time and making clear that the recipient of the latter was not part of this group due to the fact they failed to pay on time.
Another example of a successful policy intervention by BIT was increasing the number of people who applied to have their lofts insulated. The British Government had been offering large subsidies for people to insulate their lofts (thereby increasing the energy efficiency of their homes) but was surprised at the lack of uptake. When BIT was commissioned to research the problem, they found that although people were interested in installing insulation, they were not doing so because their lofts were full of junk. BIT convinced the government to provide low-cost labor (alongside subsidies for insulation), leading to an enormous 500% increase in people installing insulation.
Since the birth of nudging units in the UK’s cabinet office in 2010, the approach has gone mainstream. There are now nudge units in Canada, the USA, Japan, Greece, Australia, Germany, and Ireland.
References:
Dworkin, Gerald, “Paternalism”, The Stanford Encyclopedia of Philosophy (Fall 2020 Edition), Edward N. Zalta (ed.), URL = <https://plato.stanford.edu/archives/fall2020/entries/paternalism/>.
Halpern, David. (2015) Inside the Nudge Unit: How Small Changes Can Make A Big Difference. WH Allen, London.
Schmidt, Andreas and Engelen, Bart. (2020) ‘The ethics of Nudging: An Overview’ Philosophy Compass, Vol. 15, No. 4.
Shah, Shrupti; O’Leary, John; Guszcza, Jim; Howe, Jane. (2019) ‘Nudging For Goods: Using behavioral Science to Improve Government Outcomes’ Delloite. Available at:
Thaler, Richard and Sunstein, Cass R. (2008) Nudge: Improving Decisions About Health, Wealth, and Happiness.Yale University Press, New Haven.
