TY - JOUR

T1 - Review of Cass Sunstein, Why Nudge: The Politics of Libertarian Paternalism, New Haven/London: Yale University Press, 2014.

AU - Corrales Compagnucci, Marcelo

AU - Jurčys, Paulius

PY - 2016/4/26

Y1 - 2016/4/26

N2 - On 15 September 2015 President Obama signed an executive order which directs US federal agencies to incorporate behavioral and social sciences into their policies. This idea to give greater weight to behavioral considerations in shaping government programs has been popularised by Harvard Law School Professor Cass Sunstein, whose main proposition is that improved choices and information disclosure could softly nudge citizens to make better decisions, improve welfare, and enhance efficiency of government.Sunstein's Why Nudge? The Politics of Libertarian Paternalism (Why Nudge?) is one of several recent attempts to offer a fresh approach to the role of government. This book is based on Sunstein's personal experience gained while serving as an Administrator of the White House Office of Information and Regulatory Affairs between 2009 and 2012. Why Nudge? is a follow‐up work to his best‐selling book Nudge (written with Richard Thaler and first published in 2008 by Penguin). The notion of nudging has not only become an increasingly discussed subject in the academic literature; a great variety of measures nudging people to make choices that are supposed to enhance their welfare are implemented in public and private sectors in various countries. Probably one of the most humorous real‐world illustrations of a nudge are urinals at Amsterdam Schiphol airport with images of a fly just above the drain. The image of the fly was intended to prompt men with a target at which they would aim. The urinal experiment showed ‘spillage’ on the bathroom floor was reduced by 50 to 80 per cent.Sunstein begins his book Why Nudge? by highlighting the fact that our daily decisions are inadvertently contingent on a ‘choice architecture’ that individuals fail to recognise. He gives the example of a cafeteria where a ‘choice architect’ decides the arrangement of the salad bar, hamburgers, muffins and coffee. Placing salad at the entrance, easily visible and accessible, increases the likelihood that customers will take the salad first as a healthier choice. Sunstein explains that the notion of choice architecture encompasses various dimensions. For instance, individuals’ welfare could be increased by default double‐sided printing, automatic enrollment in pension savings plan or customised reminders about deadlines and unfinished procedures to qualify for a student loan. The essential idea of choice architecture and nudging is to help people to make good decisions without coercing them to make any particular choice.Many of the insights about choice architecture are rooted in behavioral economics. Breaking from conventional law and economics, behavioralists emphasise the bounded rationality of individuals and the notion that people tend to act irrationally and can be overly optimistic. In the first chapter of Why Nudge? Sunstein outlines Kahneman's account of human psychology according to which there are two ways of thinking: ‘thinking fast’ (System 1) and ‘thinking slow’ (System 2). System 1 is fast, emotional, impulsive, and difficult to control, whereas System 2 is slow, reflexive, measured and consciously monitored. System 1 operates automatically, effortlessly and helps answer questions such as 2+2, while System 2 is more flexible, consciously monitored and is directed to more difficult tasks such as answering 567x18. Sunstein suggests that earlier findings about the patterns of human thinking are crucial, considering how such cognitive decision‐making processes could be improved in order to enhance individual welfare.Why Nudge? essentially focuses on whether government may legitimately use various nudging techniques and whether this could be seen as a kind of paternalism. On the normative level, Sunstein tries to challenge John Stuart Mill's ‘harm principle’, which maintains that individual actions can be constrained only when there is a risk that harm will be inflicted on others. The harm principle is justified on the ground that individuals know better what is good for them. It is also argued that governments do not have sufficient information and resources and should therefore abstain from intervention. Sunstein refers to this line of reasoning as an ‘epistemic argument’ and suggests that it is sometimes wrong. He goes on to argue that in some instances paternalistic interventions are desirable especially where people are likely to err and it is necessary to provide the means for improved decision‐making.What should the government do when people are procrastinating or are likely to harm themselves? Assuming that some government intervention is desirable, Chapter 2 provides a taxonomy of different types of paternalism. One of the criteria for distinguishing types of government intervention relates to the imposition of material costs on individuals. Sunstein refers to ‘hard paternalism’ in situations where individual choice is coerced by the government, whereas ‘soft paternalism’ denotes a situation where government intervention imposes very little or no cost (ie, where a person is free to choose the form of action). Another distinction is between means and ends paternalism. Means paternalism refers to interventions that help people choose the best means to reach desired goals. A classic example is a GPS system which helps find the shortest or cheapest