Nudging – the practical applications and ethics of the controversial new discipline.

By: Raphael Potter

Nudging is an extremely new and exciting mechanism that is seeing increased usage in both the politic and business spheres – given that, we as a society must think more deeply about nudging and the ethics behind it.

This past year, Richard Thaler, a professor at the University of Chicago, was awarded the Nobel Prize in Economics for his work in Behavioral Economics. While none of this sounds atypical, his work on the theory of nudging—on which he wrote a New York Times bestselling book—is quite radical and challenges many traditional assumptions taught in Economics classrooms.

The beginnings of the theory of nudging span back to the 1970s and are based on earlier work by Daniel Kahneman (Thinking, Fast and Slow). More recently, the term “nudge” was coined by Dr. James Wilk in 1995. Since then, the theory has risen to high levels of prominence after Professor Thaler and Cass Sunstein published Nudge: Improving Decisions about Health, Wealth, and Happiness. Following the meteoric rise of attention and scholarly work after the publishing of the book, countless governments and companies have begun incorporating the insights of nudging into their policy and decision-making strategies.

To properly understand the implications and consequences of Thaler’s theory of nudging, some of the fundamental ideas and terminology pertaining to the concept must be adequately defined and expanded upon.

To begin with, “nudging” itself must be explained. Nudges, as defined by Cass Sunstein—Coauthor of the book Nudge—are “interventions that steer people in particular directions but that also allow them to go their own way”. Furthermore, “To qualify as a nudge, an intervention must not impose significant material incentives (including disincentives). A subsidy is not a nudge; a tax is not a nudge; a fine or a jail sentence is not a nudge. To count as such, a nudge must fully preserve freedom of choice. If an intervention imposes significant material costs on choosers, it might of course be justified, but it is not a nudge.”

One of the important points to note in Sunstein’s description of nudges is that for something to be truly considered a nudge it must still allow for free decision making on the part of the actor being nudged. Thereby, nudges are distinct from other forms of government intervention—specifically regulations. Regulations are restrictions on behavior used to force or coerce individuals to behave in a way that the government has approved of; nudges, on the other hand, act by virtue of positive feedback loops or by way of inertia. Rather than forcing people to behave a certain way by threatening to punish them, legislators can use nudges to etch out a figurative landscape that will promote certain behaviors over others whilst still allowing for “free will” per say.

At this point it is worth clarifying, as will be further expanded upon, that nudges are not merely used by governments as alternatives to subsidies or taxes—rather, nudges are also being used by institutions ranging from massive corporations to university cafeteria planners to employers all around the globe. The unifying factor amongst these various actors is the role they play in nudging, specifically as far as they are the party actively structuring a given situation using nudges. Formally, the party designing an environment using nudges is known as the choice architect. These choice architects can be governments looking to change people’s behavior while driving, or, alternatively, they can be more benign parties like supermarkets that are attempting to increase sales of certain items.

People make hundreds of decisions on a daily basis and are often woefully unaware of the various factors at play influencing how and why they make their decisions. Nudges are a very often overlooked component of one’s routine decision-making process. Take, for example, going to eat in a cafeteria. One of the most famous examples of nudging mentioned in Thaler’s book is that of children choosing unhealthy foods when eating in school cafeterias, a dilemma many schools have been trying to address. Administrators at a specific school had been brainstorming and attempted implementing different solutions to change student’s eating patterns such as banning the unhealthy foods, subsidizing the healthy foods, etc. Alternatively, a solution that was proposed was to move the healthy foods to eye level and make the unhealthy food somewhat out of reach—the subsequent changes were astounding. In a similar case at a high school in New York City, changing the container that fruit had been hanging from and then adding an additional light to shine on the fruit increased the sales of fruit by 54% percent merely one week after the nudge was implemented.

One of the most famous examples of nudging is the story of the urinal flies. The precursor for the urinal flies prop originated in the 1900s when a soldier noticed red dots near the drainage holes in urinals at his base. His observation was that the urinals with these red dots had significantly lower levels of spillage. This idea was then made mainstream when it was implemented by administrative members at an Amsterdamian airport. In this case, fake flies were drawn near the drainage holes in airport urinals. The results were once again shocking: spillage on the bathroom floor was reduced by 80%. The reasoning being, as explained by Thaler, is that men like to aim at things, so having a target to immobilize would be “fun”. Thus, the urinal flies encouraged men to be more accurate while in the bathroom—an exemplar case of the ability for nudges to engage people on a subconscious level.

