Thanks so much for the response, Koen.
Adam Hill
11

Thanks for the quick reaction. Wisdom mostly comes from dialogue!

I note that you do not respond to my point about eliminating options, so I will assume that you agree with me there that doing so is not a nudge. :-)

With respect to the point that nudges are not without cost, I think there are two ways in which one could react to this.

The first one is to admit that it is all a matter of degree. After all, Richard Thaler himself summarizes nudging as ‘making it easy’ – this inevitably implies that whatever the preferred option is, it was relatively more difficult before the nudge intervention, and that whatever the non-preferred options are, they must be more difficult afterwards. Since difficulty requires effort to be overcome, and effort is a form of cost, nudges imply a cost. Grabbing the unhealthy dessert from an awkward place is therefore not cost-free.

There are two problems with this viewpoint:

  • The cost in question exists prior to the nudge as well: some dessert options are unavoidably a little more difficult to pick than others. So the nudge is not imposing a new cost, it’s just rearranging the choice architecture (and hence the cost) in such a way that the easiest, least costly option is also the preferred one.
  • If nudges are treated as cost-inducing interventions, it becomes difficult (if not impossible) to establish the distinction between what is a nudge and not a nudge. Is a charge of 5p for a plastic carrier in the supermarket a nudge? I certainly don’t think so, but many people would treat it as such. But from what level should we then stop referring to them as nudges and call them what they really are: disincentives?

The second way to look at it is to look at decision-making as the interplay between preferences and transaction costs. If you have a strong preference for something, then you’re likely to be prepared to incur a significant transaction cost (travelling across town for a limited edition T-shirt, sitting in front of a computer screen for hours to secure tickets for a concert, that sort of thing). But this is not where nudges apply: they apply where preferences are weak, and where transaction costs are so low as to be no more than a bit of friction. In this grey area, just a little tilt in the other direction of the playing field makes people flip from one option to the other. I don’t think it is correct to treat these minor modifications in the choice architecture as ‘costs’ – painting patterns on a wall to nudge people in one direction rather than the other does not impose a cost to those who really want to go in the opposite one; and putting the donuts further back than the bananas doesn’t really impose a cost on those who really prefer a donut.

So such interventions, which do not eliminate or materially tax or subsidize options, but which rearrange the choice architecture, do exist, and are bona fide nudges.

Upping the price by 30% (or even 0.5%) is not such an intervention in my view.

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