IREF - Institute for Research in Economic and Fiscal issues
Fiscal competition and economic freedom
Nudge theory, according to its founders Richard Thaler and Cass Sunstein, is a kind of libertarian paternalism that helps people towards making choices that can improve their health, wealth and lives.
The theory relies on the insights of the Heuristics & Biases research program, and the assumption that people are systematically irrational. Nudge theory has been used in several cases by both government and private administrations, in an attempt to guide individuals towards making preferable decisions, always on the basis that these decisions would be better for them.
The aim of this paper is to review the relative literature of the theory’s applications in both the private and the public sector, and also examine the effectiveness of its applications. Specifically, we examine examples where nudge theory has been broadly used as a policy making tool, such as in the UK, as well as in other countries around the globe.
In addition to that, we present the implementations of the theory in the private sector and in particular, we discuss the concept of nudge management, that is now applied by many big organizations.
Moreover, we also present applications related to the controversial field of using nudges for commercial purposes. Finally, since nudging is con-sidered by many a controversial practice, we also investigate the ethical concerns that often arise from the interventions related to the behavioral insights and we attempt to present a critique of the theory’s basic assumptions.
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