Magazine article The Spectator

Nudge, Nudge: Meet the Cameron's New Guru

Magazine article The Spectator

Nudge, Nudge: Meet the Cameron's New Guru

Article excerpt

No one likes to be pushed, prodded or shoved. But no one objects to a nudge in the right direction. The idea that people can be nudged into making better choices is the brainchild of Richard Thaler and Cass Sunstein, two whip-smart University of Chicago academics. The two professors see nudging as the 'real third way', an alternative to both government regulation and laissez-faire liberalism. The idea is the new big thing; the two politicians of the moment -- Barack Obama and David Cameron -- are both keen on it.

Thaler and Sunstein, though, have no more discovered nudging than Benjamin Franklin discovered electricity. Thaler, who is currently in London teaching a summer school and having his brain picked by Conservative high command, gladly admitted to me that nudging was as old as time, quipping that 'religion at its best is all about nudging'. But what Thaler and Sunstein have drafted is a guide to how the power of nudging can best be harnessed. In this 'post-ideological' age, this is something that politicians are eager to understand. Indeed, the Tories are so keen on Thaler's ideas that George Osborne wrote an op-ed for the Guardian this week praising him and saying that Brown's failure to appreciate his insights will lead to the PM losing power. There is also an awayday planned, where the shadow Cabinet will work with Thaler and other behavioural economists to develop policies.

A nudge can come in many forms.

Sometimes it is about providing the consumer with more information. For instance, what Thaler -- with a grin playing across his affable, intellectual features -- calls 'the new nudge Cameron' might require shops that sell Chocolate Oranges at the counter to label them prominently with their calorific content, which should help more of us to make the right decision. Then there is the power of social norms; letting people know what other people do. Informing them that most of their peers are organ donors leads to more registered donors. Another kind of nudge is making the default option the more socially desirable option. One example of this advocated by Thaler and Sunstein in their book Nudge -- and adopted by the Obama campaign, to which Thaler and Sunstein are informal advisers -- is automatically enrolling people in a pension plan.

Those who want to can still opt out, but the default position is that you contribute. Such schemes have been proven to raise the savings rate.

These nudges work as they chime with human nature; a gentle reminder can dissuade us from doing something we know we shouldn't; we want to fit in and inertia is a powerful force. We understand these forces all too well. I complain to Thaler about how I still have the same mobile phone price plan as when I was at university and so now get stung with horrendous bills for making international and peak-time calls, yet the fact that I pay by direct debit means that I never get round to actually changing it. Thaler advises that direct debit is 'the right way to save and the wrong way to pay'. He makes me feel a lot better about my own failure to update my phone plan by telling me that he and his wife had not cancelled their monthly NetFlix subscription despite being away for the summer.

(The power of social norms, though, means that I now feel too relaxed for my financial good about my failure to move to a more efficient phone plan. …

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