Jason Furman's Reviews > Nudge: The Final Edition

I was very familiar with most of the ideas in Nudge from reading many of the underlying papers that Cass Sunstein and Dick Thaler draw on and that they themselves wrote plus from working in public policy and lots of conversations. But I had never read the actual book and thought I should finally get around to it.

I can see why it was such a hit. It is a true joy to read. The authors enthusiasm, humor, good intentions, and personalities show through, including the many anecdotes about both of them that are used to illustrate their points. It also does a delightful job of wearing its erudition lightly while breezily covering a wide range of behavioral economics, public policy and deeper dives into a few discrete public policy areas (including retirement savings, organ donations and climate change). Aficionados of this area will not learn a huge amount new but that is partly because of the success of the authors in conveying the ideas in so many ways.

As a matter of public policy or company behavior there is little downside to the Nudge approach. The authors are very clear that Nudges can and are used both for good and for bad, they’re not automatically good. Sure libertarians worry about a slippery slope to something more like a shove while liberals worry that it will turn into a substitute for times when shoving is truly necessary. But choice architecture is unavoidable, it should be done intentionally.

The bigger issue is how large the upside is. The authors are very enthusiastic about the upside and cite specific research and examples to back that up. I remain somewhat less convinced. The only truly large intervention in the economic space is automatic enrollment (and sometimes escalation and investment) in 401(k)s. Of the major economic policy developments in the last decades, including the Affordable Care Act, various fiscal plans, evolution in antitrust, etc. etc., Nudging takes a backseat to mandates, subsidies, and taxes. This is not a criticism of the approach, see the previous paragraph, just a sizing of its consequences.

Finally, I wished the book did more to explore some of the difficult cases and delineate where nudges are appropriate and where other remedies are needed. Some of this comes through, particularly in the very subtle, thoughtful and persuasive discussion of organ donation (they’re in favor of “prompted choice” that encourages and makes it easy for people to opt in rather than “presumed consent” that people can opt out of) and climate change. But it never systematically enunciates the principles that tell policymakers when to use what tool. And it only addresses issues where the behavioral mistake people are making is consistent with social goals (e.g., people eat more than they want to, nudging them can help save them money while helping society) but does not address the harder cases where they are not aligned (e.g., how to do automatic enrollment in health plans for young healthy people when they might want to select a plan that is good for them but society would rather they default into pooling with sicker people).

The book is labelled “Final Edition,” which the authors describe as a commitment device to avoid doing another edition. But whether or not they do they both have many, many more contribution in lots of other forms—so maybe we’ll even get more medium- and large-sized interventions. Until then it is well worth being intentional about getting even the smaller ones right.