Politicians have taken to insights from behavioral economics pretty quick. This has been a direct result of one of the key implications of the economic approach to understanding human behaviour, even in its canonical form. According to the standard rational choice approach, there are two key determinants of individual choice. On the one hand, there is a set of options, and on the other there is a preference weighting over those options. The options form a constrained subset of feasible options among a wider more encompassing set of all conceivable options. The constraints arise out of budget, cognitive or otherwise informational, and feasibility restrictions. Even in the standard approach thus, it is clear that choice can be influenced both on the side of preferences, and on the side of constraints. What the behavioural perspective is adding to this is a pychological, sociological and institutional grounding of both the preference and the constraint side. Choice architectures are basically those features of a decision situation that are structural in the sense that they shape either preferences or constraints (or both) in a way that is receptive to marginal intervention. Hence the possibility of prescriptive accounts of the purposeful redesign of choice architectures, with their partly controversial political implications.
Bobby Duffy, Head of Social Research at Ipsos MORI UK, has now presented evidence in a recent piece in the New Statesman according to which the relative acceptance of benevolent paternalism as a policy tool various considerably between different countries. And there is an inherent tension between our general acceptance of the difference between ‘good’ and ‘bad’ choices, and our reluctance, broadly speaking, to allow government to engineer choice architectures such that those ‘good’ choices prevail.
Marketing theorists readily recognise economics and in particular microeconomics as one of the key disciplines forming the foundations of marketing theory and applications. It should thus not come as a big surprise to hear that this carries over to the new economic behaviorism. In many ways, behavioral economics is conceptually closer to marketing than many strands in conventional microeconomics. Still, it is useful to have this spelled out and developed at some level of detail by the , with a particular emphasis of making insights from behavioral economics useful to advertising campaigns. For earlier initiatives along related lines, see for example Goldstein et al (2008) in the Harvard Business Review Magazine. An interesting recent paper by Young and Caisey (2010) seeks to deepen those links further by setting out a behavioral economics informed social marketing programme to reduce car ownership and use as a means of combatting anthropogenic climatechange as well as obesity.
Imagine that marriage becomes privatised. Privatising marriage would mean that the state monopoly on government licensing of marriages would come to an end. Marriage-granting organisations would be free to set their own rules of marriage and license couples accordingly, while the word ‘marriage’ would disappear from legal code. In its place, one would have contractual domestic partnership agreements between any two individuals, similar in kind to a business partnership. Such agreements would regulate the distribution of resources upon cancellation of the agreement for example, as well as organising care for any dependants.
Richard Thaler and Cass Sunstein, the authors of Nudge (Caravan, 2008), are convinced that the partnership agreements just described would allow society to take a step back and consider the social benefits of stable cohabitation on their own merit, freed from any ideological or religious connotations that come with the concept of marriage. Their underlying proposals may sound radical, but they are based on the fundamental insight that the most important aspects of decision making have to do with the prevailing ‘choice architecture’ within which decisions are made, and those choice architectures have decisive influence on how we behave. In fact, it may be much more effective to redesign a particular choice architecture so that individuals receive a gentle ‘nudge’ in the desired direction, than to try to change individual behaviour directly by fiat.
But even this nudging towards preferable behaviour already runs counter some longstanding commitments of liberally minded economists who have traditionally held that ‘de gustibus non est disputandum’: individual tastes should be taken as given. What Thaler and Sunstein’s benevolent paternalism suggests instead is to step beyond suggestions that given tastes are innocent starting points of analysis. If choice architectures are as easily amenable to change as their analysis, and that of numerous other behavioural economists, suggests then a more realistic approach would have to formulate economic choice in terms of its underlying choice architecture, which may be open to attempts to redesign it.
See also Thaler & Sunstein’s blog: Nudge
(A version of this review has been published in: “Book of the Month: Nudge.” The Grapevine, December 2009, p. 12)