Richard Thaler won the Nobel Prize for his seminal work on how psychological biases cause people to act in ways that diverge from pure rational self-interest. He believes in “nudges” as a tool, building a bridge between the economic and psychological analyses of individual decision-making, a concept he co- developed with Cass Sunstein. Thaler teaches at Chicago University, a pretty hot school since another distinguished professor, Raghuraman Rajan,was also tipped to win this year. Across the globe, governmental institutions intended to guide people towardsgood choices areare flourishing. Singapore, in a desperate attempt to get its citizens to mate and multiply, started "Love Relations for Life: A Journey of Romance, Love and Sexuality” and sunset cruises. Or, as it was more popularly known by locals, “Lee payLoongfor love, lah.”
“We want to tell students don't wait (for love) until you have built up your career,” said minister Yu-Foo Yee Shoon. “Sometimes, it is too late, especially for girls.” Seriously?The programme is designed to tackle the twin challenges embodied in a falling birthrate: too few people breeding and even fewer being part of what Singapore considers the genetically desirable educated elite.In Sweden where this neo-Nazi approach would be unacceptable, the authorities encourage young couples to take a vacation at tax-payer expense and get pregnant.The girls that is; the guys are asked to cooperate and not drink too much beer. Nudging has all of a sudden become fashionable.
"There are studies that show sex is healthy," said councilman Per-Erik Muskos, "It's about having better relationships." As titillating as a plan for paid sex breaks sounds, it is another perk for spoiled Swedes who have work breaks to exercise. Yep, they already get one paid hour off each week to hit the gym.As MrMuskos said, sex is a form of exercise "and has documented positive effects on well-being".
“A classic nudge is when a retirement plan is mandatory but contributing is optional.FOMO,(fear of missing out), leads to higher enrollment.Thaler contends that nudging is a win-win since it doesn’t force people to make unpleasant choices or struggle with “laissez faire”, which is French for “Dude, you’re on your own.” Subtly structuring choices ensures that people are nudged into making the right one. “Make it easy,” says Thaler,“You want to get people to eat healthy, put healthy choices in the cafeteria, make them easier to find, and make them taste better.”
What’s not to like?
The problem, as rival economist, Cosma Shalzi argues, is that this is remote-control which assumes that experts know better. This may be true occasionally but not most of the time and what price consumer sovereignty if ordinary people can’t decide?
Take Chethan, who earns 16K as a driver but who survives on less than Rs 30/ a day. He has monthly debts of 15K to pay off a car loan on a red-hot business opportunity that was too good to be true; it was. A finance expert advised him to buy a crappy Indica on hire-purchase, hire a driver and became an Uber capitalist. After two years the taxi business went south and with it Chethan’s hopes and dreams. Of course, the resale value on his 5 lac piece of crap was a princely 1 lac. Why doesn’t some whiz-kid form a start-up for financial literacy; the poor are easy pickings for unscrupulous experts who know suckers are born every day. Remember Goldman selling sub-prime CDO’s to investors?
Democratic policy making has better correction mechanisms than nudgeocracy since people who are sufficiently annoyed at, say, GST, have the incentive to resist. Or live in Gujarat where elections are due. Nudgeocrats are insulated from feedback that would help them get things right because they believe “daddy knows best.”
Chris Hayes describes the “hassleocracy”: make something such a hassle that only the very determined or the clinically insane will jump through the hoops to comply. Like insurance companies who do everything they can to delay filing claims by the fine print fandango, or websites that make it easy to subscribe, but require you to notarize, and sign a form in triplicate, with seven witnesses in red ink if you want to stop automatically self-renewing.
But isn’t nudgeocracy(eg compulsory Aadhar linkage)basically paternalism? Behavioral economics assumes that real-life decision-making is flawed, which is why one has a masala dosa instead of hitting the yoga mat. People don’t recognize their best interests and when they do, they find it hard to exercise self-restraint. Enter the “choice architect” — a skilled and intelligent technocrat who uses data, social science and intelligence to figure out what people would really want to do, if only they were as smart and well informed as him. This is “libertarian paternalism” — libertarian because it lets people make the choices that they want to, paternalistic because it provides them with a father’s guiding hand.
The problem is that daddy may be a kind old fogey, a pipe-smoker who delivers his well-intentioned clichés in a deep and manly voice but who doesn’t necessarily know best. This may be because of mindset or poor information about what the young want. Take Narayanmurthy for example: some of his recent utterances bring to mind a dinosaur howling across some primeval swamp. Dude, you’re retired, leave the Sikka alone.
