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Essay: The efficacy of nudge theory

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  • Published: 26 July 2022*
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Introduction

With 1.7 million Singaporeans at risk of obesity related illnesses, the Ministry of Health introduced mandatory nutrition labels for high sugar beverages (HPB, 2014). It serves as a nudge for Singaporeans to purchase healthier drinks (Goh, 2020). Conceived by Thaler and Sustein (2008), nudging rose to prominence for governments through the years. Besides promoting public health, nudging is utilized by policymakers to optimize decision making of citizens in different fields. Are these nudges sufficient in achieving the intended outcomes? This essay will examine the efficacy of the nudge theory to governments vis-a-vis another policy in attempting to achieve a socially optimal outcome.

The Nudge Theory

The nudge theory has been lauded for its efficacy in identifying and changing existing negative behaviours in people by understanding how they perceive information and make decisions. A ‘nudge’ can be defined as “any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives” (Thaler & Sunstein, 2008). It builds upon the theory on heuristics, and supplements Kahneman’s (2011) central thesis in Thinking Fast and Slow. Kahneman theorized System 1 and System 2 thinking where the former is fast and automatic while the latter is slow and reflective. Neoclassical economics presupposes the rationality of the homo economicus, who has perfect information, unbounded cognitive capabilities and optimizes decisions to achieve the highest utility. However, a human’s mental processing abilities are limited. When people face choices, System 1 thinking overrides System 2 thinking, producing hasty decisions, with outcomes determined by exigent environmental influences and a lack of conscious deliberation, commonly referred to as “irrationality”. However, with a nudge in the right direction people can select an option to maximize their own welfare even under limited time, information and cognitive abilities.

Successful Nudges

Nudging works to the advantage of the benevolent social planner, who can alter the choice architecture when presenting choices to people. Some policy choices to nudge include the usage of default options, framing, making social norms more apparent through information mechanisms, and to present information differently to the consumer (Low & Yee, 2012). Nudging healthier consumption choices through product placement in small retail stores was impactful. For instance, non-sweetened sugary beverages were 2.8 times more likely to be purchased when placed at eye level in a front cooler compared to coolers furthest away from the entrance in America (Wong, et al., 2015). This constitutes as a nudge as the healthier products were placed on areas that consumers tend to look at, but it does not restrict their choices to walk to the back cooler and purchase another drink. There were no subsidies for healthier alternatives so economic incentives remained identical. During the decision-making process, System 2 thinking (fast) overtook System 1 thinking (slow). Since the healthier drinks were more easily available, they were more salient to the consumer, and the drinks were purchased. Evidently, Thaler and Sunstein’s theory has the potential to be applied to both bureaucracies and businesses.

Limitations of the Nudge Theory: Nary a Change

However, nudging is not without its flaws. The very premise of the effectiveness of a nudge can be debatable as particular nudges are unable to enact lasting changes to behaviours. Its ability to direct behaviour according to the enactor’s desire has been the bedrock of its efficacy. However, even though a nudge’s ability to influence may go unnoticed due to its subtlety in influencing System 1 heuristic thinking, results may be awry. Factors such as the subject’s perceptiveness and malleability to influence as well as their position on certain decisions attenuate the effectiveness of nudge policies. Demonstrably, the Covid-19 public health crises have disproportionately hit countries whose leadership implemented nudge oriented policies which unfortunately became inimical to containing their outbreaks. The advisories merely encourage people to stay at home, and are nudges in the form of information provision that capitalises on the salience bias, influencing people to stay indoors (Möllenkamp, Maike, & Jonas, 2019). The anemic power of suggestion was exposed when multitudes of college students insisted on indulging in their Spring Break vacation in heavily populated areas in America (Noor, 2020). This is significant as it reveals how nudges that center on the supply of simple information or reminders are not sustainable strategies to change habits quickly, but reinforces pre-established beliefs that may run contrary to the intended policy of interventionist isolation.

