"Nudge" is New Socio-Economic Model

The “nudge” will be the “salvation.” No, not the hideous practice of recommendations, favors and fixed competitions that distorts the economy and disheartens merit. It will be the “Nudge,” the gentle, but effective nudge to pick the right choice without imposing it. Two American writers, Richard Thaler, an economist of the school of Chicago; and Cass Sunstein, a constitutional expert at Harvard, have theorized about this “nudge” in a book that not only sold out, but became one of the texts that Barack Obama read and re-read, bringing it on the electoral campaign.

Obama found it so believable that he appointed Cass Sunstein himself as the “czar” of the new regulation, the one who over the next months will have to re-write the rules of the national economic game, rules devastated by the “casino” of Wall Street. (The book will be distributed in Italy this Thursday: “Nudge. La Spinta Gentile,” Feltrinelli, pp. 284, 16 euros, translated by Adele Oliveri).

The “doctrine of a mannered and gentle nudge” has the inevitable appeal of being both brand new and a genetic cocktail of all the extinct, failed or dying species of social economic models swept away by the broom of history.

Thaler comes from the school of Chicago, which was made big by liberals and ideological monetarists like Hayek and Friedman. However, he doesn’t believe anymore in the miraculous self-adjusting ability of market.

Sunstein, who, besides having the background of a constitutionalist, cultivates and studies the theories of human behavior, was nonetheless a supporter of both Bush and Greenspan. This was before he persuaded himself that the freedom of choice and the “pursuit of happiness” granted by the Constitution can lead to disastrous choices for the individual and for society.

And here comes the formula of the nudge… It’s not the heavy hand of a “Mother State” which plans and preordains decisions, influences and addresses investments. It provides persuasion to modify behaviors and make better choices, without compromising autonomy and everybody’s freedom. It’s the good father’s… the wise mother’s… the smart teacher’s attitude. Basically, it’s the Socratic method. It doesn’t tell students or children “be back by midnight,” but lets the individual understand that coming back by midnight and not spending the whole night awake, is better, more fun, more useful.

The concept of the nudge has been called “paternalist liberalism,” an apparent oxymoron that the new lord of the rules in the Obama era explains by one of those concrete and popular examples that the American academy adores and uses. This example is free from the beginner’s complex that too often oppresses Italian professorial literature: “In America we don’t save enough money” – he says – because “Americans don’t see the benefits of saving. Firms, for example, could offer employees a program that, as incomes increase, withholds progressively a certain percentage out of the salaries; interests rates that get better and better. In societies that did that, the rate of saving tripled.” We distinguish ourselves – the “behaviorist” in him says – by being creatures of habit. Casinos know the architecture of games and study interior design and routes where we little mice lose the sense of time and place, so we are induced to play.

So, why not apply to daily life what Thaler and Sunstein baptize “the architecture of choice”? “Imagine a school cafeteria or a buffet table. As you walk in, the first things you notice are French fries, hamburgers, bacon, while fruit, healthy food, are often far away. I can guarantee you that anybody, even the most health fanatic, will surrender to temptation. I don’t want French fries and sausages to be prohibited. I would like them to be the most difficult choice, the most far away. That being secured, if someone still wants to stuff himself with fried bacon, go ahead. But we will have pushed him, without forcing him, to take the best decision for himself, for the environment, for the general economy.”

[Editor’s note: any quotes from the book “Nudge” are translated, and cannot be verified as original].

In the crazy years of sub-prime mortgages, before becoming inevitably “toxic,” finance’s cafeteria would offer miserable and dazed consumers, and professional operators, as well, a buffet of options where the worst, the riskiest, were the best presented and most appealing. It was obvious that mice would turn to them. Experience shows that, when facing too many choices, citizens tend to procrastinate, to put off, to pick the first option they see, for the sake of not losing their minds. It’s useless to impose rules and restrictions: if confusion remains so stunning, predators will always win. It would be unfair to put restrictions by law.

The “liberal paternalist” has, instead, to address the smartest, objectively proven and well documented options. If we, then, still want to bet everything on the roulette, good luck. So, “gentle nudges” and an “architecture of good choices,” within a political frame that grants freedom of action without being afraid of pointing out what’s wrong and what’s right, are the thoughts that explains the success of this book, printed over and over again as a best seller in every edition. It also hints a little bit at the “Obama enigma” that makes denigrators go crazy, and often even makes admirers nervous.

Obama is always too socialist for ultra-liberals, too liberal for those nostalgic for Keynes. The key to figuring out who the new president is, and how he conceives the role of central government, is in this book. This is a book that critics, the orthodox of various ideological and economic beliefs, find too optimistic, almost utopian in its hope to reform gently the disastrous behaviors of omnivorous consumerism and furious speculation. In fact, the accusation of being too optimistic is often pointed at Obama, after the years of the grim Bush catastrophe. This is a reason why this “paternalistic and progressive” or “liberal and interventionist” president is so well liked, and why he gives us hope.