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Behavioural Economics from a Moral Perspective: Is Nudging Ethical?

In our previous articles, we have shown that a choice architect, i.e. the person who organizes the context in which people make decisions, can alter individuals’ behaviour in a predictable way through utilizing so-called nudges. Although nudges are extensively used to induce people to save more, eat healthier, and rely on renewable energy sources, problems arise when one considers that nudges have a paternalistic aspect in that the choice architect decides what is good for the people, rather than allowing them to choose what is best for themselves. Accordingly, in this blog post, we will address the most common problems associated with behavioural policies from an ethical perspective and will strive to answer the question: How can choice architects know what is in the people’s best interest?


Do nudges interfere with freedom and autonomy?


Nudges are essentially built on the libertarian paternalism ideology, that is, the design of policies that push individuals towards better choices without limiting their freedom to choose. In his classic critique of paternalism, John Stuart Mill objects to paternalism through stating that it interferes with individual liberty. However, this critique is dependent on how liberty is defined. If we define liberty as an aspect of freedom, the ability to choose from available alternatives without having any restrictions, then coercion is the feature that would distinguish paternalistic policies from policies that aim at making people better off. In the canteen example, whereby healthy fruits were placed at the eye-level and cakes were placed in the back side of the shelves, the children still had the opportunity to choose chocolate cakes, they just needed to exert more effort to do so. In this vein, nudges do not appear to be morally problematic as they do not change nor limit the set of alternatives among which decision-makers can choose.


However, as per Hayek, liberty is a broader term than coercion or choice set; it also comprises autonomy – the command a person has over his or her own assessments and choices. There is a significant difference between what a choice architect does when he or she introduces fruits and salads to the school canteen, and when, owing to his understanding of innate psychological tendencies of people, devises a plan to promote individuals to consume a certain type of product. Although the latter intervention can induce people to consume more healthy food, it can also make people choose one option over another. From this perspective, nudges appear to be morally problematic as they diminish the extent to which individuals have control over their own actions. In this case, instead of reflecting their own evaluations, people’s behaviour reflect the tactics of the choice architect.


However, in many cases, regardless of whether there is a nudge, people’s choices will still be shaped by certain factors, i.e. a product will be placed at the eye-level in the canteen. Accordingly, as per Hausman and Welch, when choice shaping is unavoidable, it must also be permissible. In the nudge case, nudges help people to provide the means by which one’s own goals, such as having higher savings and not forgetting deadlines, are attained. This brings the question whether we should respect the non-autonomy of people who want to live more healthily but who cannot follow through or utilize nudges to help them actualize their goals. The latter appears to be more socially desirable.


Should choice architects let people err?


Adam Smith thought that adversity was the best school to develop the respectable virtue of self-command and experience-based learning. As nudges help people to avoid making errors in decision-making contexts for which they have incomplete or incompetent level of information to make the optimal decision for themselves, the cost of nudges may be that individuals forgo the chance to learn from their mistakes and therefore become reliant on them in the long-term. It might be the case that to warrant long-term success, one should let people make their own decisions while providing minimal aid, as nudging is similar to teaching a new-born how to run without teaching him or her how to crawl, creating the moral problem of infantilization in decision making.


Indeed, nudges are not always the best solution. In certain decision-making contexts where trial-and-error learning can happen, the choice architect has a primary reason to avoid nudging individuals. However, learning is most likely to happen when people get immediate, clear feedback subsequent to the engagement in a certain behaviour. In doing so, they would be able to create a causal link between their activities and the results they obtain, enabling them to adjust their behaviour in the desired direction. Alas, many of life’s most important decisions are not only infrequent but also have time discrepancy between costs and benefits. For instance, someone can continue to smoke for years without having any warning signs until symptoms of cancer arise, after which, modifying action will have a minimal impact. For these types of decisions, the delay in the required feedback might be too late to act, implying that individuals can indeed benefit from nudges.


How can choice architects know what is in the people’s best interest?


As choice architects effectively promote a certain type of behaviour, the question is whether the promoted course of action is in line with the decision-makers interest. Nudging is extremely effective when people’s ends are relatively clear, such as helping people to lead longer lives and increasing savings for retirement. However, when people’s ends are relatively unclear, a good criterion of judgment is proposed by Jean-Jacques Rousseau in his Social Contract doctrine. He postulated that although people differ in their interests, there exists a common interest, i.e. general will, on which all humankind can agree in principle, even though not all would wish to pursue it. According to his doctrine, the realization of general will is a deliberative means of seeking outcomes that satisfy the preferences of individuals and render the interventions as legitimate. Similarly, nudging aims to uphold the realization of the general will. As nudges account for the divergent private interests by keeping the choice set intact, one can assess whether behavioural interventions are in the best interest by questioning their alignment with the realization of the general will.This is the primary reason why the transparency test suggested by Thaler and Sunstein, the creators of nudge theory, is of utmost importance, since people, when communicated about interventions, are indirectly asked whether the proposed intervention conforms to the general will, which is their own will reflecting themselves in a rational fashion on their long-term interests.


References and Further Readings


Hausman, M. D. and Welch, B. 2010. Debate: To Nudge or Not to Nudge. The Journal of Political Philosophy 18(1): 123-136.


Hayek, F. A. 1960. The Constitution of Liberty. London: Routledge & Kegan Paul.


Mill, J. S. 1859. On Liberty. London: Longman, Roberts & Green.


Thaler, R. H. and Sunstein, C. R. 2008. Nudge. London: Yale University Press.



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