What’s new about nudges?

As I prepare to lecture on behavioural economics in public policy tomorrow, I’ve been riffling through the books I have in the room here & am struck by how similar they all are. The most recent is Richard Thaler’s [amazon_link id=”1846144035″ target=”_blank” ]Misbehaving: The Making of Behavioural Economics[/amazon_link], which is as the subtitle suggests about the debate within economics about foundational assumptions as well as the content of behavioural economics. It’s very good and accessible. Daniel Kahneman’s Thinking Fast and Slow is still my favourite. There’s [amazon_link id=”0141040017″ target=”_blank” ]Nudge[/amazon_link], of course, by Thaler and Sunstein. The Dan Ariely books – I have [amazon_link id=”0007256531″ target=”_blank” ]Predictably Irrational[/amazon_link] here – are jolly reads. Mullanaithan and Shafir’s [amazon_link id=”0141049197″ target=”_blank” ]Scarcity[/amazon_link] is an important book. A more scholarly volume is Eldar Shafir’s edited volume [amazon_link id=”0691137560″ target=”_blank” ]The Behavioural Foundations of Public Policy[/amazon_link]. Somewhere too in here is Colin Camerer’s [amazon_link id=”0691116822″ target=”_blank” ]Advances in Behavioural Economics[/amazon_link]. And I have [amazon_link id=”0691164371″ target=”_blank” ]Government Paternalism[/amazon_link] by Julian LeGrand and Bill New, somewhat cautious in its embrace of behavioural policies.

[amazon_image id=”1846144035″ link=”true” target=”_blank” size=”medium” ]Misbehaving: The Making of Behavioural Economics[/amazon_image]  [amazon_image id=”0141040017″ link=”true” target=”_blank” size=”medium” ]Nudge: Improving Decisions About Health, Wealth and Happiness[/amazon_image]  [amazon_image id=”0007256531″ link=”true” target=”_blank” size=”medium” ]Predictably Irrational: The Hidden Forces that Shape Our Decisions[/amazon_image]  [amazon_image id=”0141049197″ link=”true” target=”_blank” size=”medium” ]Scarcity: The True Cost of Not Having Enough[/amazon_image]  [amazon_image id=”B00P6ZJ6LS” link=”true” target=”_blank” size=”medium” ]Government Paternalism: Nanny State or Helpful Friend?[/amazon_image]

The thing that strikes me looking at these volumes covering a dozen years is how much overlap there is in the material they cover, often exactly the same examples. Does this mean behavioural economics has not really moved on from the central insight about people’s inability to calculate probabilities as if they were Mr Spock from Star Trek, and hence the “irrationality” of much decision-making concerning uncertainty and predictions of the future? The big questions I have  – and can’t readily find the answers to – are:

1. What do we know about the boundaries between situations in which people are “rational” and “irrational” (ie individual choices lead to the market outcome as predicted by conventional economic theory, or not) – is it as simple as any situation involving having to predict the future?

2. What do we know systematically about the interaction between individual decisions and social influencing (other than that it exists)?

3. What do we know about whether people adjust over time to ‘nudge’ policies and change their behaviour, as they do to any traditional economic policies?

If those who have read more of the behavioural literature know where I can find relevant material, I’d be very grateful.

9 thoughts on “What’s new about nudges?

  1. Funnily enough, I chaired a lunchtime meeting today with Cass Sunstein. Like me, he doesn’t see a role for the word irrationality in this context: bounded or quasi- maybe.
    I don’t understand your first question.
    I think the second is about social norms? There are various examples of this (eg around recycling, energy use) but I think it’s hard to generalise : they may not work in some populations.
    The third question is about fading in or fading out of effectiveness? I haven’t seen much explicitly about this: the Nudge database at Stirling would be a good place to start.

  2. Superforecasting. Tetlock and Gardner. The Art and Science of Prediction.
    Sources of Power. Gary Klein.

    Leading edge, along with Kahneman and Gegerenzer. Four corners of the behavorial devision box.

  3. I can’t recall specifics but I think the MINDSPACE paper from the institute for government would be a good start on your questions, and may point to other relevant research. Inside the Nudge Unit by David Halpern is a recently published summary of the nudge unit’s work. Finally, the Kahneman / Klein paper Conditions for Intuitive Expertise may shed some light on your first question – http://www.hansfagt.dk/Kahneman_and_Klein(2009).pdf (Not a massive spoiler to say that we can only really learn how to make predictions – ‘expertise’ – in stable, predictable environments)

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