Richard Thaler and the uncertain future of ‘Nudge’
I remember being surprised when I read that the 79th Nobel Prize in economics had been awarded to Richard Thaler. And it’s not because I don’t like Thaler’s contribution to economic literature, constant, massive and extremely original since the 1970s. Rather, this award appears to be a ex post in addition to the prize awarded in 2002, when Daniel Kahneman received the communication from Stockholm (with Vernon Smith). Indeed, Thaler had been a young co-author of Kahneman, who – without being an economist himself – brought about a significant revolution by importing into “gloomy science” a number of breakthroughs in cognitive science. Significant biases in human decision making have been uncovered by this research stream, leading to the proliferation of tracking applications in several areas, from consumer consumption analysis and contractual choices to behavioral finance, and finally nudges as a means of gently directing individuals towards specific forms of behavior by engaging in an “architecture of choice”. In fact, the nudge was an inevitable byproduct of this earlier research, as well as of earlier contributions from “inside” economics, such as Maurice Allais’ early contributions against the “status of rationality” in 1950s; and neuroscience (in particular, Herbert Simon also in the 1950s).
Thaler’s contribution to this current of literature was fundamental, difficult to overestimate. Just think of the book Nudge he co-authored with Cass Sunstein, which became a bestseller in 2008 and one of the most cited and influential social science books in recent years. The popularization of behavioral economics in the form of relatively simple experiments paved the way for a successful era of direct implementation in policy making, as evidenced by Thaler’s own involvement with the Behavioral Insights Team (BIT ) and the creation of similar teams in many other governments. , including the United States. Thaler was the economic genius behind “nudge” as much as Cass Sunstein was the legal genius. Barack Obama and David Cameron were enthusiastic followers. For the first time, policymakers have begun to recognize the relevance of choice architecture as a means of promoting healthier decisions by individuals. It was, de facto, the consolidation of two areas of social science: marketing and public policy, where the first has been convincingly applied to the second. The same techniques that had been applied for decades by companies to gain the attention and willingness to pay of end users were now used in public policies, with a view to improving social welfare and the effectiveness of policies. .
But encouragement techniques, in addition to being barely new, quickly became controversial. First, whether “libertarian paternalism,” as Cass Sunstein brilliantly dubbed the approach, is really not an oxymoron, is still open to debate. At least two different forms of nudging have emerged over time: some nudging is aimed at helping individuals choose more desirable actions for themselves; while others direct people towards behavior that is believed to be better for the society, rather than for the individuals themselves.Examples of the first type include better signage of health-related information on food products, the myplate.gov approach to indicate how to achieve a balanced and healthy diet, opt-in privacy rules, or behavioral approaches to decisions. individual pensions and savings. The second type includes opt-out regimes for organ donors, or the choice of default options that prioritize sustainable solutions, including waste recycling. Conceptually, these are two different approaches: one aims to deflect individual decision-making, the other to steer individual decisions towards outcomes that are determined by government without reference to the individual’s own well-being. individual. On the first, Daniel Kahneman is probably the most influential contributor in the history of economics. The second is much more controversial: empirical literature reported by Sunstein himself has revealed that “nudgees,” those targeted by a given nudge, tend to be significantly affected only by the nudge they are hit with. ‘okay, and in a related vein, “if people are told that they are being pushed, they will react negatively and resist.” These aspects can influence the extent to which individual behavior can be significantly removed from its own path when pushing.
In addition, the mere notion of “nudge” has remained blurred over time, and has come to incorporate almost all forms of suggestion or individual decision support, including GPS navigation systems or backpacks. donkey, which hardly seem to correspond to the idea of architecture of choice. And while significant results have been shown by Sunstein and Thaler, and then by behavioral analysis teams in different countries for several experiments, the jury is still out on the effectiveness of these longer-term interventions. For example, while in the short term, changing the order in which foods are presented in a canteen could lead to increased consumption of healthy foods compared to junk food, it is not known whether individuals end up maintaining these new consumption choices over time, or just learn where. to find the food they wanted in the first place, neutralizing the nudge. Similar results have been demonstrated in the field of health care, for example in the fight against obesity. In a few areas, notably financial services and pensions, where ad hoc decisions are made today for a future outcome, behavioral economics has really shown it can make a difference.
