Nudging for freedom


Jason Collins


February 2, 2015

“Nudges” change the decision environment so that people make “better” decisions, while retaining freedom of choice. Fitting within what Cass Sunstein and Richard Thaler call “libertarian paternalism”, nudges are often framed as alternatives to coercive measures. If you can nudge most people toward the “right” decision through the way you frame the choice, the coercive measure is not required.

A recent example is the introduction of default retirement savings in Illinois. A default three per cent of income will be directed to a retirement savings account, with freedom to opt out or increase the contribution. Another is where the Australian Financial System Inquiry recommended offering a default retirement income product (with certain income and risk management characteristics) to people when they retire, with people otherwise free to choose another product or blow their retirement savings on a sports car.

Of course, plenty of coercive measures get branded as nudges, such as proposed bans on large sugary drinks. And after extolling the benefits of retaining choice, choice restricting measures are often praised (such as in this speech by Andrew Leigh, where he praises compulsory superannuation and then defends behavioural economics against claims it is paternalistic).

But, to the point of this post - Are there are any examples of coercive government requirements being wound back explicitly because a nudge was considered effective? Has anyone stated “We have some coercive measures in place, but we have realised that by framing decision in the right way, most of you will make a good decision. Let’s remove these coercive requirements and replace them with a nudge.”?

For example, have there been any compulsory savings programs replaced by default programs on the basis that the default program could be just as effective? (In fact, a default program with a higher contribution rate could result in more savings than a compulsory program.)

If you know of any examples, please help me out. At the moment, my example basket is empty.

*Bryan Caplan has previously proposed some measures of this nature, none of which have been adopted.