Russian man defects from the Soviet Union in the years before perestroika, arrives on our shores, and walks into an American supermarket. He discovers, for the first time, abundance: brilliantly lit aisles of long shelves stacked to a high ceiling and loaded with dozens of varieties of every imaginable good, each more or less affordable even to minimum-wage American workers. He finds the choiceand the market plenitude that demands itoverwhelming, and he faints.
This fablewhich draws on the experience of Boris Yeltsin, who described a visit to a Houston supermarket as “shattering,” and of Soviet exchange students in the 1950s and ’60s, who were sure that American stores were Potemkin emporiums, erected for their benefitwas staged in the movie Moscow on the Hudson, and persists years after the collapse of the U.S.S.R. It is not, of course, a tale about Russian deprivation or the sclerotic central planning of the Soviet state. It’s about our own spectacular case of material abundance. Choice is what makes us free, the fable goes, and the market forces freed up by choice are what make Americans wealthy.
But choice is also what makes us fat and unhappy. Put two plates in front of the average American and he’ll eat both. He’ll eat whatever is put in front of him, basically, and stop only when the food runs out. (There have been some playfully sadistic experiments showing this by means of bottomless soup bowls, and in one study, moviegoers chowed through large buckets of popcorn that they later described “as like eating Styrofoam packing peanuts.”) This is a public health issue, but there is also a public happiness problem: as sociologists from Daniel Bell to Barry Schwartz have shown, living in a land of plenty is not necessarily paradisiacal. In many casesparticularly high-stakes cases such as choosing colleges, careers, or matesthe opportunity can be psychologically crippling. We might not faint before a buffet of options like the proverbial Russian migr, but we block out the experience of confronting choices in other ways, overlooking available information, neglecting due diligence, and arriving at decisions often contrary to our own interests by economic autopilot.
And, as behavioral economist Richard Thaler and legal theorist Cass Sunstein show in Nudge: Improving Decisions About Health, Wealth, and Happiness, a wonky little book on public policy, even when we are able to make decisions, we invariably make bad ones. We sign up for free trial subscriptions, and fail to cancel them once the bills start coming. (Economists call this “status quo bias,” and marketers exploit it mercilessly.) We plan for our rosiest futures, not our likeliest ones, and nobody saves as much money as they’d like, deferring contributions to savings accounts or 401(k)s for even the most trivial expenditures. We are extremely uncomfortable with risk, even when large profits are likelier than small losses. Thaler has spent the better part of his career studying these shortcomings and mapping the ways in which ordinary people fail the standard of rational choice set for them by orthodox economics.
Our powers of estimation and forecasting are just as weak. Students handed a mug and asked to sell it to others in the class value the good at roughly twice the price others are willing to pay. (This is known as the “endowment effect,” and it complicates even the simplest transactions.) We are overconfident: 90 percent of drivers believe they’re better than average on the road, and nearly everyone thinks they have a superior sense of humor. Since homicides are more visible than suicides, most people wrongly believe they are also more common, and telemarketers who ask for larger amounts of money receive larger contributions. (This is called “availability bias.”) Teenage girls who see other teenagers getting pregnant are more likely to become pregnant themselves; and the average Republican judge shows liberal voting patterns when sitting with Democratic appointees, and vice versa. (This is plain-old suggestibility.)
Thaler and Sunstein are cheerleaders, though, not dour dons. They offer this dim portrait of human reason not to depress us, but to inspire us. In particular, they would like us to rethink the way in which public policy shapes private choice, given how suggestible most Americans arehow likely their preferences are to be determined by a meteorology of indifference, bias, and laziness.
When seniors sat down with their Medicare Part D paperwork in 2006, most didn’t feel they were making affirmative choices about managing their own health and lifestyle, but that they were flying blind through yet another maze of government bureaucracy. As a result, they became increasingly resentful at the complexity and opacity of the program. This kind of failure isn’t inevitable, but avoidable through better planning. People will make smarter decisions, Thaler and Sunstein insist, when they’re given smarter choices.
Our intuitive picture of consumer choice is of a man in a marketplace, evaluating goods. But that is really only half a model, Thaler and Sunstein say. Where is the man standing, they ask, in front of a stall, or inside one? What shape is the stall? Which kinds of goods are being sold in those to the left and right of it? How far is this stall from the entrance to the market, and which path did the man take to get here? What stalls did he pass along the way? The answers to these questions, Sunstein and Thaler say, with the force of several decades of research behind them, will determine a lot more than how long it’ll take our friend to finish shopping: they will determine what he buys, how much he buys, and what he pays for it. He has made a choice, but that choice has been shaped by a particular set of circumstances, and that context, more likely than not, is the result of intelligent design (as it were).
Thaler and Sunstein call this “choice architecture,” and in Nudge, they set out to erect an entire political philosophy according to its principles. Where others might see the lovable limitations of human reasonthe inability to keep New Year’s resolutions, say, or a preference for buying AmericanThaler and Sunstein see opportunities for policy intervention. If people won’t freely make the choices economists want them to, then perhaps a carefully calibrated piece of public policy can “nudge” them in the right direction. This philosophy they call “libertarian paternalism,” where the liberty-preserving element is that the government is always sure to give us more than a single option, and the paternalism part is that we’re generally too dumb, without additional help, to be trusted to choose between them.
