EESC welcomes Nobel Prize for Richard Thaler on nudge theory

Last week, US academic Richard Thaler received the Nobel Prize in economics for his pioneering work in the field of behavioural economics.  Mr Thaler is particularly well known for his research on nudge theory. He coined the term “nudging” to explain how certain actions can encourage individuals to make certain decisions.

“Nudges have two major advantages: they do not restrict the freedom of individuals, and they cost very little but have the potential to make a considerable impact,” said Thierry Libaert, rapporteur of the EESC opinion. “They can therefore be used as a complementary tool for public policies which seek to make individuals behave more responsibly towards their health, the environment and so on.”

One year before Mr Thaler’s award, the European Economic and Social Committee (EESC) argued in favour of nudging as a useful instrument for overcoming specific social, environmental and economic challenges.

In an own-initiative opinion on this topic, the EESC suggested nudging could be a fifth tool for public authorities alongside information and awareness-raising, financial incentives, legislation (prohibition or obligation) and exemplarity.

Two very well-known examples of nudges in Europe are fake flies painted inside urinals at Amsterdam airport in order to encourage men to take proper aim and the musical stairs in Stockholm’s Odenplan station, designed to get people to use the stairs rather than escalators.

However, nudges have their limitations. They need to be carefully designed and implemented. They also raise both technical and ethical questions. Nudges are not a substitute for informing individuals and educating them about their choices, nor can they replace traditional government activities such as legislation and financial incentives.

Additionally, the line between information, communication and manipulation is sometimes unclear. Nudges can be manipulative, to the detriment of individuals.

The EESC therefore proposes a code of ethics to prevent nudges from drifting towards irresponsible objectives. In his opinion, Mr Libaert mentioned four conditions that should be met when designing a nudge:

  • the process needs to be transparent;
  • the people involved should always be free to choose whether to act in one way or another;
  • they should be given reliable information;
  • they must not be made to feel guilty.

“We are very pleased that with this Nobel Prize, nudging is becoming a focus of debate. Subject to this code of ethics, nudges could be integrated into the general public policy framework and accelerate public policy implementation at very little cost,” said Mr Libaert.

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