Nudge, nudge: meet the Cameroons’ new guru

16 July 2008

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The economist Richard Thaler — a favourite of the Cameron and Obama camps — talks to James Forsyth about the power of ‘nudging’: small transformative acts of persuasion

These nudges work as they chime with human nature; a gentle reminder can dissuade us from doing something we know we shouldn’t; we want to fit in and inertia is a powerful force. We understand these forces all too well. I complain to Thaler about how I still have the same mobile phone price plan as when I was at university and so now get stung with horrendous bills for making international and peak-time calls, yet the fact that I pay by direct debit means that I never get round to actually changing it. Thaler advises that direct debit is ‘the right way to save and the wrong way to pay’. He makes me feel a lot better about my own failure to update my phone plan by telling me that he and his wife had not cancelled their monthly NetFlix subscription despite being away for the summer. (The power of social norms, though, means that I now feel too relaxed for my financial good about my failure to move to a more efficient phone plan. I had been nudged back to where I started.)

Understanding why nudges work requires doing something quite difficult for an economist: jettisoning the idea of homo economicus. Thaler thinks that man never was a purely rational economic actor, that the idea was a ‘useful figment’. He explains the economist’s traditional belief in him as a way to make the discipline work: ‘Economics started to get mathematical in the 1940s and especially in the 1950s and when it got mathematical, the math got hard very quickly. The only way to make the math easy is to make the people very smart.’ Thaler thinks that economists under 40 accept that homo economicus is a flawed concept while those older than that cling to the old certainties. But this problem is self-correcting. With a hearty laugh, Thaler recalls Max Planck’s adage: ‘science marches on, funeral by funeral’.

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Chingford Man

July 18th, 2008 7:39pm Report this comment

Politicians chasing the next new fad - well fancy that.

Wouldn't it be nice if we had some politicos able to form their own view of the world independently and frame policies accordingly, instead of clinging to the latest fashion?

Homo Neanderthalensis

July 20th, 2008 12:56pm Report this comment

I'm already looking forward to seeing what kind of nudge will be necessary to get a JSA-claiming heroin addict back into full time employment.

David Lindsay

July 21st, 2008 1:29am Report this comment

I’d love to know how much Richard Thaler and Cass Sunstein are paid for their statements of the bleeding obvious. But it is good to see that the agenda is no being set by State regulation of the economy in the service of greater social, cultural and political goods.

So, will David Cameron explain how he intends to “nudge” people into buying British, or into marrying and having children in that order, or into refraining from illegal drug use? Surely he isn’t saying that he doesn’t believe in such things?

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