From a Nudge to a Shove? Will Behavioral Economics Become a New Form of Coercion?


Over at Neuroworld, Reason contributor Ryan Sager looks at two examples of applying behavioral economics to public policy. Here, he quotes from a Guardian piece by George Osborne and Richard Thaler (the latter is the co-author with Obama regulation czar Cass Sunstein of Nudge):

In Sacramento, an energy company has harnessed the insights of behavioural science, and prints information on energy bills that allows households to compare their energy use with similar homes. This simple change led to a fall in overall energy consumption as homes using more energy than their neighbours quickly adjusted their behaviour to fit in with the norm.

OK, that doesn't seem too bad, right? So here's another suggestion from Osborne and Thaler:

We are working together to formulate a series of public policies on issues ranging from the environment to financial regulation. Because the academic literature shows the importance of a way a decision is framed, the Conservative party is working with councils to replace Labour's bin taxes with schemes that pay the public to recycle. In Windsor and Maidenhead our pilot scheme has already increased recycling rates by 30%.

OK, that doesn't seem too coercive, does it? Though it may well be an incredible waste of money depending on how much it costs to pay people to increase recycling rates by 30 percent. The authors don't mention that tidbit in their col, alas, so any sort of cost-benefit analysis is impossible.

But then Sager notes what else our dynamic duo is up to:

The piece also recommends a seven-day cooling-off period for store credit cards, so that people don't wrack up huge debts in the heat of the moment at the checkout counter. They call this less intrusive than banning the cards or instituting a new tax — though, it still sounds pretty intrusive to these American ears (errr… eyes).

Read Sager's post here.

Yes, I'd say that's intrusive. And might well have all sorts of effects on business, when you can officially bring back any credit card purchase after a week. It's worth noting that many cards and stores have return policies already. Why not allow the private sector to work it out? Because, I assume, that wouldn't be as much fun for paternalists.