Nudge, nudge

One of the most excruciating experiences of my life was to sign up for an introductory economics course. I think I lasted three lectures.

What got my goat was the assumption that one of the most basic predictors of decision- making was ‘economic man’ – the creature who ruthlessly cacluated and maximized his own self-interest. Such a man (I use the term out of deference to the more highly evolved female of the species) seemed to me to be a fiction, curiously absent from the pages of literature and history—subjects that were actually taught at university when I was there in the ’70s.

So it was with some sense of vindication that I began reading recent popular books on the subject of behavioural economics – the science that purports to marry economics and psychology and concludes that even when a person thinks he or she is acting rationally, he or she, is probably not. Perhaps the best-known author on the subject is Dan Ariely, who has written the intriguingly titled tomes Predictably Irrational, The Upside or Irrationality, and The (Honest) Truth About Dishonesty. The books are replete with descriptions of experiments (many conducted on hapless literature and history students who needed the spending money) showing how people consistently overvalue short-term gain over greater long term reward and the bird in the hand over the more cheaply available alternative.

The most enjoyable book I have read on the subject of behavioural economics is “Nudge,” the authors of which are Richard Thaler and Cass Sunstein. The authors show how the insights of behavioural economics can be deployed in public decisionmaking, principally around the ‘default choices’ that people are called upon to make. Two for-instances: an organ donation system that makes the ‘do nothing’ option one of consent to the harvesting of one’s organs, and a bias in favour of calling upon individuals to contribute to a state-convened group retirement savings program rather than saving on their own account.

Interestingly enough, the authors characterize their theories as “libertarian” in nature and not any kind of Orwellian social engineering. They are just ‘nudging’ people in the desired direction but leaving the door open for people to make other choices and, presumably, to suffer the consequences from which there is no public obligation to rescue them.

This is nothing fanciful. The British government has set up what it calls a “nudge unit,” or more formally, a “behavioural insights team,” which claims to have effected savings in the order of $461 million over three years against annual expenditures of just $1.8 million. A recent Globe and Mail report cited an example of a purported savings of $50 million triggered by the sending of court fine notices by text rather than traditional mail. The United States is also well into this game as well, according to a University of Toronto economist.

And Canada? Well, according to the Globe and Mail article, the Deputy Minister of Finance Michael Horgan has recently been briefed on the work of the nudge unit, and a spokesman for Finance Canada has confirmed that “the department is incorporating behavioural economics in recent policy moves.”

The alarm bells might begin to sound any time. Our “Harper Government,” for example, has been known to harbour a penchant for secrecy and its own self-interest, never mind countenancing a lapse in ethical niceties such as hoodwinking voters with robocall misinformation. Would it be any surprise if that government passed a regulation under the dark cover of night in which it transpires that ‘all Canadians are deemed to have voted for our Dear Leader unless they have dipped at least one foot into each of three oceans within a twohour period on August 1, 2013’?

Not surprisingly, the proponents of nudging have their defence prepared. Thaler says he’s not aware of any governments misusing his theories, and that nudging is taking place every day: “if you go into the supermarket, somebody’s figured out the most profitable way of having you walk through the store.” And a briefing note prepared by a Finance Canada staffer and obtained pursuant to an access to information request noted that “the opportunity for abuse on the part of policy makers is a valid concern; however, this concern is not fundamentally different from concerns over the abuse of traditional policy tools, PROVIDED THAT NUDGES ARE DESIGNED TO BE TRANSPARENT (my emphasis added).”

The only small bugaboo was that the sections of the memorandum dealing with “implications for Canada” and “next step” were not just nudged out – they were smudged out completely. This, apparently, is highly classified information that needs to be protected from the public, even though nudges themselves must, according to the briefer, be designed to be transparent.

Sort of leaves a sour taste, doesn’t it? Know what I mean, nudge nudge.

dsimmonds@wellingtontimes.ca