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CHAPTER 1
WHAT THE HELL IS WATER?
Here is a tale from the novelist David Foster Wallace: "There are these two young fish swimming along and they happen to meet an older fish swimming the other way, who nods at them and says 'Morning, boys. How's the water?' And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes 'What the hell is water?'?"
This is a tale about choice architecture — the environment in which choices are made. Choice architecture is inevitable, whether or not we see it, and it affects our choices. It is the equivalent of water. Weather is itself a form of choice architecture, because it influences what people decide. On snowy days, for example, people are especially likely to purchase cars with four-wheel drive, which they do not always love, and return to the market unusually quickly. Human beings cannot live without some kind of weather. Nature provides a kind of choice architecture. So do people in both public and private sectors. The law of contract is a regulatory system, and it influences us, even if it gives us a great deal of flexibility and preserves a lot of space for freedom of choice. For example, contract law includes "default rules," which specify what happens if the contract is silent on a disputed question. Because contracts are often silent, default rules can make all the difference.
We can insist on freedom of choice all we like, but we cannot wish choice architecture away. Any store, real or online, must have a design; some products are seen first, and others are seen last, and still others are barely seen at all. Any menu places options at various locations. Television stations are assigned different numbers, and strikingly, the number matters, even when the costs of switching are vanishingly low; people tend to choose stations with lower numbers. Any website has a design, which will affect what and whether people will choose. One of the best books on website design is entitled Don't Make Me Think. The title signals the importance of navigability. It suggests that the best websites are so easy to navigate that you don't even know that you are navigating them.
It would be possible, of course, to define choice architecture in a narrow way, and to limit it to intentional designs by human beings. There is nothing intrinsic to human language that rules out that definition, and my emphasis here will be on intentional design. But if the goal is to see how and when people are influenced, the broader definition is preferable. It shows that our choices are often an artifact of an architecture for which no human being may have responsibility — a sunny day, an unexpected chill, a gust of wind, a steep hill, a full (and romantic) moon.
NUDGES
Nudges are interventions that fully preserve freedom of choice, but that also steer people's decisions in certain directions. In daily life, a GPS device is an example of a nudge. It respects your freedom; you can ignore its advice if you like. Perhaps you like a more scenic route; perhaps you enjoy seeing familiar landmarks. But the device is there to help you to get to your preferred destination. It increases navigability.
Many other nudges have a similar goal. Signs are nudges. So are calorie labels at restaurants; text messages, informing customers that a bill is due or that a doctor's appointment is scheduled for the next day; automatic enrollment in pension plans; default settings on computers and cell phones; and programs for automatic payment of credit card bills and mortgages. In government, nudges include graphic warnings for cigarettes; mandatory labels for energy efficiency or fuel economy; "nutrition facts" panels on food; and automatic enrollment in benefits programs. All of these are forms of choice architecture. Whatever form of choice architecture is in place, it will nudge.
Those who favor nudges emphasize that human beings often lack important information, have limited attention, face self-control problems, and suffer from behavioral biases. We have already encountered "present bias." People may also procrastinate; for many of us, inertia is a powerful force. We are often unrealistically optimistic and overconfident, and we may either exaggerate or underestimate serious risks. In these circumstances, nudges can be exceedingly helpful. They can improve the lives of people who lack information or suffer from behavioral biases, without harming those who do not. A key reason is that nudges make life more navigable.
Many policies, by contrast, take the form of mandates and bans. For example, criminal law forbids theft and assault. It does not allow people to go their own way. Other policies take the form of economic incentives (including disincentives), such as subsidies for renewable fuels, fees for engaging in certain activities, or taxes on gasoline and tobacco products. These policies play important roles, but they are not nudges. Mandates and bans eliminate freedom of choice, at least in the sense that they are meant as flat prohibitions. Incentives maintain freedom of choice, but they impose a kind of skew. If nudges do that as well, it is not because they impose material burdens or grant material benefits.
In recent years, a primary goal of behaviorally informed policy has been to insist that many interventions, both private and public, are forms of choice architecture that decisively affect choices and outcomes, even if they do not alter incentives. Because of the appeal of choice-preserving approaches, many nations have shown keen interest in nudges and nudging, and have established Nudge Units, or Behavioral Insights Teams, to promote health and safety or otherwise to help fulfill important goals. By any measure, the consequences of some nudges are not properly described as modest — in the United States, the United Kingdom, the Netherlands, Ireland, Denmark, Singa-pore, and numerous other nations.
