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Nudge Versus Boost: Agency Dynamics Under Libertarian Paternalism

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  • Ralph Hertwig
  • Michael D Ryall

Abstract

Thaler and Sunstein (2008) advance the concept of ‘nudge’ policies—non-regulatory and non-fiscal mechanisms designed to enlist people's cognitive biases or motivational deficits so as to guide their behaviour in a desired direction. A core assumption of this approach is that policymakers make artful use of people's cognitive biases and motivational deficits in ways that serve the ultimate interests of the nudged individual. We analyse a model of dynamic policymaking in which the policymaker's preferences are not always aligned with those of the individual. One novelty of our set-up is that the policymaker has the option to implement a ‘boost’ policy, equipping the individual with the competence to overcome the nudge-enabling bias once and for all. Our main result identifies conditions under which the policymaker chooses not to boost in order to preserve the option of using the nudge (and its associated bias) in the future—even though boosting is in the immediate best interests of both the policymaker and the individual. We extend our analysis to situations in which the policymaker can be removed (e.g., through an election) and in which the policymaker is similarly prone to bias. We conclude with a discussion of some policy implications of these findings.

Suggested Citation

  • Ralph Hertwig & Michael D Ryall, 2020. "Nudge Versus Boost: Agency Dynamics Under Libertarian Paternalism," The Economic Journal, Royal Economic Society, vol. 130(629), pages 1384-1415.
  • Handle: RePEc:oup:econjl:v:130:y:2020:i:629:p:1384-1415.
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    File URL: http://hdl.handle.net/10.1093/ej/uez054
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    Cited by:

    1. Lazaric, Nathalie & Toumi, Mira, 2022. "Reducing consumption of electricity: A field experiment in Monaco with boosts and goal setting," Ecological Economics, Elsevier, vol. 191(C).
    2. Primidya K. M. Soesilo & Maureen L. Morrin & Nese Nur Yazgan Onuklu, 2021. "No longer green with envy: Objectifying and destroying negative consumer emotions," Journal of Consumer Affairs, Wiley Blackwell, vol. 55(3), pages 1111-1138, September.
    3. Löfgren, Åsa & Nordblom, Katarina, 2022. "Sustainability preferences and financial decision-making among mutual fund investors," Working Papers in Economics 826, University of Gothenburg, Department of Economics.
    4. Kai A. Konrad, 2023. "The Political Economy of Paternalism," Working Papers tax-mpg-rps-2019-17, Max Planck Institute for Tax Law and Public Finance.
    5. Daria Gritsenko & Matthew Wood, 2022. "Algorithmic governance: A modes of governance approach," Regulation & Governance, John Wiley & Sons, vol. 16(1), pages 45-62, January.
    6. Victor I. Espinosa & William Hongsong Wang & Jesús Huerta de Soto, 2022. "Principles of Nudging and Boosting: Steering or Empowering Decision-Making for Behavioral Development Economics," Sustainability, MDPI, vol. 14(4), pages 1-18, February.
    7. Löfgren, Åsa & Nordblom, Katarina, 2020. "A theoretical framework of decision making explaining the mechanisms of nudging," Journal of Economic Behavior & Organization, Elsevier, vol. 174(C), pages 1-12.

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