Do the Ends of Nudge Policy Justify the Means?

What difference can a suggested contribution make for your retirement? In 2016, the United States’ “Thrift Savings Plan” included a recommended contribution rate, or ‘anchor rate,’ in its email messaging to the plan’s participants. This relatively low-cost nudge policy led to more than $1 million in new contributions in one month alone (National Science and Technology Council, 2016).

Critics of nudge policy argue that nudging infringes upon volitional autonomy, the freedom to act upon one’s own interests and values. However, proponents assert that nudge policy is a freedom-preserving, cost-effective, and evidence-based tool essential to every policymaker’s arsenal. First coined by Cass Sunstein and Richard Thaler, nudging aims to improve an individual’s decisions by changing their ‘choice architecture’, or structure of presentation of options. This alteration embraces “means” paternalism, a framework Sunstein analogizes to a GPS, “you can ignore what the GPS says and try your own route.” On the other hand, “ends paternalism” acts as a GPS steering “people toward a destination that is not their own.” Nudging therefore does not change one’s “menu” of options, rather it alters the way these options are presented.

In their recent paper, Andreas T. Schmidt and Bart Engelen present several arguments for nudge policy: nudge programs are cost-effective, can be tested through randomized control trials, and endorse evidence-based decision-making in public policy. They point to multiple studies which demonstrate citizens are more likely to accept nudges than traditional “carrot” and “stick” approaches, e.g., taxation and fines. Since interventions do not change or remove an individual’s options or significantly alter economic incentives, nudges respect freedom of choice.

The authors contend nudging is inevitable since no method exists to “neutrally” frame decisions. By refusing to design optimal choice environments, a critic of nudging is disregarding the suboptimal choices individuals make in the absence of nudges, such as postponing saving for retirement. Does nudging violate freedom of choice then? The definition the authors provide of nudging renders this argument invalid, as nudging should not compromise external choices or alter economic incentives, rather it should change the decision-making environment. If an individual is automatically enrolled in a retirement plan, they still have the ability to opt-out of the arrangement.

But how do policymakers know what is in the nudgee’s best interest? Schmidt and Engelen point out that the argument applies to all policy tools and is tangential to the slippery slope reasoning of excessive paternalism. In less clear cases, to ensure nudge policy goals and people’s interests are aligned, nudging must be transparent, and subject to democratic accountability and control. Government nudge units like the United Kingdom’s Behavioral Insights Team achieve transparency through online project publication. However, when nudging is purposefully discreet, such as in the private sector, misaligned goals emerge.

Private entities, like grocery stores, systematically take advantage of human irrationalities by using welfare-reducing choice architectures, which may lead to impulse purchases. Placement of palatable but low-nutrition foods in high prominence locations like check-out lanes is positively related to their purchases (Kerr et al., 2012). A 2017 study found that attaching “traffic light” labels, that is, red labels to unhealthy food products and green labels to healthy food products, reduced consumer intake of calories, total fat, and sodium (Emrich et al., 2017). In grocery store environments replete with colorful and enticing packaging of unhealthful foods, indicative labels provided consumers with the means to achieve a healthy lifestyle. Public policy nudging aims to correct unoptimized environments by creating a match between decision-making propensities and choice environments.

Critics also argue that nudging fails to address socioeconomic causes of social ills, and instead imposes responsibility onto the individual. On the contrary, nudging may combat structural disadvantages by providing disadvantaged groups with better choice environments. For example, sending parents and students personalized text messages about key tasks for college matriculation has shown to combat “summer melt,” a phenomenon in which up to 30% of college-accepted low-income students drop out of college the summer prior to matriculation (Castleman & Page, 2015).

Though nudging is not a panacea, it can be a viable alternative and complement to structural reform. Schmidt and Engelen caution that it is imperative to conduct ethical analysis case by case. In other words, implementing an automatic organ donor enrollment policy is not the same as playing classical music to calm public transport passengers. Despite the ongoing debate on its ethics, nudging has grown in popularity as a policy tool and is a testament to the increasing consideration of behavioral interventions in public policy.

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Castleman, Benjamin L., Lindsay C. Page. “Summer nudging: Can personalized text messages and peer mentor outreach increase college going among low-income high school graduates?” Journal of Economic Behavior & Organization, Volume 115, 2015, Pages 144-160, ISSN 0167-2681, https://doi.org/10.1016/j.jebo.2014.12.008.

Emrich, Teri E., Ying Qi, Wendy Y. Lou, Mary R L’Abbe. “Traffic-light labels could reduce population intakes of calories, total fat, saturated fat, and sodium.” PloS one vol. 12,2 e0171188. 9 Feb. 2017, doi:10.1371/journal.pone.0171188 .

Executive Office of the President National Science and Technology Council. 2016. Review of Social and Behavioral Sciences Team 2016 Annual Report. United States Government. https://sbst.gov/download/2016%20SBST%20Annual%20Report.pdf.

Kerr, Jacqueline, James F. Sallis, Erica Bromby, Karen Glanz. “Assessing reliability and validity of the GroPromo audit tool for evaluation of grocery store marketing and promotional environments.” J Nutr Educ Behav. 2012 Nov-Dec; 44(6):597-603. doi: 10.1016/j.jneb.2012.04.017. PMID: 23140564.

Sunstein, Cass R. 2018. “Misconceptions about nudges.” Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 2(1), pages 61-67, March.

Benartzi, Shlomo, John Beshears, Katherine L. Milkman, Cass R. Sunstein, Richard H. Thaler, Maya Shankar, Will Tucker-Ray, William J. Congdon, Steven Galing. “Should Governments Invest More in Nudging?” Psychological Science, 2017; 095679761770250 DOI: https://doi.org/10.1177/0956797617702501.