Nudge: Improving Decisions About Health, Wealth, and Happiness

The final chapter on the social uses of nudging deals with climate change, which Thaler and Sunstein realize is an extremely large subject. They focus on emission reduction. Thaler and Sunstein believe there is a “perfect storm” of human psychological factors that make it difficult to mobilize on climate change. These include present bias, salience, lack of “specific villain,” and loss aversion. Salience is a problem, for example, because the emissions in the atmosphere are often invisible, making them less salient (or attention-catching) than dirty water or smog.

They discuss the tragedy of the commons and the free-rider problem. Some countries might not be doing their share (free riding) while the issue is global and deals with atmospheric conditions that are not anyone’s property (leading to the tragedy of the commons). They write the following regarding the free-rider problem:

The free-rider problem is more important still at the governmental level, because the only way we can make the required progress on climate change is through coordinated actions by governments around the world. You can think of nations as akin to those farmers deciding how many cattle to add to the pasture (288).

They go on to discuss the “public goods game” and note that when everyone in the game fully cooperates with everyone else, they all double their winnings in a very short time. The insinuation is that if nations did this with regards to carbon emissions, the tragedy of the commons would be averted, and all would be in a better position. The more free-riders there are, the less likely any individual (or nation) is to cooperate.

Thaler and Sunstein remind the reader that humans are self-serving in their biases about what is and isn’t fair. Different nations have strongly different senses about fairness in responsibility for curbing carbon emissions. They then try to outline better incentives for action on emissions. This includes penalizing those who pollute and cap-and-trade programs, which allow companies to trade limited rights to pollute with the hope that this reduces pollution overall. Negative taxation, i.e., subsidization can also be useful when trying to promote cleaner sources of power. They write, “In theory, the tax should be equal to the ‘social cost of carbon,’ a number that is designed to capture the damage done by a ton of carbon emissions” (295).

Thaler and Sunstein again bring out the kitchen sink approach, advocating for using every tool in the choice architect’s arsenal to reduce carbon emissions. They note that just requiring companies to disclose their emissions, with no accompanying punishment, can cause positive change. They once again advocate for “Making it Easy.” They write that the “green” options in energy should become defaults, even as it applies to home appliances. They discuss the “Home Energy Report,” a program through the company Oracle that informs households how their energy usage compares to that of their neighbors (306). They conclude by stating their hope that the world will enter a greener future.

The authors end the book with a response to their critics and a short epilogue. This chapter is only in the Final edition and addresses raised after the original publication in 2008.

They quickly address criticisms of their paternalism. They note that they want to help people achieve what is good by their own standards, not to impose a way of life. The nudge is meant as an assist, not a correction. They also remind critics that they are not naive enough to think all choice architects are perfect or benevolent, but they are quick to add that avoiding nudges is impossible. Reliance on choice architects cannot be avoided. They write, “objecting to nudges per se makes as much sense as objecting to air and water. you can’t avoid them. And one reason for nudging, as opposed to prohibiting, is precisely the fallibility of choice architects” (313). They tell their libertarian colleagues who are agitated by the label “libertarian paternalists” to “get over it” (314). Thaler and Sunstein argue that they have no reason to accept the problem of “nudge creep,” the worry that nudges will morph into coercive enforcement.

Some critics argue instead for active choosing rather than default settings. Thaler and Sunstein are not always against active choice, especially when the decisions are simple. Complex decisions, as they’ve already shown throughout the book, are not always best undertaken by unsophisticated consumers or employees. They also note, contrary to the intent of its promoters, that active choice is paternalistic. It forces a choice where people might not want one or may feel unqualified.

Still other critics say they should advocate for boosting, or educating, not nudging. Thaler and Sunstein don’t believe these are mutually exclusive and, as teachers, they advocate for the boost. Still, the nudge has a role, especially since “the world is hard” and people may not have the time to educate themselves on every trivial detail of their lives. They also show data on financial literacy that educational boosts are not retained over long periods, making the nudge more useful than the boost.

Critics also accuse nudges of sneakiness, but Thaler and Sunstein note that transparency about nudging does not change its effectiveness (324). They then claim that they endorse a principle from the liberal political philosopher John Rawls. Rawls’s publicity principle, they write, “suggests that no choice architect in the public or private sector should adopt a policy that she would not be able or willing to defend publicly” (327). The architect should disclose her actions and, preferably, allow others to comment on them in a public forum. They write that they are against “subliminal advertising” in nudging (328).

Finally, they realize that in certain contexts a nudge is not enough. Sometimes mandates are required. Laws against assault and theft, they write, are proof of this. It is not adequate to simply nudge someone away from harming someone else. They end the book with the following thought:

So long as people are making informed decisions about how to live their own lives, we would favor an attitude of humility and respect—and hence a presumption in favor of freedom of choice. But that presumption certainly protects your right to disagree with us (334).

The authors provide a brief epilogue describing some of the updates that have occurred in the world of nudging since the original publication of the book in 2008. They laud the “enormous progress” in the application of behavioral science to public policy, which, they state, “is starting to become as routine as doing a standard cost-benefit analysis or business plan (336). They implore the reader who’s finished reading to pass the book along and to include the inscription “Nudge for good,” as Thaler does when he signs a copy. They convey their general excitement for the quiet revolution in public policy that their book has helped spark.