Daily Tao – Nudge: Improving Decisions About Health, Wealth, and Happiness – 1
The false assumption is that almost all people, almost all of the time, make choices that are in their best interest or at the very least are better than the choices that would be made by someone else. We claim that this assumption is false—indeed, obviously false. In fact, we do not think that anyone believes it on reflection. Suppose that a chess novice were to play against an experienced player. Predictably, the novice would lose precisely because he made inferior choices—choices that could easily be improved by some helpful hints. In many areas, ordinary consumers are novices, interacting in a world inhabited by experienced professionals trying to sell them things.
This is one of the interesting premises in Richard Thaler’s book that opens up many moral questions of whether we should be taking active action in manipulating people to make decisions that are perceived to be good for them. Nudge, in general, is about the design of choices and how seemingly miniscule factors can have a significant effect on the choices of people. For instance, we could try to dissuade people from taking sugary food products by putting them in supermarket shelves that hard to see or reach. In many instances, such a seemingly small choice can lead to significant results without the consumers being aware of it.
The passage above relates more towards our life experiences. For many of us, we only buy perhaps a house once or twice in our lifetimes. Other things, like weddings or vehicles are also things that we tend to only make a purchase a handful of times in our lives. Essentially, we are novices, trying to read the salesmen who are trying to extract every dollar out from us, and are extremely experienced in doing so. This then serves as a justification for a “nudge policy”, where the government takes an active role in trying to protect the consumers. That also explains why government regulation can be helpful, and new sources like internet reviews/ratings and forums have helped give most of us “novice” consumers some more information.
Of course the question that goes is how much is too much? What are the areas of our lives that we are comfortable with letting the government decide? From where I live in Singapore, I feel that there are many aspects of our polices that “guides” us towards certain paths and choices. This is exemplified by the public housing scheme. I feel like many local couples center their future plans around a house purchase (BTO), a scheme that lets people get a completely new flat and maximizes their asset value. This is due to the extremely attractive incentives and schemes to “nudge” people into taking up public housing. And while one can’t argue with the results (80% of locals live in public housing), it also reduces the attractiveness of alternate paths. Some might even say it is stifling and overly paternalistic.
Interestingly, Thaler proposes a form of “libertarian paternalism” towards the end of his book. It is a concept where government can try to influence our decisions through the framing of choices, but that the people also have the freedom to ultimately choose what they want. As things tend to be with such ideology, the devil is always in the details. How one might feel comfortable living in such a government would always depend on the specific policies.
