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Washington Post: How ‘Nudge Economics’ Lets Companies Pass the Buck

By May 16, 2022June 15th, 2022No Comments

From The Washington Post:

I’ve never been able to decide if the idea that we can “nudge” people into better decision-making that improves the world around them is an optimistic or deeply cynical impulse. On the positive side: it assumes that many a societal problem can have relatively simple solutions, if only we can get people out of their own way.

But there is a darker interpretation, too. As behavioral finance economists Nick Chater and George Loewenstein write in a recently released working paper, the mass acceptance of behavioral nudges “unwittingly helped promote the interests of corporations who oppose systemic change.”

It’s a hefty charge, but they make it stick.

A nudge is an all but invisible prompt that encourages a certain desired behavior in individuals, designed to make an improvement in a global condition. A signature concept of behavioral finance, it gained mass popularity in the late aughts, with the publication of Richard H. Thaler and Cass R. Sunstein’s best-selling book titled, yes, “Nudge.”

If you go to a fast-food restaurant and see a calorie count, that’s a nudge to remind you to order a healthier meal. A graph on your water or electric bill, comparing your usage to averages in your neighborhood? Ditto.

Quartz called “Nudge” “one of the most influential academic books of the 21st century.” Co-author Sunstein ended up working for the Barack Obama’s White House, tasked with improving regulation by offering a carrot to corporations. He was so good at the job, he subsequently boasted that under his watch, the Obama administration enacted less regulation in its first four years than during both the first four years of George W. Bush and George H.W Bush’s time in office.

That stat should start to give you a hint of the problem. A nudge is ultimately a highly conservative approach to the question of how a society should think about the public good. As these authors argue, it both asks little and accomplishes little. Take carbon taxes. Chater and Loewenstein note that a number of studies have found that both the knowledge of or taking part in a nudge hack in this area reduces popular support for more stringent regulations or action.

Read more at The Washington Post.

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