route to the individual's destination. Means paternalism is justified and desirable because it does not override individual freedom in deciding how to reach a desired destination. However, measures intended to change end‐destinations are thought to be too intrusive to a person's autonomy and are therefore unjustified.In Chapters 3 and 4, Sunstein guides us through arguments by those who oppose government intervention, nudging, and autonomy. He criticises welfarist objections for failing to take into consideration the fact that most public policy decisions are already made and individuals have only a modest ability to control the exercise of those underlying choices. Furthermore, welfarists fail to acknowledge the empirically proven likelihood of error in decision‐making. Those who object to paternalism by arguing that people can learn from their mistakes should note, in turn, that nudges cannot be avoided. In fact, nudges and default rules are everywhere and help people navigate an information‐overloaded world. Sunstein advocates for a choice architecture, which he labels libertarian paternalism: individuals are encouraged to make active choices, which helps to solve the shortcomings of a much criticised, one‐size‐fits‐all approach. Public choice problems should not be used as an all‐purpose bludgeon or a trump card because it is possible to empirically identify cases in which people are better off if government acts paternalistically. Empirical findings help craft government policies grounded on cost and benefit analysis.Preserving individual autonomy is one of major points of debate. In Chapter 4, Sunstein introduces freedom of choice as a category independent of welfare considerations. On that view, all forms of paternalism endanger individual dignity and liberty. Such a view is juxtaposed with a ‘thin version of autonomy’, where freedom of choice is just one of the ingredients of welfare. This thin view does not seem to run counter to the use of active choice mechanisms, nudges or default rules. On the contrary, the paternalist actions may lead to welfare gains that are greater than the welfare loss. People may feel frustrated to discover that certain decisions had been already made for them. Hence, it is important to leave an option to revisit those decisions if people do not like them. In this manner, choice architecture promotes, rather than undermines, autonomy; choice architecture saves time and enables people to focus on what really matters to them.In the last chapter of the book, Sunstein elaborates on three separate concerns related to soft paternalism. First, the government is usually accountable for the measures it implements and one of the essential safeguards of democracy is transparency. Some economists have expressed concern that soft paternalism is often situation‐specific and therefore hard to control. Sunstein seems to partially agree that behaviorally informed initiatives attract less attention from the public because they are less intrusive than direct mandates or commands. Hence, more deliberation in designing choice architecture is seen as a desirable improvement. A second question relates to the role of soft paternalism if the costs of reversing decisions based on nudges and default rules are very low. Sunstein agrees that in reality people fail to opt‐out, even if it is relatively easy to do; and that opt‐outs are more often merely an illusory safeguard of choice. Nevertheless, Sunstein convincingly submits that soft paternalism is less intrusive and dangerous than governmental mandates or bans. Third, Sunstein reiterates the finding that most of the decisions by individuals are based on System 1 and high risks of error are inherent in such decisions. This, however, does not mean that choice architects should overreach; instead paternalistic approaches should be focused on enhancing the welfare of individuals with the least possible harm.Why Nudge? provides a solid overview of key theoretical issues that arise in the context of nudging and libertarian paternalism. The book also deserves serious attention because it sets out a modern account of Mill's harm principle and the limits of individual autonomy. By adopting insights from behavioral economics, Sunstein contributes to the legal theory landscape and draws multiple projections for designing choice architectures that could help make people's lives better. The last chapter of the book refers to the need for increased transparency in government policies shaping nudges and underlying choice architectures. This is one of the areas in which much has yet to be accomplished in the United States and elsewhere.One senses that future debates on nudging, Systems 1 and 2, and paternalism will be related to the broader question of trust in governments and their design of choice architecture. Why Nudge? illustrates that most day‐to‐day decisions are made on the basis of emotions and biases (System 1). And yet, most people are unaccustomed to the idea that government should take paternalistic measures even if such measures increase individual welfare. Building trust in government and its policies to softly nudge people towards wiser decisions will certainly take time and require much prudent groundwork. Nevertheless, the proliferation of governmental agencies and various initiatives that aim to employ behavioral economics in real policy innovations establish the value of this book and provide inspiration for closely following the future directions of this flourishing area of regulation.

