Too much nudging, not enough shoving

The case against behavioural economics being used in public policy ironically has been made by two prominent figures from within the field. I am referring to George Lowenstein and Peter Ubel who have argued in the New York Times against the tendency of taking the politically convenient route of applying nudges which are based on informational cues to improve decision-making to problems which are best solved by traditional tools from traditional microeconomics which use price signals such as taxes and subsidies.

Within the context of the debate over climate change in Australia, the two leading parties, Labor and the Liberals, have opted for "direct action" and balked at imposing a price on carbon immediately contrary to both their platforms in 2007. This is a prime example for how one set of policy tools have been substituted for another due to the inherent unpopularity of the latter with voters. One of the main discoveries made by behavioural economics is that in making lifelong decisions such as whether to make tiny sacrifices today in exchange for a large payout tomorrow, people tend to put a greater weight on the short-term pain.

If left to their own devices, people tend to procrastinate up until the last minute to deal with such questions. That is why savings has been less than adequate from a social standpoint in most advanced economies and why action on climate change has not been forthcoming from governments who are expected to heed the will of the people (who are fickle and irrational according to the theory). Nudge theory is conceived of as being paternalistic libertarian in the sense that it tries to account for human frailties in designing policy interventions without restricting individual choice or socialising the cost of such interventions. The question is whether or not nudging people is adequate in response to existential threats such as climate change or whether a shove is better at least initially to affect the calculations made by individuals over decisions that have long-term consequences.