But the rhetorical bark here is bigger than the policy bite. In most cases, what Thaler and Sunstein offer under the cover of iconoclasm are really just pleas for greater transparency: they would like cell phone companies to provide comparison pricing sheets to potential customers, for instance, and mortgage companies to translate complex payment models into simplified rates, and health care providers to be more forthcoming about what will or won’t be covered by a particular plan. In other cases, they venture into the realm of actual brick-and-mortar architecture, pointing out, for example, that designers who etch targets into the walls of urinals can reduce spillage by up to 80 percent. These are commonsensical suggestions, and genuinely nonideological; the earnest wonkiness of most of Nudge means that its rhetorical posture, heralding a new policy movement that breaks from the political past, seems contrived, an effort to throw stones by men who’d really rather be building glass houses.
When they do throw stones, a favorite target is retirement plans. When a new employee joins a company that sponsors a 401(k), he is typically given a few forms to fill out in order to participate; if he neglects to fill out the forms, he won’t collect any of the benefits. In this standard, opt-in model, only 20 percent of new employees join the 401(k) within three months, according to one study, and only 65 percent bother to sign up after thirty-six months. But a company that automatically enrolls new workers, giving them the option instead to leave the program when they wish, can expect 90 percent participation after three months and 98 percent after thirty-six months.
Some workers, of course, decline to invest in 401(k)s so that they might invest the money on their own, and others decline because they prefer cash now to security later. (Thaler and Sunstein don’t think this second option is too productive, but they aren’t about to write a law addressing it.) Most, though, seem to be forsaking long-term financial security simply to avoid the brief and trivial task of filling out a few forms over lunch at the office. The numbers are astonishing, even hard to swallow. Americans may exhibit a treadmill industriousness in some aspects of their professional lives, Sunstein and Thaler suggest, but when it comes to making real choicesand real changeswe are an incredibly passive, even lazy nation. Which means, of course, that we can be pushed pretty easily in one direction or another.
Thaler and Sunstein like that idea, and in their eagerness to remodel our decision making, they occasionally push too far. As of 2006, more than ninety thousand Americans were on waiting lists for organ transplants. (Most need kidneys.) The waiting list grows by 12 percent every year, and experts estimate that as many as 60 percent will die before an organ is found for them. Of course, there are excess organs in hospitals across the country, in the bodies of the twelve to fifteen thousand brain-dead patients who suffer irreversible injury each year. For Thaler and Sunstein, this represents what others might crudely call an “arbitrage opportunity.”
The problem, as they see it, is that we operate in the United States under “explicit consent” laws: citizens are required to authorize the removal of their organs in the event of injury, and the bodies of those who fail to express a preference are left untouched. Sunstein and Thaler would like to institute instead a “presumed consent” regime, in which, absent any expressed preference to the contrary, organs would be routinely harvested from bodies just after brain death. They point to studies showing that commitments to organ donation nearly double, from 42 percent to 82 percent, when the default is set to “donate,” and that only 43 percent of those who say they’d like to donate organs have committed to doing so under our current regime. In Germany, one of the few European countries to use an opt-in program, only 12 percent pledged their organs; in Austria, an opt-out country, 99 percent did.
As statistics, these numbers are as striking as those dealing with retirement plans, but the ethics behind that innocuous “default” are much more troubling. As Sunstein and Thaler well know, there is no reason to think that, among those who have neglected to express a preference, there are more eager participants than there are those who find the prospect of being personally scavenged after death ghastly, or who happen to object to donating on other grounds. Instituting a presumed consent policy would therefore mean harvesting organs from the bodies of roughly as many unwilling participants as willing ones. There would be benefits to the living, sure. But this brings us far from the gentle, liberty-preserving choice architecture promised by libertarian paternalism; we are closer to the definition the novelist Norman Rush once offered of blindered do-good liberalism, “To alarm and soothe in the same moment of policy.”
Here, mercifully, the humility of the authors intervenes, and, though they clearly prefer a presumed consent regime, they also offer a compromise model, politically palatable, in which applicants for driver’s licenses must express an organ-donation preference to complete their application. (The question would be posed without any default.) Nudge is, in the end, and despite its billing, a modest book, earnest rather than dogmatic, offering sensible, even familiar policy suggestions to the practically minded. If it’s a manifesto at all, it’s a manifesto for tinkering.
What the book does offer is an opportunity to reconsider the marriage between economics departments and political libertarianism. Once upon a time, self-reliance and self-sufficiency were major markers of the American character, but those market-skeptical values have been replaced on the political landscape by market-friendly libertarianism. As Sunstein and Thaler show, however, reconciling ourselves to markets doesn’t mean the government need withdraw completely from economic life, as those more doctrinaire than they might suggest: many libertarians, for instance, favor instituting an open market for organ trading, and some others have suggested that the preferences of the dead should never preside over deliberations of such matters. Now these are people in need of a nudge.