How “Nudge” Inspired the Libertarian Paternalist in Me

A review of “Nudge”

Nudge: Improving Decisions about Health, Wealth, and Happiness

Prior to reading Nudge, I would not readily identify myself as either a libertarian or as a paternalist. A few chapters in, however, I found myself converted. Richard Thaler and Cass Sunstein’s logic is straight-forward and easy to follow. The authors do a great job of introducing key concepts (such as “libertarian paternalism” and “choice architecture”) early on, and then weaving them into every new topic.

Chapter One, “Biases and Blunders”, does a particularly good take-down of the concept of “homo economicus”. One of the key axioms of classical economic theory is that humans are rational: that when presented with perfect information, human beings will always make the perfect choice. Nudge does a great job of debunking the myth that people always make the best decisions. Studies have shown time and time again that the heuristics that humans use are consistently biased and lead to sub-optimal decision-making. Anchoring, the availability heuristic, the representativeness heuristic, status quo bias, and herd mentality all contribute to people making subpar decisions. The authors draw on the work of Daniel Kahneman in his ground-breaking book Thinking, Fast and Slow (also on my reading list) in describing the reflective (conscious) and automatic (gut reaction) systems of thinking.

Thaler and Sunstein argue that choice architects (the designers of systems in which people have to make choices) should adopt a system of libertarian paternalism to offset the negative externalities caused by human irrationality. Libertarian paternalism means respecting the right of an individual to choose (hence libertarian) while also giving them a “nudge” (hence the name of the book) in a particular direction (which is paternalistic). Rather than go through all of the book’s recommendations and arguments, however, I’m going to focus on two that stood out to me: 1. replacing the opt-in system of organ donation with an opt-out system and 2. replacing the current state-controlled institution of marriage with privatized marriage.

I frequently advocate for an opt-out (or presumed consent) system of organ donation. Currently, the United States operates in an opt-in system, meaning that if you die without having checked the consent to organ donation box on your driver’s license application, your organs will not be donated. This contributes to a massive organ shortage in the United States, which results in both a dangerous black market for organs and the death of over 8000 people every year. The libertarian paternalist solution to this is, as Thaler and Sunstein argue, to make the default “donate my organs” instead of “don’t donate my organs”. This way, more people take the most societally beneficial course of action, without anybody being forced into it.

The authors also point to marriage as an example of a field where the law needs to change to fit a new paradigm. I do not understand how marriage privatization falls within the purview of the book but I felt that Thaler and Sunstein made a great argument in favour of it. Marriage privatization — a policy favored by many libertarians — would maintain and expand the current legal designation of “civil union” (which gives legal protections to a couple without discriminating according to the sex or gender of either participant) but would abolish “marriage” as a state-controlled institution (instead relegating the ability to define what constitutes a marriage to private institutions). This would greatly expand the rights of homosexual couples, without restricting the freedoms of religious organizations.

At the end of the book they address counter-arguments from both those who favour more libertarianism (no nudges) and more paternalism (shoves instead of nudges). They do a great job of addressing arguments from both sides, without making a middle ground fallacy. By sticking to their values and putting each argument through their usual rigorous logical scrutiny, Sunstein and Thaler preempt many critiques that had not occurred to me. It was particularly rewarding to see authors who resist the urge to straw man their opponents arguments, but instead build them up properly before tearing them down.

All in all, I think Nudge is a stellar book. It is incredibly well written; both rigorous and easy to follow. The authors seamlessly tie in anecdotes, data, and theory, leaving the reader both convinced and informed. The authors tackle mundane and laborious topics such as Medicare Part D while managing to leave the reader wanting to learn more. I would highly recommend this book to everyone, but especially to those interested in economics, public policy, healthcare reform, or applied psychology.

If you have any questions or recommendations for books to read and review, feel free to comment here or shoot me an email at dannyleybzon@gmail.com. Also, check out my next review: The Confidence Game by Maria Konnikova. Thanks for reading and have a great day!