The Nudge Wars: A Glimpse into the Modern Socialist Calculation Debate

Paper by Abigail Devereaux: “Nudge theory, the preferences-neutral subset of modern behavioral economic policy, is premised on irrational decision-making at the level of the individual agent. We demonstrate how Hayek’s epistemological argument, developed primarily during the socialist calculation debate in response to claims made by fellow economists in favor of central planning, can be extended to show how nudge theory requires social architects to have access to fundamentally unascertainable implicit and local knowledge. We draw parallels between the socialist calculation debate and nudge theoretical arguments throughout, particularly the “libertarian socialism” of H. D. Dickinson and the “libertarian paternalism” of Cass Sunstein and Richard Thaler. We discuss the theory of creative and computable economics in order to demonstrate how nudges are provably not preferences-neutral, as even in a state of theoretically perfect information about current preferences, policy-makers cannot access information about how preferences may change in the future. We conclude by noting that making it cheaper to engage in some methods of decision-making is analogous to subsidizing some goods. Therefore, the practical consequences of implementing nudge theory could erode the ability of individuals to make good decisions by destroying the kinds of knowledge-encoding institutions that endogenously emerge to assist agent decision-making….(More)”