Nudging Merit Goods: Conceptual, Normative, and Practical Connections

Abstract

Mainstream economics has traditionally maintained a respect for preferences and the choices that individuals make based on them. But recent advances in psychology and behavioral economics have led scholars and policy-maker to doubt if people make wise choices in their own interests. Based on this, libertarian paternalists endorse choice interventions—nudges—designed to steer people to decisions that will better promote their interests. However, the complex, multifaceted, and subjective nature of interests implies that policy-makers are imposing externally chosen interests for people’s own when designing nudges. In this sense, policy-makers are treating the interests they choose to advance like merit goods as described by Richard Musgrave, goals or ends that are explicitly judged by policy-makers to be worth advancing even if they are not ranked highly or chosen consistently by individuals themselves. This paper will make explicit the conceptual and normative connections between nudges and merit goods, arguing that nudges can be considered delivery mechanisms for merit goods, and recommending that libertarian paternalists abandon their claim to be advancing people’s true interests and instead adopt the objective theories of good used to justify merit goods.

Keywords:

• nudge
• merit goods
• value substitution
• ethics
• choice

Acknowledgments

I appreciate the comments of Stefan Mann and two anonymous referees for the Forum.

Notes

¹ For seminal work, see Kahneman, Slovic, and Tversky (1982). For accessible summaries, see Ariely (2010), Kahneman (2011), and Angner (2012).

² For more on these three problems, see White (2013); for similar critiques, see Saint-Paul (2011) and Rebonato (2012).

³ The distinction between soft and hard paternalism is elaborated upon in Feinberg (1986, pp. 12–16), and is discussed alongside related terminology in Dworkin (2014). The same terms have also been used to distinguish between libertarian and coercive paternalism, although either could be soft or hard; see Conly (2013, pp. 5–6).

⁴ For evidence that we do not know our own interests (or selves) as well as we imagine we do, see Loewenstein and Schkade (1999), Gilbert and Wilson (2000), and Haybron (2008, chapter 10).

⁵ Note that here I focus on the value substitution inherent in nudges and its role in an internal critique of the practice, and less on their manipulative aspects and implications for autonomy, which comprise an external critique. (As one anonymous reviewer correctly advised, even if we knew for certain a person’s true interests, he or she may still disapprove of being nudged in their direction.) Manipulation, which is invoked by the leverage of unconscious cognitive processes in nudges, is a much more complex issue and one that also indicts private firms who use behavioral techniques in marketing and advertising (for example). On manipulation in general, see Coons and Weber (2014), and on the manipulative aspect of nudges, see White (2013, chapter 5).

⁶ For more on the distinctions and the criticisms discussed below, see White (2016a).

⁷ Modern paternalists also argue that the justification of any particular nudge is an empirical question based on the costs and benefits of the intervention. However, the costs and benefits will in large part be based on the effect of the nudge on people’s interests, which is impossible to know given the subjectivity of those interests—and if the cost–benefit analysis is based on the imposed interests that the nudge is designed to promote, this begs the (empirical) question in favor of the nudges.

⁸ It is also invoked (in a slightly different way) in Kirchgässner (in press) with respect to the issue of merit goods in relation to nudge policies.

⁹ See White (2014, pp. 55–61) for more on objective theories of the good in relation to economics and policy.