Lastly, and likely of the greatest significance, many countries have started adopting a new system for organ donation: citizens are now assumed to prefer to have their organs donated. This switching from an opt-in system—in which people would have to opt-in in order to donate —to an opt-out system—in which they are assumed to want to donate their organs, but have to opt out of the system if they do not wish to—has led to tremendous increases in organ donation rates. The most prominent example of such is that of Spain. Spain implemented an opt-out system and now has an organ donation rate of 43 donors per million people—a rate more than double that of the E.U.’s average of 19.6 per million people and significantly higher than the U.S. rate of 26.6 per million people. Once again, it is important to note that citizens are not being forced to donate their organs and if they are against doing so in whatever capacity they can opt-out. The nudges have been highly effective in this case due to the inertia of the situation—simply put—most people are too lazy or do not feel strongly enough to opt out even though they’re fully capable and allowed to do so.

Despite the potentially beneficial uses of nudging policies, opponents have presented serious ethical and practical concerns. Firstly, many have taken issue with nudging to the extent that it is highly manipulative and “brainwashes” constituents. As opposed to laws—which are explicit by nature—nudging coerces people to behave in specific ways and prompts certain outcomes, and yet in doing so there is an implicit unawareness of the subtle prodding, or nudging, that is taking place.

It is worth further analyzing the difference between nudging and more conventional methods of government intervention. The typical relationship between citizens and the state is one in which citizens may consent to not violate laws ordained by the government, regardless of their philosophical beliefs about the validity of the law, so as to not be penalized. In this case, both parties, the state and the citizens, are aware of the dynamic at play: citizens may consciously and intentionally choose to abide by a given law even if they disagree with the underlying normative claim that the law is based upon. This is starkly different from a case that involves nudging, as in that scenario, citizens may choose to behave in a given way, thinking that they are acting entirely of their own accord, while they will, in fact, be making the decision as a result of governmental manipulation. The important distinction here is that decisions, especially those in which a person believes they’re doing so because choosing to do so makes sense, are self-reinforcing. A government manipulating its citizens into doing certain things is frightening, as it is allowing a government to shape the values of its citizens. Nudging poses a shift from a general perception of law to the underlying impact the government has on its citizens. Initially, there is an evident situation in which the government has the right to codify what it believes to be right or wrong and citizens can choose to follow these laws regardless of whether or not they believe these laws to be right or wrong. Then, the idea of nudging creates a situation in which the government decides what is right and wrong and prods its citizens into behaving in a way that conforms with the previously mentioned standard. By doing so, the government reshapes the way that citizens think about ethics and brainwashes them to some extent.

Secondly, there is the consideration of the integrity of the people subjected to the policies of nudging. Taking nudging to its hypothetical extreme results in a situation in which the freedom for autonomous adults to make personal choices—how much money to save for retirement, whether or not to take the stairs, etc—is now no longer truly their decision. Nudging techniques will only become more efficient as the academic research on nudging continues to grow. The prospect of a society in which people are constantly manipulated by large corporations or authoritarian governments to behave in certain ways while being completely ignorant of this exploitation is a legitimate concern for many people, even now.

Following from the previous point, there have recently been concrete examples that have raised red flags about the usage of nudging. Throughout the discussion thus far of nudging, most cases have been predicated on the notion that nudging will only be used in some utilitarian fashion to promote the well-being of an individual or of the constituents of a society. However, consider the possibility in which an amoral international conglomerate begins ramping up its use of nudging to promote certain behaviors that are, in fact, not in society’s best interest. There have been accusations levied against Uber, for example, claiming that it has used nudging in a way that has strong-armed its drivers into working dangerously long hours or working in areas that are not the most lucrative for them. There have been other cases in which betting platforms have identified consumers with the strongest inclinations for high-level risk-taking, prompting them with more high stakes and dangerous bets than their other customers—a maneuver that draws on people’s psychological weaknesses and uses nudging as a perpetual marketing and manipulative strategy for a company to earn higher profits.

Nudging, like other mechanisms in the free market, is amoral—it is neither good nor bad. The notion of nudging and the changing face of economics, one that is increasingly incorporating behavioral economics, is here to stay. Nudging will be an increasingly prominent strategy taken by various agents in our world. It is important that we as consumers understand what nudging is and are able to properly identify who is attempting to nudge us so as to make better-informed decisions.

Works cited