Sunday, 24 August 2008

Nudge: Improving Decisions About Health, Wealth and Happiness, by Richard H. Thaler and Cass R. Sunstein

This is another of these books that I think should be called “quick airport idea-book”. These books pick one (usually interesting) idea, tell a few personal stories around this and refer to a few studies. It feels as if these books are written to entertain a person with no time for deeper reflection and with a need to have a theme for a dinner conversation at the end of the flight. They are OK, but there are too many of these books out that don’t really challenge our thinking.

The book is not bad, I will return to the idea of “nudge”, but I think the most important contribution from this book is that it is part of a broader trend that tell us that the time for the neo-liberal free-market approach to the world is over (for this time). I’m fascinated that the way an idea that has dominated political thinking for about two decades dissolves is by a situation where the new ideas are closing the time-gap from both ends creating a situation where the “simple ego-economic” perspective never existed. It is as if this period of time did not have anything to contribute to human development. A lot of the book covers the social research from the 50s and 60s. Research that show that humans are not the simplistic economic abstractions that many economist have played around with the last decades. Using studies by people like Solomon Asch from the 50s it provides us with a theoretical base for “humans”. I think it is not good as the simplicity and immature argument of clowns like Ayn Rand posing like thinkers will attract a new generation unless the simplicity of the arguments in their “thinking” are discussed.

For anyone who has read social science, and especially social psychology, it is hard to know if the authors are ironic towards the neo-liberal economist, or if they actually think that they have something new to provide. I think they are honest and are not ironic when they suggest that we should use “Econs” and “Humans” to understand to different ways to understand people and I think they think they are thinking about something new.

What surprises me with their book from a historical perspective is that they seem to have forgotten the ground they walk on. Two leading thinkers from Chicago, in the field the authors of Nudge try to explore, where instrumental to the work of many of the theories and ideas they refer to from the 50s and 60s. The two are John Dewey and G.H. Mead, both moved to University of Chicago a little more than 100 years ago. Maybe their thinking is still too far head of the new economic front that is waking up to the fact that humans are not machines as they are exploring the very nature of the “self”.

For those interested where the economic front might move next, Mead and Dewey might be worth reading. I would like to add Simmel to the list as the current economic discourse still shy away from the idea that there might not be something that easily can be referred to as an “I”. Simmel approached the challenges from a macro perspective more than Mead and Dewey.

Returning to the concept “nudge” I want to congratulate the authors of introduce an idea that is easy for people educated in economic thinking to understand and to use this to introduce the most important contribution of the book, the concept “choice architect”. The fact that some people actually shape the very frames that people move within is a radical departure from traditional economic thinking. Unfortunately the book focus is on very marginal, but still important, issues. There is a choice architect providing information about fuel consumption on the windshields of cars that are on sale (that the authors use as an example). But there is also a choice architect behind the kind of cars coming out of the factories, and there are choice architects behind the infrastructure and possibilities to move from A to B without using a car.

Unfortunately the book is silent when it comes to more substantial choice architecture in society. Nowhere is this lack of will to acknowledge that there are broader structures, such as global equity, that must be considered more obvious than the discussions about climate change. In a book with many interesting ideas and good arguments it hurts to read a sentence that at best is naïve and must have been included due to a mistake unless the authors are without any global perspective.

When talking about economic incentives to reduce CO2 emissions with a global cap-and-trade system they write: “A central argument for such a system is that it would ensure that reductions would be made by those who could do so most cheaply – and that those with a real need [italic added] for emissions licenses would pay people, perhaps especially in poor nations, who would prefer to have the money”.

This is not a very clever statement. An American (like the authors) lives in a society that has been built by polluting the global environment, and they use more energy per person than almost anyone else on the planet (due to a political system that very often seems to ignore global public goods). Now the world needs reduced emissions. Without any equity in the equation or historic understanding the simple economic perspective is that we should buy and sell emission rights. To point at the desperate need of the poor for money as a way of allocates more rights to pollute for the rich is an argument that does not fit in a book that in an American context argues for transfer of resources to those less fortunate.

If the idea of a “choice architect” could be expanded to big institutions and include a historic perspective we might be able to use the concept in two ways. First as a way to identify situations where we are pushing people in one or another direction and discuss the different options that are available, second as a way to identify those who actually can influence the important decisions today.