Finally, with the advent of big data analytics and artificial intelligence, the possibilities for governments to entice individuals to engage in advanced choice (or code) architecture appear to be increasing exponentially. The use of automated decision-making processes and algorithms that provide suggestions to end users has been shown to be extremely effective in getting individuals to engage in areas other than public policy (e.g. Netflix’s recommendation engine explains up to 60% of the company’s revenue). Applied in public policy, the nudge can go “on steroids” in cyberspace, very often leading to uncontrolled political results and an excessive degree of end-user manipulation. Recently, Karen Yeung, professor at King’s College London, used the expression “hyper-nudges” to describe this phenomenon.. As Larry Lessig observed at the end of the 1990s, in cyberspace, “the code, not the law, determines what is possible”: and the code can incorporate countless nudges, making it difficult for end users to maintain a sense of reality or independence in a fully manipulated world. All the debate about fake news, echo chambers and filter bubbles on the internet is driven by the inevitability of pushing end users, whenever data-driven, AI-enabled algorithms are in play. One need only think of the recent US election to discover how algorithms used online can polarize political opinions and shape entire elections.
In summary, Richard Thaler’s contribution to behavioral economics over the past decades has been fundamental, enlightening and revolutionary. But the contribution of behavioral economics and the push to public policy is still unclear; and the application of incentive techniques in the digital economy today gives rise to more concern than hope. Against this background, it is hoped that future developments in behavioral knowledge will help shed light on how behavioral economics can be usefully used in cyber policy, transforming consumer protection and the architecture of choice into an exercise aimed at to empower end users. But isn’t that exactly the opposite of (hyper-) nudging?
© Originally published by CEPS on October 20, 2017
 See https://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2017/advanced-economicsciences2017.pdf
 See https://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2002/.
 See D. Kahneman, JL Knetsch and RH Thaler (1986), “Fairness and the Assumptions of Economics”, Business Journal, 59: S285-S300; D. Kahneman, JL Knetsch and RH Thaler (1990), “Experimental tests of the endowment effect and the Coase theorem”, Journal of Political Economy, 98: 1325-1348; and D. Kahneman, JL Knetsch and RH Thaler (1991), “The Endowment Effect, Loss Aversion, and Status Quo Bias”, Journal of Economic Perspectives, 5: 193-206.
 See M. Allais (1953), “The Rational Behavior of Man in the Face of Risk: Critique of the Postulates and Axioms of the American School”, Econometric, 21: 503-546 and HA Simon (1955), “A Behavioral Model of Rational Choice”, Quarterly Journal of Economics, 69: 99-118.
 CR Sunstein and RH Thaler (2003), “Libertarian paternalism is not an oxymoron”, University of Chicago Law Journal 70: 1159-1202. For a review, see K. Yeung (2012), “Nudge as Fudge”, Modern law review, 75: 122-148. doi: 10.1111 / j.1468-2230.2012.00893.x.
 See, for an elaboration, A. Renda (2011), Law and economics in the RIA World, Amsterdam: Intersentia.
 See CR Sunstein (2014), “Nudging: A Very Short Guide”, Consumer Policy Journal, 37: 583.
 See K. Yeung (2017), “Hypernudge: Big Data as a mode of regulation by design”, Communication and information society, Flight. 20, n ° 1, 22.05.2016, pp. 118-136.
 See L. Lessig (1999), Code and other laws of cyberspace, Basic books.
 See for example “Blue feed, Red Feed” of the Wall Street Journal, at http://graphics.wsj.com/blue-feed-red-feed/.