Institute for Research in Economic and Fiscal issues

IREF Europe - Institute for Research in Economic and Fiscal issues

Fiscal competition
and economic freedom


IREF - Institute for Research in Economic and Fiscal issues
Fiscal competition and economic freedom
https://en.irefeurope.org/1247

An Impossibility Result on Nudging Grounded in the Theory of Intentional Action
by Sergio Beraldo

WP 2018-01. Executive summary.

According to Thaler and Sunstein (2008), a nudge is any aspect of the choice architecture that alters people’s behaviour in a predictable way without forbidding any options or significantly changing economic behaviour. This is what happens, for example, when an authority sets up a default option or arranges the alternatives given to individuals in such a way as to make the choice of a given alternative more likely.
In recent years, nudging has become very popular both in the United States and in Europe, as evidenced by the technical support committees constituted by the governments (Behavioral Sciences Team in the USA, Behavioral Insight Team in the United Kingdom) or by the “Nudge it” project of the European Commission.

There are some reasons behind this popularity. First of all, nudging requires a modest amount of public resources, since in most cases the authority needs little more than redefining the choice environment. Secondly, it does not seem to violate individual freedom in any way, and meets approval by all political parties.

Yet, there are reasons to believe that nudging threatens people’s control over their own evaluations and deliberation.

In this paper, the author provides an argument against the use of nudges that trigger automatic behaviour without involving reflective thinking. Setting up default options to increase organ donations or contributions to a pension scheme are pertinent examples, as well as arranging the options available to consumers to increase the probability that a given choice will take place.

In particular, the author proves that if nudges are motivationally irrelevant (as their supporters maintain), i.e. nudges do not change how individuals’ preferences translate into their choices, and individuals’ are unlikely to be fooled (the so-called “no money pump condition”), any choice induced by a nudge must be unintentional. Hence, it reflects exclusively the preferences of the authority.
This entails a violation of individual autonomy and runs against liberal principles.

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WP 2018-01 An Impossibility Result on Nudging Grounded in the Theory of Intentional Action

by Sergio Beraldo

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