The Best "Nudges" are Market Driven
In several of our earlier posts we have covered Richard Thaler and his new book “Nudge”. Thaler’s book is about using behavioral economics to promote libertarian paternalism. Today, Tim Harford presents an interesting piece arguing that the best nudges come from clever entrepreneurs vs politicians. Mr. Harford is the author of the Undercover Economist and writer for the Financial Times
Article Excerpts (Via Undercover Economist):
The real justification for libertarian paternalism is that it is a failsafe system to guard against bad decisions. Most of those bad decisions come from government: you and I almost certainly know our own preferences and interests better than any government bureaucrat. That is the case for individual freedom of choice.
Effective nudges are so common in the private sector that politicians should be asking themselves why. What is it about competitive markets that produces such clever wheezes?
Article Wrap-up (Via Undercover Economist)
The answer has been obvious for a long time: the market is a machine for producing good ideas, promoting experimentation and scything down concepts that fail, all the while giving the customer the power to choose.