August 13, 2013

When ‘Nudge’ Comes to Shove

Sherzod Abdukadirov

Former Research Fellow
Summary

A recent news article revealed the federal government's plan to create a "Behavioral Insights Team," which would look for ways to "nudge" people toward supposedly better choices. It kicked off the debate over the potential benefits and pitfalls of nudges.

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A recent news article revealed the federal government's plan to create a "Behavioral Insights Team," which would look for ways to "nudge" people toward supposedly better choices. It kicked off the debate over the potential benefits and pitfalls of nudges.

On the upside, they promise to improve policy effectiveness while allowing consumers greater choice. On the downside, it can be misused for political purposes.  If the nudge policy is hijacked by special interests to push a narrow political agenda, it will become yet another tool for the government's intrusion into people's private lives and choices.

Nudges exploit the irrational quirks in human behavior to gently push people to make better decisions. For example, nudges can target our tendency to procrastinate in order to make us save more for retirement. Many people tend to put off retirement saving decisions and save too little as a result. Yet, if companies enroll their employees in a retirement plan by default, most employees stick with that choice. Those who wish to save more or less have the freedom to change the default choice. Ultimately, a simple change in the default option can help people save more for retirement. 

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