Sunday, 16 January 2011

Private versus public nudging

An excellent article from Mark Pennington:
Professor Thaler is an engaging speaker. His assertion that ‘libertarian paternalism’ is merely an extension of methods widely adopted in daily life is a beguilingly simple, yet ultimately dangerous one. According to Thaler since good mothers constantly attempt to ‘nudge’ their offspring in the ‘right direction’ then we should not worry about governmental nudging. Whether it is ‘fat taxes’ to discourage unhealthy eating induced by ‘weakness of will’ or compulsory enrolment in savings schemes to induce less ‘short-sighted’ and more thrifty conduct, people should learn to love a government that coaxes them towards what they themselves would recognise is in their own best interests.
Listening to Professor Thaler I was reminded of the claim made by many socialists in the past – Lenin being perhaps the most prominent – that since private firms routinely engage in ‘planning’ there should not be any concern about the state ‘planning’ on a society wide scale. Yet, as Hayek noted on numerous occasions, to recognise that ‘planning ‘ is an essential element of a progressive society tells us nothing about ‘who should plan’ and ‘for whom’. Likewise, to acknowledge that ‘nudging’ strategies may be an aid to effective decision-making in the context of limited rationality, tells us nothing about ‘who should nudge’ and ‘for whom’. It does not follow that since some nudging may be desirable that we should automatically favour governmental nudging. On the contrary, there are several reasons to suggest that ‘private’ nudging should in fact be preferred to the statist variety.
I recommend the whole article.

Jamie Whyte's 2008 article on the same subject is also superb.

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