By Patricia Houlihan
Photo Courtesy of Chicago Booth

Barack Obama made it part of his platform before he won the Democratic presidential nomination.

David Cameron, leader of Britain’s Conservative Party, “urges all his MPs to read it.”

Since Nudge: Improving Decisions About Health, Wealth, and Happiness exploded onto the scene this summer, politicians in the United States and United Kingdom have embraced the book’s belief that with a gentle guidance from designers, employers, or even the government, people can make better decisions independently. The work of coauthors Richard Thaler, the Ralph and Dorothy Keller Distinguished Service Professor of Behavioral Science and Economics in the Chicago Graduate School of Business, and Cass Sunstein, the Harry Kalven Jr. Visiting Law Professor, has become part of the political conversation around the world, finding allies on all sides of the political spectrum.

The key may be that the central idea in Nudge does not fall neatly into any political camp. Instead, it requires what Thaler calls “libertarian paternalism,” a phrase that, he admits, sounds like an oxymoron. “By ‘libertarianism,’ we mean protecting people’s right to choose,” Thaler says. “By ‘paternalism,’ we mean caring about people’s outcomes. We want to devise policies that will make people better off—choices that they themselves think are better.”

Just in Time for the Campaign

The American media, both liberal and conservative, were fascinated with the behavioral economics illustrated in Nudge.

Among the examples:

  • Firms can ask new employees to opt out, rather than opt in, of 401(k) plans.
  • Fresh fruit, instead of candy, can be placed at eye level in school cafeterias.
  • Cars for sale could display a chart showing how much a driver can expect to spend on gasoline in a year—not just gas mileage.
  • Designers of a Dutch airport etched an image of a fly in the urinals; given a target, men improved their aim. Thaler called it a prime example and jokingly suggested it be the book’s cover image.

Among those who may believe the ideas have merit is Obama. Many stories call the authors and former colleagues “informal policy advisors” to the Democratic candidate for president. The New Republic wrote, “Thaler is revered by the leading wonks on Barack Obama’s presidential campaign. Though he has no formal role, Thaler presides as a kind of in-house intellectual guru, consulting regularly with Obama’s top economic adviser Austan Goolsbee, the Robert P. Gwinn Professor of Economics at the GSB. “My main role has been to harass Austan, who has an office down the hall from mine,” Thaler quipped.

Conservative columnist George Will devoted his June 30 column in Newsweek to the book. The piece was headlined, “Dare we hope that Barack Obama shares the ‘libertarian paternalism’ of two of his former University of Chicago colleagues?” Will couldn’t resist a touch of levity. “Beginning this autumn, Sunstein, while retaining a connection with Chicago, will teach primarily at Harvard, an act of downward mobility that illustrates a central tenet of Nudge—that even intelligent and analytical people often make foolish choices,” he wrote.

A Hot Read

In Britain, the book topped Cameron’s list of summer reading for political leaders. In July, the Economist wrote that Cameron, whose policy team met with Thaler, had embraced the book for illustrating how governments can coax citizens into making choices they might otherwise avoid, such as organ donation. “George Osborne, the clever but excitable shadow chancellor, bragged in a recent newspaper article that the Tories were ‘at the forefront of this new intersect,’ extolling this enthusiasm as ‘yet more proof that the Conservative Party is now the party of ideas in British politics,’” the story said.

An editorial in the Guardian criticized the “bedraggled Labour Party” for missing a chance to champion the cultural shift outlined in Nudge. “However the immediate politics pans out, the study of behavior is disrupting the foundation stones of economics. It is unclear how many of them will be dislodged: traditional economics has pedigree and resilience. But it now faces a serious challenge—because behavioral economics is much more than a buzzword,” the Guardian wrote in September.

Thaler, who National Public Radio dubbed “the father of behavioral economics,” admitted the approach has its limitations. “I don’t think we’re going to nudge Osama bin Laden,” he told the Economist, “but maybe we can make progress on litter.”

The applause from both the left and the right has left some pundits scratching their heads. But it didn’t seem to both Thaler, who hopes the next president will keep the book—headed for paperback in March after selling more than 50,000 copies—on his reading shelf. “We happen to be friends of Obama’s,” Thaler said. “But if McCain won, we’d be happy to work with a McCain government.”

Originally published on October 6, 2008.