Misjudge A Nudge And It Might Not Budge — Spontaneous Order
But if it fudges, get ready for grudges.
Ask not what your country can do for you; ask what you can do for your country.’
While the latter clause of JFK’s now-immortal line rouses and rivets the dullest of hearts, the president clearly dodged a bullet on the former (too soon?).
The question “what can — or rather, should and shouldn’t — your country do for you” has aeons of political, philosophical and economic disagreements to its name. What the government can, or rather should be able to do is fundamental to the very definition of State, People and Society.
Modern libertarian politics advocates restricting government interference only to where the free market fails. With the evolution and subsequent incorporation of behavioural economics in policymaking, a new market failure is recognized. “Behavioural market failures” refer to the irrational blind spots in people that lead them to suboptimal outcomes. The government, here, has two alternatives to achieve the desired outcome. It can issue a direct regulation/ban (a “shove”) or introduce a policy (a “nudge”) that would merely hint at the desired outcome.
The nudge, as a policy tool, has risen to popularity for its discretion. It simultaneously protects the individual’s autonomy whilst getting the job done. The success of the UK’s “Nudge Unit” has prompted governments across the world to innovate. In keeping with the 2018–19 Economic Survey’s recommendations, the NITI Aayog has a tentative idea of setting up a behavioural insights group in the works. In fact, Prof Ramit Debnath of Cambridge encourages the same. For a country as large and diverse socially, religiously, and linguistically, a nudge-based policy can incite results ubiquitously. Nudges can prove to be universal in their approach, barring any demographic impediments, especially literacy. Yet, as seductively simple and clever as it may sound, the reality leaves much to be desired.
A recent study by Queen Mary University of London, analysing 65 articles, published between 2008 and 2019, revealed a total of eight types of failures in nudge-based policies. These include nudges that are “confusing” or based on inaccurate information or just produce no result at all. A prominent kind is the “backfire”, when the nudge is, conversely, counterproductive. This becomes especially critical, considering the cost — both in terms of money and time — of testing and implementing these policies. The study highlighted the significant failures in attempting to alter social behaviour, such as encouraging tax compliance, charity donations, pro-environment behaviour, and healthy life changes.
In part, these failures can be understood by the obstinacy of certain social habits. Kahan (2000) describes this phenomenon as “sticky norms”. It is observed that when accosted with cases that are sensitive or societally taboo (such as rape, sexual assault, or domestic abuse), a hard “shove” does not work. Having a strict sentence only deters jurors from convicting the accused due to the stigma of the issue. However, when replaced by a “nudge”, the effect was worse. A lenient sentence was perceived as the State is not only indifferent but also encouraging of such criminal behaviour: a “nudge” becomes a “sly wink”.
The case reveals an interesting relation between law and societal norms. It is society’s idea of morality and judgment that birth its legal structure. But, if you reverse the causality, the nudge cannot budge one’s biases.
Nonetheless, biases persist on the individual’s as well as the State’s end. Policies are, after all, devised by very real, very much fallible people which have their own blind spots. Frederic Bastiat called it the “unseen” effects of policies. A most glaring example would be the maternity leave policy. The policy intended to not make a woman choose between starting a family and building a career. However, it backfired as most companies saw the mandatory maternity leave as an additional cost. It not only dissuaded them from hiring more women (irrespective of their family plans) but also justified paying them less than their male counterparts, citing their lesser productivity.
Other policy decisions also have notably gendered (negative) effects. Another infamous case is how health-targeting policies can lead to disastrous consequences. Although well-intentioned, government health propaganda in the US began to be seen in poor light. Instead of fitness, it came to be interpreted as promoting “slimness”. Especially since mainstream beauty and media industries (such as advertising) actually peddled the “thin beauty ideal”, the policies became associated with the same. In effect, these policies only fuelled body-image issues, promoting anorexia and body dysmorphia, instead of wellness, amongst young women. Then there are paternity and period leaves. Feminist economics is rife with many such instances.
Yet, the crux of the problem with nudges is the nature of nudges themselves. A nudge is an instrument to simply prod an individual towards a certain outcome by framing their choice of architecture. Fundamentally, it isn’t normative in nature — it suggests, not sermonizes. Two obvious issues become apparent. First, it is only useful in the short-term. Repeated use of a nudge can make an individual immune to it, as is in the case of cigarette packets.
The second concern is the need for a nudge at all. The notion that people are unable to make the right choice by themselves, and need to be directed by their Big Brother government, is patronizing, at best. Despite its “soft” nature, nudge-based policy approaches are ultimately rooted in a paternalistic state. The nudge only gives it a free pass under the guise of autonomy in libertarianism. Sin taxes present the darker side of nudges. For instance, the ex-New York mayor, Michael Bloomberg, was met with heavy criticism on his ban of sodas in containers larger than 16 ounces.
It opens a Pandora’s Box of questions: How is the right outcome decided? Who decides which areas require nudging? And how much punishment is enough?
All in all, knowing how unpredictable, fallible, and arbitrary nudges as a policy device can be, the bottom line is: is it really worth it?