Because of automatic enrollment in free school meals programs, more than 10 million poor American children are now receiving free breakfast and lunch during the school year. With respect to savings, automatic enrollment in pension programs has produced massive increases in participation rates. Credit card legislation, enacted in 2010, is saving con-sumers more than $10 billion annually; significant portions of those savings come from nudges and nudgelike interventions. Other nudges, now in early stages or under discussion, could also have a major impact. The Earned Income Tax Credit is among the most effective antipoverty programs in the world, but many eligible people do not take advantage of it. Automatic enrollment would have large consequences for the lives of millions of people. In many nations, automatic voter registration would turn countless people into eligible voters. If the goal is to reduce greenhouse gas emissions, automatic enrollment in green energy would have large effects.
With respect to the world's most serious problems (including relief of poverty, reduction of violence, and improvement of health), the use of nudges remains in its preliminary stages. We will see far more in the future, and the impact will not be small. The point to under-line here is that nudges insist that people should be free to choose. If they do not like the direction in which they are being nudged, they can choose to go where they like.
FEAR OF GOVERNMENT
Many people object to nudges for one reason above all: fear of government. Suppose that public officials are incompetent, self-interested, reckless, or corrupt. Suppose that your least favorite leaders are or will be in charge. Would you want them to nudge? If interest groups are able to push government in their preferred directions, and if public officials lack crucial information, then you might insist: Do not nudge! Reliance on private markets might seem far better.
Indeed, behavioral science itself might be taken to put this conclusion in bold letters. There is no reason to think that public officials are immune to behavioral biases. In a democratic society, the electoral connection might mean that they will respond to the same biases that affect ordinary people. To be sure, structural safeguards might help, especially if they are designed to promote reflection and deliberation, and if they ensure a large role for technocrats who are insistent on science and on careful attention to costs and benefits. But in any real-world polity, behavioral distortions are difficult to avoid.
These are fair and important points. But as we have seen, they run into a logical problem: a great deal of nudging is inevitable. So long as government has offices and websites, it will be nudging. If the law establishes contract, property, and tort law, it will be nudging, if only because it will set out default rules, which establish what happens if people do nothing. Fried-rich Hayek, the greatest critic of socialism, wrote that the task of establishing a competitive system provides "a wide and unquestioned field for state activity," for "in no system that could be rationally defended would the state just do nothing. An effective competitive system needs an intelligently designed and continuously adjusted legal framework as much as any other."
As Hayek understood, a state that protects private property and that enforces contracts has to establish a set of prohibitions and permissions, including a set of default entitlements, establishing who has what before bargaining begins. If government is up and running, that is just the tip of the iceberg. For that reason, it is pointless to exclaim, "do not nudge!"— at least if one does not embrace anarchy.
Because nudges maintain freedom of choice, they offer a safety valve against official error. Those who favor nudges do not trust government. On the contrary, they are keenly alert to the possibility that public officials will show behavioral biases or otherwise make mistakes. For those who fear or distrust government, the principal focus should be on mandates, bans, subsidies, and taxes. To be sure, nudges ought not to be free from scrutiny.
It is true, of course, that some nudging is optional. Government can warn people about smoking, opioid addiction, and distracted driving, or not. It can seek to protect consumers against deception and manipulation, or not. It can undertake public education campaigns, or not. If you think that government is entirely untrustworthy, you might want it to avoid nudging whenever it can.
In the abstract, that position cannot be ruled out of bounds. On highly pessimistic assumptions about the capacities and incentives of public officials, and highly optimistic assumptions about the capacities and incentives of those in the private sector, official nudging should be minimized. But private actors nudge, and sometimes it is very much in their interest to exploit behavioral biases, thus causing serious harm to countless people. Would it be a terrific idea to forbid public officials from taking steps to reduce smoking and distracted driving? In any case, the track record of real-world nudging includes impressive success stories, certainly if success is measured by cost-effectiveness. Sometimes nudges turn out to be the best tools of all.
Everyone should agree that government nudges, like other official interventions, should be constrained by democratic requirements, including transparency, public debate, and independent monitoring (including continuing evaluation of how nudges work in practice). Nudging must also be respectful of individual rights. Constraints of this kind can reduce the risks (without eliminating them). The fundamental point is that those risks are far larger with other tools, above all mandates and bans.
