The New Yorker
Originally published 30 Sept 23
Here is an excerpt:
Despite a good deal of readily available evidence to the contrary, neoclassical economics took it for granted that humans were rational. Kahneman and Tversky found flaws in this assumption, and built a compendium of our cognitive biases. We rely disproportionately on information that is easily retrieved: a recent news article about a shark attack seems much more relevant than statistics about how rarely such attacks actually occur. Our desires are in flux—we might prefer pizza to hamburgers, and hamburgers to nachos, but nachos to pizza. We are easily led astray by irrelevant details. In one experiment, Kahneman and Tversky described a young woman who had studied philosophy and participated in anti-nuclear demonstrations, then asked a group of participants which inference was more probable: either “Linda is a bank teller” or “Linda is a bank teller and is active in the feminist movement.” More than eighty per cent chose the latter, even though it is a subset of the former. We weren’t Homo economicus; we were giddy and impatient, our thoughts hasty, our actions improvised. Economics tottered.
Behavioral economics emerged for public consumption a generation later, around the time of Ariely’s first book. Where Kahneman and Tversky held that we unconsciously trick ourselves into doing the wrong thing, behavioral economists argued that we might, by the same token, be tricked into doing the right thing. In 2008, Richard Thaler and Cass Sunstein published “Nudge,” which argued for what they called “libertarian paternalism”—the idea that small, benign alterations of our environment might lead to better outcomes. When employees were automatically enrolled in 401(k) programs, twice as many saved for retirement. This simple bureaucratic rearrangement improved a great many lives.
Thaler and Sunstein hoped that libertarian paternalism might offer “a real Third Way—one that can break through some of the least tractable debates in contemporary democracies.” Barack Obama, who hovered above base partisanship, found much to admire in the promise of technocratic tinkering. He restricted his outfit choices mostly to gray or navy suits, based on research into “ego depletion,” or the concept that one might exhaust a given day’s reservoir of decision-making energy. When, in the wake of the 2008 financial crisis, Obama was told that money “framed” as income was more likely to be spent than money framed as wealth, he enacted monthly tax deductions instead of sending out lump-sum stimulus checks. He eventually created a behavioral-sciences team in the White House. (Ariely had once found that our decisions in a restaurant are influenced by whoever orders first; it’s possible that Obama was driven by the fact that David Cameron, in the U.K., was already leaning on a “nudge unit.”)
The nudge, at its best, was modest—even a minor potential benefit at no cost pencilled out. In the Obama years, a pop-up on computers at the Department of Agriculture reminded employees that single-sided printing was a waste, and that advice reduced paper use by six per cent. But as these ideas began to intermingle with those in the adjacent field of social psychology, the reasonable notion that some small changes could have large effects at scale gave way to a vision of individual human beings as almost boundlessly pliable. Even Kahneman was convinced. He told me, “People invented things that shouldn’t have worked, and they were working, and I was enormously impressed by it.” Some of these interventions could be implemented from above.
