Five Reasons for Choice-Preserving Approaches

Cass Sunstein at Nudges vs Shoves: “Psychologists and behavioral economists have identified many sources of human errors, including self-control problems, “present bias,” unrealistic optimism, and limited attention.  Building on these underlying findings, a great deal of work has explored the possibility of enlisting libertarian paternalism, or nudges, to make people’s lives go better.  Nudges preserve freedom of choice and thus allow people to go their own way.  But in light of behavioral findings, there has also been increasing interest in asking whether mandates and bans have a fresh justification.1  The motivation for that question is clear: If we know that people’s choices lead them in the wrong direction, why should we insist on, or adopt a precommitment to, approaches that preserve freedom of choice?  Some skeptics, notably Professors Ryan Bubb and Richard Pildes, object that behavioral economists have “trimmed their sails” by adopting an unjustified presumption in favor of choice-preserving approaches.2

It should be agreed that if a mandate would increase social welfare, suitably defined, there is a strong argument on its behalf.  No one believes that nudges are a sufficient approach to violent crime.  In the face of a standard market failure, coercion has a standard justification; consider the problem of air pollution.  We know that there are “behavioral market failures” as well.  If people suffer from unrealistic optimism, limited attention, or a problem of self-control, and if the result is a serious welfare loss, there is an argument for some kind of public response.  We could certainly imagine cases in which the best approach is a mandate or a ban, because that response is preferable, from the standpoint of social welfare, to any alternative, including nudges.
Nonetheless, there are many reasons to think that if improving social welfare is the goal, nudges have significant advantages and are often the best approach.  They may well have high benefits without high costs, and in any case their net benefits may be higher than those of alternative approaches.  Five points are especially important.
First, choice-preserving approaches make sense in the face of heterogeneity.  By allowing people to go their own way, they reduce the high costs potentially associated with one-size-fits-all solutions, which mandates often impose.  Second, those who favor nudges are alert to the important fact that public officials have limited information and may themselves err.  If nudges are based on mistakes, the damage is likely to be less severe than in the case of mandates, because nudges can be ignored or dismissed.  Third, nudges respond to the fact that public officials may be improperly affected by the influence of well-organized private groups (the public choice problem).  If so, the fact that people can go their own way provides an important safeguard, at least when compared with mandates.  Fourth, nudges have the advantage of avoiding the welfare loss that people experience when they are deprived of the ability to choose.  In some cases, that loss might be severe.  Fifth, nudges recognize that freedom of choice can be seen, and often is seen, as an intrinsic good, which government should respect if it is to treat people with dignity….”