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The normative and descriptive weaknesses of behavioral economics-informed nudge: depowered paternalism and unjustified libertarianism

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  • Riccardo Viale

    (University of Milano – Bicocca
    Collegio Carlo Alberto)

Abstract

The article aims to demonstrate that the nudge theory suffers from three main weaknesses stemming from its theoretical dependence on behavioural economics. The first two weaknesses endanger the paternalistic goal, whereas the third does not justify the libertarian attribute. The first weakness lies in the incomplete realistic characterisation of behavioural economics theory that is the central theoretical pillar of Nudge theory. The second weakness is even more relevant. The normative model of behavioural economics is neoclassical rationality. It can be applied to choices in conditions of risk, when it is possible to forecast the probability of the outcomes of one’s choices. On the contrary the real life problems are inside a complex and uncertain environment. In an uncertain environment the neoclassical algorithms are no longer valid, in that they postulate the knowledge of the probability of the outputs. Thus errors and bias, as observed in behavioural economics, are not such in many instances, but they are instead adaptive and therefore rational responses to the context of decision-making. Therefore nudge theory that pursues the normative paternalistic objective of neutralising the bias and judgement errors discovered by behavioural economics and putting paternalistically the citizen on the right track, is in fact proceeding in the wrong direction. The last weakness concerns an assumption of Nudge theory about the duality of mind. System 1 represents the intuitive mind, while System 2 corresponds to the analytical one. System 1 tends to make decisions quickly and unconsciously, while System 2 follows a slow and conscious process. Biases and judgement errors are mainly generated by System 1. However, System 2 may later intervene to correct them. From this premise, the Nudge theory affirms its libertarian character. In this paper I will argue that the dualism of the mind would not entail the reversibility of some nudges, particularly of default states. In this way the fundamental pillar is weakened to justify the libertarian character of the nudge theory.

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  • Riccardo Viale, 2018. "The normative and descriptive weaknesses of behavioral economics-informed nudge: depowered paternalism and unjustified libertarianism," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 17(1), pages 53-69, November.
    • Handle: RePEc:spr:minsoc:v:17:y:2018:i:1:d:10.1007_s11299-019-00207-2
    DOI: 10.1007/s11299-019-00207-2
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    1. Riccardo Viale, 2019. "Architecture of the mind and libertarian paternalism: is the reversibility of system 1 nudges likely to happen?," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 18(2), pages 143-166, December.
    2. Nathan Berg & Yuki Watanabe, 2020. "Conservation of behavioral diversity: on nudging, paternalism-induced monoculture, and the social value of heterogeneous beliefs and behavior," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 19(1), pages 103-120, June.

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