By Leon Shepherd

This was originally going to be a single article, but it become over 5,000 words, so it got split into two articles. Expect the second article on nudging soon.

There is this single idea of the perfectly rational human has been the foundation of Libertarian thought; from Ayn Rand’s discussion of the perfect decision makers of the individual rational man and Nietzsche’s ‘übermensch’ who acts perfectly in his own interests against all social pressure and ideological actions for his self-actualisation. Moving onto becoming the foundation of the entire Libertarian philosophy, that every man is perfectly rational and able to make the correct decisions; as such, anyone who fails to act in a rational manner is to be blamed themselves. The Libertarian perspective is simple:

Caveat emptor; buyer beware.

The truth is that there are many factors that we don’t even notice that work against our judgement; we have discussed the many, many weaknesses (and occasionally, a strength) of this argument in the following aspects:



So we shall discuss the theory of Humans and Econs, proposed by Sunstein and Thaler (2009), in their work that would eventually lead to a Nobel Prize for Thaler. We shall explain and support that argument in depth in this article using the example of obesity across society as proof that people act not as economic genius’, but as flawed humans. In a further article, we shall explain the extent to which nudges unknowingly change our behaviour, without our consent or awareness.

This research is heavily supported; focusing only on ten journals, Battaglio et. al. (2018) found over 1,300 published articles on cognitive bias and nudging alone; the majority of research has focused primarily on citizens and how to nudge them to better choices. Why?

Because it is useful for governments to have healthier, happier citizens, and it is useful for businesses to control their markets. While Battaglio et. al. (2018) focused on the benefits for improving the decisions of government workers and public administrators, let’s be honest; this is research focused on making the lives of the common man healthier.

“Libertarian Paternalism”

Sunstein and Thaler (2009) state in their foundational book ‘Nudge’ that they fall under the umbrella called ‘Libertarian Paternalism’.

The argument they make is simple: they do not stop or limit any choices. Let’s take a few famous examples they use.

In terms of organ donors, they found that the majority of people will simply default (known as the ‘status quo bias’). If you want to increase organ donations, place the default as ‘Yes, I’ll donate”. People being lazy or unsure will simply choose the default option, and thus you get the desired outcome without forcing people to donate.

In the case of the Amsterdam Airport, who placed a small fly scratching into the urinals. Nothing else. Accuracy for men improved by 80% with absolutely no input or extra effort, simply because you gave men something to aim at.

So if there is a selection of food, how to organise it? Currently, we let two methods decide. Either we use the method of ‘being lazy’ and slap whatever wherever we put it, or we allow the market to decide, with suppliers pressuring for their products to be placed first. Research suggests that whatever is eye level is what we pick.

So to improve public health, Thaler and Sunstein (2009) argue we should place fruit and vegetables at this level, which will increase the consumption of these healthy foods and lead to outcomes that are better.

In all of these examples, you have the choice to refuse donation, to pee on the floor, and to eat nothing but crisps (making it Libertarian), but the decision maker (or choice architect, as they put it) can make it easier and more likely to follow predetermined healthier and desired outcomes (making it Paternalistic) (Thaler and Sunstein, 2009).

This theory uses a combination of microeconomic incentives and efficiency and behavioural psychology to create a system of low investment, high reward behavioural changes. It is simple, elegant, and worthy of the Nobel Prize they won. Let’s ask why it is oxymoronic.

Oxymoronic Libertarian Paternalism

However, as we examine the evidence of the limitations in human perception, intelligence, and independence, I cannot help but come to a conclusion; the lack of control we actually exercise over our behaviour, and the extent to which we are controlled and manipulated without our knowledge means that, while Nudging is very paternalistic, it is not Libertarian at all because it is so overly effective that it is hard to argue people retain a real sense of independent choices.

And the lack of use for nudging for positive outcomes, but instead being used by corporate actors for potentially negative outcomes for the sake of profit over health and happiness, there is an argument that the technique is current an exploiter, rather than a parent.

We have a theory that claims Libertarian Paternalism, but in practise, is too powerful to be libertarian, and too exploitative in today’s marketplace to be paternal. Due to the massive practise of these techniques already, there is no way to reclaim the liberty from market actors, and it would be better to use them for healthier, happier outcomes, and at least reclaim the paternal aspect of the theory.

In a future article, we shall cover yet more theory, examples, and research into nudging, but for now, we shall return to the issue of Econs and Humans.



Humans and Econs

One of the old economic assumptions is that every person acts perfectly rationally and for self-interest; this in turn means that the market is the most efficient, and therefore best use of goods and services. This in turn will lead to economic growth, which in turn will make everyone rich. This is the Libertarian argument, and the Neo-Classical economic argument.

So the question is why do people make bad decisions? People spend literally tens of thousands of dollars on education that leads to no improved salary or employment. People are fatter, sicker, more divorced, and everyone believes that they best understand the political situation, and the other side of politics are useful idiots voting against their interests. We all accept that everyone but ourselves are idiots, but believe that the government/corporations are rational perfect actors who don’t mistake mistakes (despite being full of the same idiots that you look down on).

This is one of the contributions from Thaler and Sunstein (2009); the idea of the ‘Homo Economus’ (Econs) and ‘Humans’; the behaviour expected in traditional economic theory, and the behaviour actually displayed by the beautiful and flawed humanity we actually are. This helps to explain the proliferation of poorly chosen yet widely acted behaviour.