To nudge is one thing, to nanny quite another

Behavioural economics, the application of psychological insights to economic theories and problems, has been growing in influence for decades. But with the publication of Richard Thaler and Cass Sunstein’s Nudge, it seems to have struck policy primetime – and as with many once-good ideas, it has mutated. I recently attended a meeting at one government department at which the conversation rarely strayed from the question of how the latest marketing tricks could be used to get citizens to behave as the nanny state preferred.

At a seminar for the UK’s government economic service on applying behavioural economics to public policy, I therefore expected to be the lone voice of caution – especially since fellow panellists included Dan Goldstein, a psychologist, and Pete Lunn, author of Basic Instincts, a popularisation of behavioural ideas. I was wrong: while everyone was impressed with the potential contribution of psychology and neuroscience to economics, they all seemed queasy about how quickly behavioural economics has appeared as a policy panacea.

Lunn began by displaying Poggendorff’s optical illusion, in which a diagonal line passes behind a vertical block, creating the impression of two separate but parallel lines. Thaler and Sunstein have a similar optical illusion at the beginning of chapter one of Nudge. Their point: the human brain has evolved to take short cuts in the way it processes information, short cuts that sometimes lead us astray. Hence, sometimes we could use a little help in nudging us towards the correct decision when we make mistakes.

The remainder of the article can be read here. Please post comments below.

The Undercover Economist: a guide

Publishing schedule: Excerpts from "The Undercover Economist" and "Dear Economist", Tim's weekly columns for the FT Magazine, are published on this blog on Saturday mornings.
More about Tim: Tim also writes editorials for the FT, presents Radio 4's More or Less and is the author of "The Undercover Economist" and "The Logic of Life".
Comment: To comment, please register with FT.com, which you can do for free here. Please also read our comments policy here.
Contact: Tim's contact address is: economist@ft.com
Time: UK time is shown on posts.
Follow: A link to the blog's RSS feeds is at the top of the page.
Follow on Twitter
FT blogs: See the full range of the FT's blogs here.