Nudge thyself: Economists have more to learn from the natural sciences if they are to claim a realistic model of human behaviour
You’ve come to a canteen for lunch: at one end of the counter, you see juicy fat burgers sizzling on a grill and, at the other end, healthy-looking salads. After a little hesitation, you choose the burger. “Cheese and bacon with that?” Well, why not?
Classical economists, perhaps uniquely among members of the human race, would assume you made your decision fully aware of the implications of your actions, that you weighed up those implications and came to the conclusion that, all things considered, the cheese and bacon burger is the better choice. But I for one am rarely so rational and frequently rue my failure to take the healthy option. Considering there are more than a billion people worldwide who are overweight, I’m guessing I’m not alone.
Some economists have realised this and, given the failure of classical models to predict the financial crisis, their young discipline of behavioural economics is now enjoying something of a heyday. They are convinced that accurate models and good policymaking require accurate approximations of real-life human behaviour. They therefore try to take into account our most predictable foibles, such as a tendency to short-term thinking. Economists’ knowledge of these foibles comes from other disciplines - psychology mostly - so they are always playing catch-up. But ever more research on the depths of our irrationality suggests they are still way, way behind.
Take nudging. The idea is that when economists and policymakers understand the ways in which we are predictably irrational, they can tweak policies so that we make the right choices despite ourselves. So, for example, we could make sure the salads are presented at eye-level at the entrance to the canteen, and the burgers are tucked away somewhere at the back.
Since the publication of the book Nudge in 2008, this art of gentle manipulation without restricting freedom of choice has become the new big idea in politics; one of the authors, Richard Thaler, is now a consultant for David Cameron, while the other, Cass Sunstein, has been given a senior position in Barack Obama’s White House. It is an approach to market intervention acceptable to both left and right, promising cheap, practical, “third-way” solutions to many of our pressing social and economic ills.
But what if a lot of people still buy burgers in artery-clogging quantities even if they have to walk past the health food to get to them? I know that every time I go to a certain Swedish furniture megastore, that part of me that speaks up for the salmon salads (displayed first and at eye-level) is easily bludgeoned into silence by the part of me that wants those fatty little meatballs in creamy sauce. If the depths of our irrationality is such that we will hunt down the burgers (or equivalent) wherever they are hidden, then nudging will not be enough.