Can governments change behaviour and save money in the process?by Jonathan Derbyshire / October 23, 2015 / Leave a comment
I recently attended a policy roundtable on the UK energy market. One of the subjects up for discussion was “consumer disengagement,” which, according to the Competition and Markets Authority, is “impeding the proper functioning of [that] market.” Too many customers, particularly those in the poorest 10 per cent of households, are on “default” energy tariffs and are unaware of the range of deals available. “We’ve tried to poke customers into becoming more active market players,” one of the participants said, “but it’s not enough.”
I took this to be a disobliging allusion to the idea that governments can “nudge” (rather than poke) people into changing their behaviour without mandating or instructing them to do so. This is a notion popularised by the American social scientists Cass Sunstein and Richard Thaler in their 2008 book “Nudge“. Sunstein and Thaler argued that the insights of the behavioural sciences could be used both to “help people to achieve their goals” and to improve the “efficiency and effectiveness of government.” They called their philosophy “libertarian paternalism”—”libertarian” because it doesn’t appeal to the coercive power of the state; “paternalism” because it asserts that the state nonetheless has an interest in behavioural change of certain kinds.