AB - On 15 September 2015 President Obama signed an executive order which directs US federal agencies to incorporate behavioral and social sciences into their policies. This idea to give greater weight to behavioral considerations in shaping government programs has been popularised by Harvard Law School Professor Cass Sunstein, whose main proposition is that improved choices and information disclosure could softly nudge citizens to make better decisions, improve welfare, and enhance efficiency of government.Sunstein's Why Nudge? The Politics of Libertarian Paternalism (Why Nudge?) is one of several recent attempts to offer a fresh approach to the role of government. This book is based on Sunstein's personal experience gained while serving as an Administrator of the White House Office of Information and Regulatory Affairs between 2009 and 2012. Why Nudge? is a follow‐up work to his best‐selling book Nudge (written with Richard Thaler and first published in 2008 by Penguin). The notion of nudging has not only become an increasingly discussed subject in the academic literature; a great variety of measures nudging people to make choices that are supposed to enhance their welfare are implemented in public and private sectors in various countries. Probably one of the most humorous real‐world illustrations of a nudge are urinals at Amsterdam Schiphol airport with images of a fly just above the drain. The image of the fly was intended to prompt men with a target at which they would aim. The urinal experiment showed ‘spillage’ on the bathroom floor was reduced by 50 to 80 per cent.Sunstein begins his book Why Nudge? by highlighting the fact that our daily decisions are inadvertently contingent on a ‘choice architecture’ that individuals fail to recognise. He gives the example of a cafeteria where a ‘choice architect’ decides the arrangement of the salad bar, hamburgers, muffins and coffee. Placing salad at the entrance, easily visible and accessible, increases the likelihood that customers will take the salad first as a healthier choice. Sunstein explains that the notion of choice architecture encompasses various dimensions. For instance, individuals’ welfare could be increased by default double‐sided printing, automatic enrollment in pension savings plan or customised reminders about deadlines and unfinished procedures to qualify for a student loan. The essential idea of choice architecture and nudging is to help people to make good decisions without coercing them to make any particular choice.Many of the insights about choice architecture are rooted in behavioral economics. Breaking from conventional law and economics, behavioralists emphasise the bounded rationality of individuals and the notion that people tend to act irrationally and can be overly optimistic. In the first chapter of Why Nudge? Sunstein outlines Kahneman's account of human psychology according to which there are two ways of thinking: ‘thinking fast’ (System 1) and ‘thinking slow’ (System 2). System 1 is fast, emotional, impulsive, and difficult to control, whereas System 2 is slow, reflexive, measured and consciously monitored. System 1 operates automatically, effortlessly and helps answer questions such as 2+2, while System 2 is more flexible, consciously monitored and is directed to more difficult tasks such as answering 567x18. Sunstein suggests that earlier findings about the patterns of human thinking are crucial, considering how such cognitive decision‐making processes could be improved in order to enhance individual welfare.Why Nudge? essentially focuses on whether government may legitimately use various nudging techniques and whether this could be seen as a kind of paternalism. On the normative level, Sunstein tries to challenge John Stuart Mill's ‘harm principle’, which maintains that individual actions can be constrained only when there is a risk that harm will be inflicted on others. The harm principle is justified on the ground that individuals know better what is good for them. It is also argued that governments do not have sufficient information and resources and should therefore abstain from intervention. Sunstein refers to this line of reasoning as an ‘epistemic argument’ and suggests that it is sometimes wrong. He goes on to argue that in some instances paternalistic interventions are desirable especially where people are likely to err and it is necessary to provide the means for improved decision‐making.What should the government do when people are procrastinating or are likely to harm themselves? Assuming that some government intervention is desirable, Chapter 2 provides a taxonomy of different types of paternalism. One of the criteria for distinguishing types of government intervention relates to the imposition of material costs on individuals. Sunstein refers to ‘hard paternalism’ in situations where individual choice is coerced by the government, whereas ‘soft paternalism’ denotes a situation where government intervention imposes very little or no cost (ie, where a person is free to choose the form of action). Another distinction is between means and ends paternalism. Means paternalism refers to interventions that help people choose the best means to reach desired goals. A classic example is a GPS system which helps find the shortest or cheapest route to the individual's destination. Means paternalism is justified and desirable because it does not override individual freedom in deciding how to reach a desired destination. However, measures intended to change end‐destinations are thought to be too