AS JUDGED BY THEMSELVES
Some nudges are designed to reduce negative externalities, understood as harmful effects on third parties; consider fuel economy labels that draw attention to environmental consequences, or default rules that automatically enroll people in green energy. Nudges can easily be designed to reduce theft, assault, and rape. But many nudges are designed to increase the likelihood that people's choices will improve their own well-being. In such cases, the central goal of nudging is to "make choosers better off, as judged by themselves."
That idea borrows from the liberal philosophical tradition in the sense that it gives ultimate authority to individual choosers. It makes them sovereign. It respects their dignity and their freedom. For reasons that may involve autonomy or that may involve well-being, it allows them to have the final say. I will be focusing much of the discussion here on the "as judged by themselves" criterion and attempting to explore its complexities. As we shall see, navigability is a crucial part of the picture.
Social planners in government — or in the terminology that Richard Thaler and I prefer, choice architects — might well have their own ideas about what would make choosers better off. But in general, the lodestar is people's own judgments. A central reason is that human well-being matters, and those judgments are a reasonable (if imperfect) way to test the question of whether nudges are promoting their well-being.
It should be clear that this claim places a premium on human agency. It builds on the view, associated with John Stuart Mill, that individuals are in a unique position to know what will improve their well-being, and that outsiders will often blunder. Mill insists that the individual "is the person most interested in his own well-being," and the "ordinary man or woman has means of knowledge immeasurably surpassing those that can be possessed by any one else." When society seeks to overrule the individual's judgment, it does so on the basis of "general presumptions," and these "may be altogether wrong, and even if right, are as likely as not to be misapplied to individual cases." If the goal is to ensure that people's lives go well, Mill concludes that the best solution is for public officials to allow people to find their own path. Consider in the same vein F. A. Hayek's remarkable suggestion that "the awareness of our irremediable ignorance of most of what is known to somebody [who is the chooser] is the chief basis of the argument for liberty."
To be sure, behavioral science raises questions about these claims insofar as it finds that human beings often make decisions that impair their own well-being. Some of our choices are profoundly self-destructive. I will have something to say about that possibility in Chapter 3. But in a free society, Mill and Hayek nonetheless provide a good place to start.
THREE OBJECTIONS
It should be clear that the "as judged by themselves" criterion runs into three immediate objections.
First: Suppose that people are manipulated into having some belief or engaging in some action — for example, buying a product or supporting a candidate. To evaluate this concern, we need to define manipulation and specify what is wrong with it. Let us stipulate, very briskly, that manipulation is a way of tricking people. Manipulators typically exploit people's ignorance or behavioral biases. They do not sufficiently engage people's capacities for reflection and deliberation. A manipulator might encourage people to purchase a used car by emphasizing how sleek it looks (and downplaying the fact that it is likely to break down), or to join a health club by showing photographs of healthy, beautiful people (and downplaying the fact that the club has terrible facilities).
The first problem with manipulation, thus defined, is that it does not treat people with respect. It is disrespectful of human agency. The second problem involves the risk to well-being. Because manipulators do not put people in a good position to make choices about what will actually promote their own interests and reflect their own values, they threaten to reduce people's welfare as well.
When people are manipulated, they are deprived of the (full) ability to make choices on their own, simply because they are not given a fair or adequate chance to weigh all relevant variables. To that extent, victims of manipulation are less free. Manipulation is a close cousin to coercion; it belongs in the same family. At the same time, manipulators often lack relevant knowledge — about the chooser's situation, tastes, and values. Lacking that knowledge, they nonetheless subvert the process by which good choosers make their own decisions about what is best for them.
Things are even worse if the manipulator is focused on his own interests rather than on those of choosers. Modern advertisers and modern politicians are often focused in just this way. It is in this sense that a self-interested manipulator can be said to be stealing from people — failing to respect their agency and moving their resources in the manipulator's preferred direction. Manipulators are thieves. If manipulation has occurred and if it is wrong, we would have an objection, even if people end up happy or satisfied after the fact. To that extent, it makes sense to reject manipulation, even if the "as judged by themselves" standard is met.
(Continues…)
Excerpted from "On Freedom"
by .
Copyright © 2019 Cass R. Sunstein.
Excerpted by permission of PRINCETON UNIVERSITY PRESS.
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