The Rationality Paradox of Nudge: Rational Tools of Government in a World of Bounded Rationality

Abstract

Nudge and the wider behavioral economics approach has become increasingly dominant in contemporary political and policy discourse. While much attention has been paid to the attractions and criticisms of nudge (such as liberal paternalism), this article argues that nudge is based on a rationality paradox in that it represents an approach that despite its emphasis on bounded rationality, does not reflect on its own limits to rationality. The article considers the implications of this paradox by considering mechanisms that influence government decision making and mechanisms that lead to unintended consequences in the context of policy interventions.