intrusive to a person's autonomy and are therefore unjustified.In Chapters 3 and 4, Sunstein guides us through arguments by those who oppose government intervention, nudging, and autonomy. He criticises welfarist objections for failing to take into consideration the fact that most public policy decisions are already made and individuals have only a modest ability to control the exercise of those underlying choices. Furthermore, welfarists fail to acknowledge the empirically proven likelihood of error in decision‐making. Those who object to paternalism by arguing that people can learn from their mistakes should note, in turn, that nudges cannot be avoided. In fact, nudges and default rules are everywhere and help people navigate an information‐overloaded world. Sunstein advocates for a choice architecture, which he labels libertarian paternalism: individuals are encouraged to make active choices, which helps to solve the shortcomings of a much criticised, one‐size‐fits‐all approach. Public choice problems should not be used as an all‐purpose bludgeon or a trump card because it is possible to empirically identify cases in which people are better off if government acts paternalistically. Empirical findings help craft government policies grounded on cost and benefit analysis.Preserving individual autonomy is one of major points of debate. In Chapter 4, Sunstein introduces freedom of choice as a category independent of welfare considerations. On that view, all forms of paternalism endanger individual dignity and liberty. Such a view is juxtaposed with a ‘thin version of autonomy’, where freedom of choice is just one of the ingredients of welfare. This thin view does not seem to run counter to the use of active choice mechanisms, nudges or default rules. On the contrary, the paternalist actions may lead to welfare gains that are greater than the welfare loss. People may feel frustrated to discover that certain decisions had been already made for them. Hence, it is important to leave an option to revisit those decisions if people do not like them. In this manner, choice architecture promotes, rather than undermines, autonomy; choice architecture saves time and enables people to focus on what really matters to them.In the last chapter of the book, Sunstein elaborates on three separate concerns related to soft paternalism. First, the government is usually accountable for the measures it implements and one of the essential safeguards of democracy is transparency. Some economists have expressed concern that soft paternalism is often situation‐specific and therefore hard to control. Sunstein seems to partially agree that behaviorally informed initiatives attract less attention from the public because they are less intrusive than direct mandates or commands. Hence, more deliberation in designing choice architecture is seen as a desirable improvement. A second question relates to the role of soft paternalism if the costs of reversing decisions based on nudges and default rules are very low. Sunstein agrees that in reality people fail to opt‐out, even if it is relatively easy to do; and that opt‐outs are more often merely an illusory safeguard of choice. Nevertheless, Sunstein convincingly submits that soft paternalism is less intrusive and dangerous than governmental mandates or bans. Third, Sunstein reiterates the finding that most of the decisions by individuals are based on System 1 and high risks of error are inherent in such decisions. This, however, does not mean that choice architects should overreach; instead paternalistic approaches should be focused on enhancing the welfare of individuals with the least possible harm.Why Nudge? provides a solid overview of key theoretical issues that arise in the context of nudging and libertarian paternalism. The book also deserves serious attention because it sets out a modern account of Mill's harm principle and the limits of individual autonomy. By adopting insights from behavioral economics, Sunstein contributes to the legal theory landscape and draws multiple projections for designing choice architectures that could help make people's lives better. The last chapter of the book refers to the need for increased transparency in government policies shaping nudges and underlying choice architectures. This is one of the areas in which much has yet to be accomplished in the United States and elsewhere.One senses that future debates on nudging, Systems 1 and 2, and paternalism will be related to the broader question of trust in governments and their design of choice architecture. Why Nudge? illustrates that most day‐to‐day decisions are made on the basis of emotions and biases (System 1). And yet, most people are unaccustomed to the idea that government should take paternalistic measures even if such measures increase individual welfare. Building trust in government and its policies to softly nudge people towards wiser decisions will certainly take time and require much prudent groundwork. Nevertheless, the proliferation of governmental agencies and various initiatives that aim to employ behavioral economics in real policy innovations establish the value of this book and provide inspiration for closely following the future directions of this flourishing area of regulation.

KW - Faculty of Law

KW - Nudge Theory, Cass Sunstein, Why Nudge?, Libertarian Paternalism

UR - https://onlinelibrary.wiley.com/doi/epdf/10.1111/1468-2230.12200

M3 - Review

VL - 79

SP - 533

EP - 536

JO - The Modern Law Review

JF - The Modern Law Review

SN - 0026-7961

IS - 3

ER -