From A Nudge to a Shove

Therefore, to secure changes in behaviour within a short span of time, we require another strategy – a shove – instead of just a nudge. This can manifest as paternalistic governance adopted for pertinent socio-economic problems instead of salience nudges. To overcome the aforementioned limitation of nudges, governments should aim to improve social welfare in the long run by correcting the flaws in people’s decision-making processes and outcomes. Intervention is required for a fundamental change in behaviour rapidly. Here, a deliberate “shove” is required to enforce a cardinal change in behaviour, as illustrated below.

The efficacy of policy implemented using shoves is juxtaposed to its nudge counterpart in the Covid-19 example above as shoves directly orchestrated society’s heuristic choice architecture by bypassing it entirely. Past the initial stages of the crisis, the Chinese government had swiftly imposed a formal lockdown banning all non-essential travel (Nair, 2020). Quintessentially a draconian authoritarian maneuver, the Central government’s mandate to impose a stringent lockdown contrasts other nation’s measures as a shove. Citizens were barred cordon sanitaire, veritably locked up within their own homes in some instances. Although decried by the international community for its blatant contravention of basic human rights, China had emerged from the pandemic in a much more favourable position than its democratic counterparts (Tian, 2020). The plunge in cases after the lockdown had been enacted stands testament to the impersonal efficacy of a shove mandate. Meanwhile, soft nudge policies in the US with reluctance to impose a nationwide lockdown have seen infection numbers careening past China, despite the latter’s initial head start (Bergengruen, 2020). In crises, immediate changes are necessary to prevent an exacerbation of said crisis, hence a shove is required to disambiguate any potential aberrant behaviour that a less imposing nudge might permit.

Limitations of a Shove & Its Applicability

However, there are more complex moral and ethical implications of a shove as opposed to a nudge. A shove would be outrightly paternalistic, while nudging is a form of liberal paternalism where choices are still preserved for people to decide. However, such coercive restriction and interference of an individual’s liberty for his own good could still be morally acceptable. Whether a shove is morally permissible also depends on the government’s magnanimity with potential for autocratic policies to be misused for the politician’s personal gain. A dilemma arises as the arbiter of the law, the government, is not infallible. To resolve this, we advocate for shoves to be used only for exigent socio-economic problems which undermines the welfare of the majority where the state is the most effective influence. Therefore, shoves are situationally recommended in emergency situations where it warrants immediate government intervention. Otherwise, under other circumstances, the advantages of a nudge and its applicability are more pronounced, hence would see greater use over shove techniques.

Evaluation: Government failure

Up till now, we have conducted an independent analysis of the different policies. However, the addition of the government as the executor of either the nudge or shove theory can complicate the net result to the public. First, the premise that governments know best for citizens is questionable. By involving themselves, the government presupposes the choice that maximises people’s or society’s utility. Unfortunately, governments can be steering individuals in the wrong direction despite their wealth of knowledge. The fallibility of governments occurred in the UK, where drivers were nudged to purchase diesel cars instead of petrol ones in consideration for health and environment (Weaver, 2017). Unfortunately, diesel cars were equally terrible. Despite the best intentions of the government, inaccurate information can propel the execution of successful nudges for the wrong reasons. Second, even if the government identified the right reason, the execution of nudging or shoving may be inappropriate. The path to a noble goal can be complicated when governments fail to utilize appropriate techniques for citizens and factor public interest. According to the principal-agent relationship, the implementation techniques must be seen to benefit the public’s interest to garner support (Soudry, 2007). For instance, when public officials nudge citizens through a default rule to donate to charities, the public is upset as they prefer to have the final decision over who to donate to (Sunstein, 2017). Similarly, shoves require the government to be tactful to account for the interest of citizens in order to gain compliance without risking a loss in support. Even when well-intentioned, blunders do materialize which limits the ability of any government to achieve a socially optimal outcome. However promising the nudge and shove theory is, mistakes are inevitable.

Conclusion

In essence, the nudge theory has its merits in achieving socially optimal outcomes through a non-intrusive government implementation. However, its limitations render it less effective to achieve crucial outcomes during a crisis. An efficient government can include both the nudge and shove theory in its arsenal of policy options to achieve desired objectives depending on the industry and environmental contexts.

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