Sunday, April 20, 2008

Nudging People in the Right Direction?

I'm still a bit skeptical but on its face of the idea of "libertarian paternalism" makes sense provided all the options are presented clearly. The authors of Nudge have written an editorial in the LA Times. The basic premise is this: we make decisions based on how information is presented to us and how choices are structured. So from a public policy perspective, the authors make the argument that those who provide services should structure the "beneficial" ones in such a way that buyers must opt out and make it more difficult to choose inertia versus making changes that are presumably good for them:

We find ourselves these days mired in political battles that pit laissez faire capitalism, with its reliance on unrestricted free markets, against heavily regulated capitalism, which favors government mandates and bans in an effort to ensure "good" outcomes. But this opposition is false and misleading. Any system of free markets will include some kind of choice architecture, and that means libertarian paternalism can offer a real "third way" around the battleground.

The most important social goals are often best achieved not through mandates and bans but with gentle nudges. In countless domains, applying libertarian paternalism offers the most promising alternative to the tired skirmishing in the increasingly unproductive fight between the left and the right.

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