Nudge: Improving Decisions About Health, Wealth, and Happiness Paperback – February 24, 2009

There are two predominant beliefs about human nature and free will. One, which is popular among conservatives and libertarians, says that we are totally self-made, and have no one to blame, or credit, for our success or failure but ourselves.According to this view, anyone can be a John Galt or Howard Roark if they only try. Because of this, government should simply allow as much freedom as possible. That way, the worthy can rise to the top and the slackers will become virtuous or die off, either way making society better.The other view, common among leftists "intellectuals," says that humans are slaves to their genetics and environment. Thus, the only way to improve their lives is for the State to intervene and control them for their own good.Both of these views are nonsense. The truth, as it usually does, lies in between these two equally untenable extremes. We are free to make up our own minds as well as slaves to human nature and limitations. What we are and do is a curious amalgamation of both our choices and the influences that come our way.The authors of this excellent book admit this paradoxical truth, and use it as a foundation to create sensible public policies. Among the areas they address are school choice, retirement accounts, and healthcare. Their recommendations center around the idea that nudges in the right direction can assist people in making choices that will approve their quality of life.One idea they propose is changing the default option on 401 K sign up forms, so that one must opt out of using a plan. Currently the exact opposite is the norm. One must expend effort to join, yet do nothing to avoid participating.Theirs is a brilliant approach that will increase well-being while preserving freedom of choice. People will still be able to decline the best options. But, due to human tendencies like the "status quo bias," most of them will simply accept the default option, leading them to eat healthier, save money, and exercise more.Those who critique this book on ideological grounds are, IMO, in denial about their own natures. Ayn Rand's heroes are cardboard caricatures, as are the flesh-and-blood automatons that inhabit the wacky theories of the far left. This fine volume dispenses with both of those silly views. In their place, it offers a reality-based approach to enhancing the welfare of individuals and society. It gets my highest recommendation.

First some quick comments, then some longer ones:1) Anyone interested in the Social Sciences should get this. Parts of it are written as if the book were a guide to finance, but that was probably just a marketing ploy of some sort. The main thesis is really interesting and very refreshing for those interested in the somewhat stale and oversimplified "big vs. small government" debate.2) I read this right after Kahneman's "Thinking Fast and Slow." Both are extremely similar, but Nudge is more to the point and more organized. "Thinking Fast and Slow" was still brilliant though.3) All those reviewers who call this "manipulation" or some other "Big Government!!!" charge, I must say, probably didn't read the book. The authors address libertarian concerns multiple times, and with great consideration, throughout the entire book. Understanding what makes "libertarian paternalism" libertarian is an extremely important step in getting the authors' main point. Honestly, if anything, it made my political views MORE libertarian rather than less, so it's difficult for me to think of Nudge as a "defense of Big Brother" or some other right-wing nonsense.4) The only inconsistency I came across (and I mention this below) is that when they talk about being "anti-mandate," they really mean being against public or consumer mandates. However, many of their proposals do implicitly involve mandates on businesses though, such as requiring that air conditioner manufacturers install a light that would tell the user when the filter needs replacement (which would save a good amount of energy). I am not opposed to this whatsoever, but it's important to acknowledge that it's still a government mandate, so it's not as libertarian as it first seems. However, it's still more libertarian than other conceivable alternative mandates that could be placed on the public to use less energy.5) My take-away from the book: The authors spend a good amount of time describing ECONS and HUMANS, but not so much time describing why ECONS are so important for right-wing economists. This is also partly because authors' main objective, it seemed, was political. They describe their philosophy as "libertarian paternalism." They are libertarian in the sense that they (ostensibly) don't generally like the idea of the government "banning," "mandating," and "outlawing" economic choices, or making some economic choices extremely difficult for the consumer (for example if the government made all vehicles which get less than 20 MPG twice as expensive via taxes, and mandated that a consumer must wait 90 days before being able to register a low-MPG vehicle, whereas high-MPG vehicles could be registered immediately). However, the other part of their philosophy involves "paternalism"--a very dirty word to libertarians. The basic normative argument for paternalism is that the government has some role to play in guiding people toward better choices. In talking about "libertarian paternalism," they are saying that whatever the government does, it is going to have some effects upon the population, even if it is not explicitly trying to manipulate or persuade the public. So, instead, adopt smart policies (with predictable results) that guide the public toward a "good" direction, but allow individuals to opt-out if they wish. An interesting example they brought up involved organ donors. Turns out that there are some massive inter-country differences when it comes to the desire to donate organs. But is this because the people in each country have such massively different attitudes about it? No--the main variable is a simple one: Is the default option to donate, or not to donate? In the U.S., on our licenses, we have to check a box that confirms we want to be organ donors and, therefore, our default is that we are not donors. In other countries, the default option is that citizens are donors--but of course they are free to opt-out at any time.Bringing it back to the ECONS vs. HUMANS debate is what makes a simple example like this so mind-blowing (for me, at least). The crucial key to understand is that, to the ECON, it makes no difference what the default is. The ECON always knows what s/he wants--if s/he wants to be a donor, and the default is "No," the ECON would instantly change it to "Yes," and vice versa. Simple as that. But HUMANS, on the other hand, don't do this. HUMANS have a massive, statistically proven bias toward the default option and, as a result, which route the government decides to go ends up making a massive difference. If the government decides that it's probably a "good" thing if most citizens are willing to donate vital organs, the authors argue, then it should keep the default at "Yes" and allow people to opt-out. (Notice that if the government simply mandated that everyone donate their organs, it would be paternalism outright, not libertarian paternalism.) The book is essentially a collection of examples like this, where the authors wish to enact policies that result in a better society/economy while staying true to the libertarian paternalist ethic. (One place where I think they slip a bit, though, is that they are more inclined to support "regulations" on businesses--but these regulations are of course mandates, however much they don't want to call them mandates. When they say they are against mandates, they seem to be more against regulating average citizens and consumers than regulating businesses.)As I see it, the die-hard libertarian still has a valid argument to make. Basically, they can object to the nudge argument on purely political grounds, which would sound like this, "I don't give a crap if libertarian paternalism would result in a better economy or better society. The government has no right to--i.e., shouldn't--participate in manipulative policymaking." It's a fair political argument, but it doesn't cohere with the free-market argument, which states that free-market policies will actually result in a better economy. Nudge shows how free-market policies actually won't result in a better economy, in large part because the actors receiving, evaluating, and acting upon economic signals are HUMANS, not ECONS.For those interested, I wrote an article about this type of stuff (and long before reading Nudge or much else in the way of behavioral economics) called "Unmasking the GOP's Faith-Based Economics" available @Truthout.org