On ‘Nudge’

This introduction is my contribution to the 17th meeting of the Innovation Reading Circle, and should be read along with the accompanying prose on the IRC site. A shareable and printable version is available on Scribd.

Nudge is Thaler and Sunstein’s first foray into ‘pop econ’, and it deserves applause for its foisting of otherwise controversial economic theory [1] into the mainstream. It introduces the pioneering work of Kahneman and Tversky, along with other like minded thinkers – including Thaler himself – in the form of a readable and accessible frolic in the field of behavioural economics.

Refreshingly – and, as a text aimed at a popular audience, as it is entitled to – it avoids the long-fought academic arguments which centre around the validity of behavioural theory itself. Instead, it playfully introduces the core tenets of much of the last twenty years’ thinking: loss aversion, choice anchoring, the status quo bias, rules of thumb and the ‘two system’ model of choice. Comprehensive examples in the second half of the text (e.g. Prescription Drugs: Part D for Daunting) convince the reader of the importance of good choice architecture, or at least the importance of thinking about choice architecture, and the book concludes with a plea to consider more fully the role good choice editing might play in determining the effectiveness of government policy.

An otherwise likeable text is marred by Thaler and Sunstein’s seemingly compulsive over-enthusiasm. The endless political references turn an otherwise neutral economic study into a frustrating battle, with the reader forced to make continual assessments of its validity. They divert attention away from the core economic message, diluting its credibility. Additionally, the lexical choice occasionally borders on the cultish – ‘nudges are everywhere’ – which again prompts the reader to question the soundness of the underlying theory. All of this is quite unnecessary, and a reader familiar with the subject matter is left wondering whether the book would have been more convincing to the lay person, if perhaps not as provocative, had it been couched in less partisan terms.

A final warning: As the authors state in the conclusion, ‘choice architecture, both good and bad, is pervasive and unavoidable, and it greatly affects our decisions’ – but good choice architecture itself doesn’t preclude the need for substantive thinking about the desired outcome of choice problems, though unwary readers might be tempted to think so. Nudge should be seen as a book about process and people, and not policy or purpose. Nevertheless, as an invitation to improve processes, it is a welcome addition to the popular economics canon.

1. Those with an interest in some of the ‘serious’ writing on the subject are invited to read Daniel Kahneman’s Nobel Prize Lecture (PDF) and acquire Kahneman and Tversky’s excellent Choices, Values, and Frames (2000, Cambridge University Press) which features some of Thaler’s academic papers.