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Nudges – The Paradigm of the Oriented Free Choice

Nudges – The Paradigm of the Oriented Free Choice Economy Near Us (XXIV)

Referring to the extremes of economic behavior we can say that they are: a) the imperative norm and b) the absolute autonomy (we refer here to the individual freedom, which does not take into account the free choice of others). Focusing on the concept of freedom, it represents, according to Jonge (in his book “Rethinking Rational Choice Theory”), the autonomy of desires and not freedom of action. In Rawls’ opinion, freedom is first in the hierarchy of interests, higher interests becoming normative.

In his two books, “Inadequate Behaviour” and “Nudge”, the American economist Richard Thaler, who received the Nobel Memorial Prize in Economic Sciences in 2017, proposes an intermediate position in economic behaviour, which he calls the nudge.

In the following we will briefly examine the concept of the nudge and its relationship to public policy. 

The concept of the nudge and the rationality of choice 

Thaler defines the nudge as an architectural aspect of the choice, which predictably changes the behavior of the people, without prohibiting options and without significantly changing the economic incentives. This assumes that an architecture of choice is the one responsible for organizing the context in which people make choices. These are opposite to orders, obligations or prohibitions, which may be considered special rules. The author emphasizes that we should not confuse thrusting with nudging (or, equivalently, do not confuse thrust with nudge). From a conceptual point of view, the thrusting would be closer to the imperative norm while the nudging would be closer to absolute autonomy. In his opinion, the nudges are useful for choices that fulfill three cumulative conditions:

  1. a) they are difficult;
  2. b) they are rare;
  3. c) they did not receive an immediate feedback.

Regarding the issues related to the rationality of the decision/action, they must be viewed as purpose-driven processes (in Nozick’s opinion), that are based on principles that can be both matters of judgment and questions of reliability. The relationship between the medium and the purpose falls within the sphere of instrumental rationality, which, however, cannot evaluate the rationality of the goals. A pure theory of rationality should refer to the choice of goals that should be pursued, thus, there could be a situation where we would rather make a less reliable choice but which, if it fails, would have less disastrous consequences, or to choose a more reliable purpose but which, if it fails, will have more serious consequences. We consider that there are two principles of rationality on the basis of which we could make a choice, the principle of decision, and the principle of justification, and we affirm that they are mutually dependent.

Another approach to rational choice, which we encounter in Jonge, discusses the individual decision under the conditions in which the consequence is known. It depends on two factors: the amount of information available and the order of preferences. Thus, between freedom and choice we consider four aspects (differences), namely: freedom refers to the relationship between the individual and the state - free choice does not; freedom is a social (i.e. relational) concept - free choice is not; freedom is independent of preferences – free choice is not; in the issue of freedom, each person has the same weight, that is, a vote – free choice does not. 

Nudges and Libertarian Paternalism 

The concept of libertarian paternalism refers to the creation of conditions (by public or private institutions) for people to choose what is best for them, but without restricting their freedom of choice. In Thaler’s acceptance, “the golden rule of libertarian paternalism: to come up with nudges that have the greatest chance of helping and the least chance of harming”. Thaler states that the need for nudges arises when people have to make difficult, rare decisions and when they have difficulty in understanding aspects of a situation that is not formulated in terms that are easy to understand for them.

It must be said that the mechanism of the nudge must maintain the freedom of choice. Regarded as an architecture of choice, the state, through its interventions, does not seek to adopt measures to improve its deliberative capabilities but aims to improve the architecture of choices for individuals, so that, without constraining them, they choose an alternative that the architecture would designate as better and ethically acceptable.

The legitimacy of the state intervention is based on the criterion of self-testability, respecting the freedom of choice of individuals. In other words, it is desirable that the state (through the government or governmental agencies) does not establish itself in a current, effective positive rule administrator, but is limited to a role of initiating the “rules of the game” through the role of regulator, respectively to an observation/adjustment role, through its role of controller/inspector.

Nudges and Design of Public Policies 

In the field of public policy, the nudge can be regarded as a vehicle of oriented free choice. This means that, once the criterion of legitimacy of the state intervention has been verified, as mentioned above, two other levels of “filtering” of the oriented free choice must be operationalized. The first of these concerns the preservation of freedom of choice. In other words, from the perspective of this “filter”, the individual should not be confronted with obligations or prohibitions (of course, unless the general constitutional and legal principles are not violated), but should be given targeted permissions. The expression of oriented permissions contains precisely the idea of ​​the nudge, that is, a “suggestion” which the legislator considers beneficial for the individual concerned. Of course, the problem of the nudge in designing the architecture of libertarian paternalism is fundamentally confronted with the eternal problem of subjectivity – the problem of subjectivity has reached its maximum sharpness in relation to the concept of preference, including the perspective of Arrow’s theorem regarding the impossibility of aggregating the hierarchies of preferences. Like in the case of preference, the nudge is or is not compatible with the scale of values, with the cultural basis, or with the individual options. Because, in order to be integrated in the norm, the nudge must have a certain generality (i.e. to express a common core of sensitivity to external normative suggestions), it turns out that the risk of incompatibility between the particular individual and the generic one subsists. The second "filter" refers to ensuring the nudge with the potential to be legitimized in the voluntary behaviour of the individual. This means that the nudge in question must lead to such behaviour (i.e. to such acts or abstentions) that the reason of the nudge is internalized in the axiological structure of the individual. In other words, this “filter” ensures the subsequent “uselessness” of the nudge, which means that the concept of the nudge must be credited (and endowed) with a pedagogical vocation. We want to point out that the issues raised by the two “filters” mentioned above are not identified and discussed by Thaler, and may constitute additional research directions in the field of public policy design within the paradigm of libertarian paternalism. 

Photo credit: pxhere.com.

 

 
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OEconomica No. 1, 2016