Why Nudges Are Unethical

Abstract

In the last chapter, I discussed practical problems with libertarian paternalism based on information and interests, but I couldn't seem to avoid the closely related ethical issues regarding respect and autonomy that are raised by value substitution. In a way, value substitution has been in the background since the first chapter of this book, since any economic model used to explain and predict behavior has to assume some goals that are likely not the goals of any real-world person. In that case, value substitution is a problem with designing models and interpreting results-a methodological problem-but it becomes an ethical problem largely when policymakers use these models to influence behavior, especially when they presume to do it in people's interests. In other words, it becomes morally problematic when those in power act on the recommendations of behavioral economists, and the theoretical issues with behavioral economics are integrated into policy and start influencing people's lives. Even if regulators did have information about people's true interests, it is nonetheless paternalistic of them to enact laws or regulations to benefit those interests on people's behalf. The term paternalism doesn't sit well with most people, invoking thoughts of Big Brother from George Orwell's novel 1984 or "nanny-states" in which the government presumes to take care of its citizens like a parent rightfully takes care of his or her children. This is for good reason: as this chapter explains, paternalism is inherently opposed to personal autonomy, no matter what form it may take, because it interferes with people's determination and pursuit of their own interests. And as we saw in the last chapter, even if policymakers are well-intentioned, they cannot possibly know people's true interests, and as a result any paternalistic laws or regulations are crafted in policymakers' idea of people's interests (usually overly simplistic and biased). Specifically, the "libertarian paternalism" of Cass Sunstein and Richard Thaler (as well as other sympathetic writers) falls victim to the same flaw as does any type of paternalism: rather than serve people's own interests, as it claims, it serves the interests that policymakers think people do or should have. Sunstein and Thaler use the term libertarian paternalism in hopes of dispelling these concerns and convincing the reader that nudges are not coercive. But I argue that libertarian paternalism is very much coercive, and in some ways more insidious than "old school" paternalistic policies such as prohibiting or taxing behavior. Rather than telling people what to do or not to do, or influencing them explicitly with taxes or subsidies, nudges-such as changing default options or the arrangement of choiceshave an intrinsically covert nature, designed as they are to piggyback on people's cognitive biases and dysfunctions to "guide" them into the "right" choices. Even if one is comfortable with some paternalism on the part of the government if done openly and transparently, it is unseemly for policymakers to use people's decision-making flaws to manipulate them, subtly and secretly, into making choices that policymakers want them to make, rather than the ones they would have otherwise made themselves.