Lobstergirl's Reviews > Nudge: Improving Decisions About Health, Wealth, and Happiness

Libertarians are always annoying, and these two are no exception. Their particular brand of libertarianism they call "libertarian paternalism" and it involves the idea of "nudges," which are things/designs/incentives that push people toward "better" options. "Better" options would include: choosing healthfullier food, not smoking, not driving drunk, enrolling in your company 401(k) plan vs. not enrolling, lessening your factory's carbon emissions. An example of libertarian paternalism of which they approve is requiring fast food restaurants to list calorie counts. More information to help you decide what to eat is good, they think, but banning high calorie menu items outright would constrict freedom, thus bad.

The way choices are presented to you is called "choice architecture." An example of poor choice architecture was George W. Bush's new entitlement for prescription drugs for seniors, Medicare Part D. There was an enormous number of plans, no good way to compare their various elements to see which plan would work best for you, and if you were unable to decide on a plan, one was selected at random for you. Not just seniors, but their doctors, pharmacists, and experts drafted by the authors found the "choice architecture" for Medicare Part D incredibly confusing, and picking out a plan took hours even for experts and economists.

(Another example of horrible choice architecture, or choice design, would be Palm Beach County, Florida's infamous butterfly ballot in the 2000 presidential election. Many voters couldn't tell which punch hole was designated for which candidate, and as a result voted for a candidate they had not intended to.)



The authors discuss nudges and choice architecture in the contexts of investing, health insurance, organ donation, school choice, privatizing marriage, and other areas. The most compelling chapter for me was on Medicare Part D, because I'm kind of a health insurance nerd. Weaker chapters were on school choice (the authors uncritically accept the notion that vouchers are good) and on medical malpractice insurance.

On the latter: they argue that the price of health insurance contains the cost of malpractice lawsuits, and therefore if a buyer of health insurance could waive filing such suits, their health insurance premium would be cheaper, and doctors and hospitals would also be able to charge them less. They claim that malpractice lawsuits increase medical costs by 5 to 9 per cent. First, who knows if that hazy range of numbers is accurate. Although tort reform is of course lovingly put forward by Republicans every time the issue of healthcare costs arises, the consensus among non-Republicans is that malpractice litigation costs are a tiny percentage of overall costs and not worth addressing. What bugs me more about this chapter is that the authors never bother to ask, or to address: just because the cost of lawsuits might vanish from their bottom line, why do we automatically believe that doctors and hospitals would charge a patient less, rather than take the savings as increased profit? How would having two types of health insurance policies, one where you could sue your doctor and one where you couldn't, affect the doctors themselves? Would doctors take patients from each category, or would they restrict their practices only to patients who had agreed not to sue them? If the former, would they charge different prices to the patients according to whether or not they might sue? In other words, this is interesting theoretically, but how would it work in practice? The authors don't care, because they are mostly interested in these clever theoretical notions.

The chapter on privatizing Social Security was another instance of mental masturbation. It looked at the system in Sweden, where accounts had been privatized, to see how the choice architecture had affected the way beneficiaries designed their investment plans. Yet the authors don't question whether privatizing Social Security is a good idea or a terrible idea (even though the paperback edition of the book went to press after the giant stock market crash of 2008-2009 and the book contains a postscript discussing some aspects of the crash that could have been avoided with proper nudges). They merely advise that although George W. Bush's yearning to privatize never went anywhere, "some version of this proposal is likely to be considered again before long". Well, the crash of 2008 killed all thoughts of Social Security privatization, at least until we become idiots again. Obviously, when countries and economies are run by idiots, all bets are off.

They wrap up the book with ideas presented to them, via their website, for other "nudges." The stupidest of these is trayless cafeterias (when people use trays, they tend to waste more food and napkins), which is a splendid idea for societies where people have four hands.