Earlier this week I was lucky enough to be at a LSE public
debate entitled the ‘Ethics of Nudge’.
Nudge is the idea that government can influence and improve
individual decision making without reducing the choice that people have. For
example, placing healthy food at eye level in a school canteen is a nudge. It
is proven to help people achieve the goal of being healthy (something everyone
wants to be but lack the will-power to varying extents). Because it doesn’t
reduce choice, nudging is termed libertarian paternalism. The right wing
critique of this is well-known: individual choice is sacrosanct and should be
left alone, but the proponents Nudge are widely accepted to have overcome these arguments.
At the debate George Loewenstein (famous behavioural economist)
gave a left wing critique of nudge. It was new to me and goes something like
this…
The problems that Nudges try to address like obesity are not
old problems. Obesity has only started becoming a problem for society in the
last 30 years, therefore the root cause of obesity is not ‘human nature’. Thus
nudges, which are essentially attempts to counteract human nature, are a second
best solution. The real underlying problems are ones of externalities and
mis-aligned incentives. In the case of obesity, the real economic problem is
that food companies are not accountable for feeding us unhealthy food. McDonald’s
et al. should be held responsible for the economic cost of obesity. Tried and
tested solutions like regulation and taxation are needed. Heavy handed economic
tools are required. Nudges are a distraction.
It’s easier to blame fat people for being fat than fix the
underlying economic problems. Nudge tries to fix fat people. Nudge won’t fix the
fast food industry.
Thoughts?
I disagree that a 'nudge' is a second best solution to issues such as obesity. Your post alluded to obesity being due to externalities and mis-aligned incentives. I counter that obesity is due to irrationality on the part of consumers and to a lesser extent a lack of information at the point of consumption. There is no externality, the cost of unhealthy food is a private one borne by the consumer. Similarly there are no mis-aligned incentives, there is the profit motive of the firm and the maximisation of utility for the consumer as in any exchange. Thus it is irrationality at the point of consumption, whereby even though a consumer knows that a food is bad for them they still desire it. This can be overcome in a libertarian manner through counteracting this irrationality with a nudge back to healthy food. However, if not strong enough then regulation plays a role to prevent access to a good that consumers do not have the rationality to consume efficiently. Thus rather than bearing externalities, fast food should be seen as akin to alcohol which is regulated as consumers are unable to make rational decisions.
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