Give Reform A Bit Of A Nudge (a la Thaler)
A nice fellow implores the Australian Government to use “nudge” oriented reforms.
Click Here To Read: Give Reform A Bit Of A Nudge (a la Thaler)
Excerpt (Via Andrew Leigh)
In Nudge: Improving Decisions About Health, Wealth and Happiness, Chicago University academics Richard Thaler and Cass Sunstein argue that economists and politicians have overestimated the attention that citizens devote to decision-making. Rather than assuming that people have the time of a monk and the skills of an actuary, it might be better to craft policies for busy lives. Or to put it another way, the representative citizen is closer to Homer Simpson than to HAL.
One set of Nudge reforms aim to improve default options. In the political arena, wars have been waged over optional versus compulsory systems. Yet in many choice regimes, people simply stick with the default option. Getting defaults right can make a big difference to people’s lives.
The best known application of this kind of ‘behavioural economics’ research is in the area of savings. Recognising that the typical person under-saves for retirement, Australia introduced compulsory superannuation in 1992, and steadily increased the compulsory contribution. But for all the talk of superannuation choice, the vast majority of us are in the default fund chosen by our employer and the default plan chosen by that fund.
Changing defaults, improving information, and making government more effective are all part of what Thaler and Sunstein have tagged ‘libertarian paternalism’. Unlike most government programs, these reforms aim to improve wellbeing without constraining choice. Perhaps our cash-constrained governments could be nudged into checking them out?
Click Here To Read: Give Reform A Bit Of A Nudge (a la Thaler)
