The nudge-nudge approach to policy

Where did the buzz word originate?
It's the title of a new book which argues that the basic premise of economics - that we are "rational" actors who always make choices that "maximise" our interests - is fundamentally flawed. In the real world, as opposed to the world of textbook economics, we eat too much, drink too much, don't take enough exercise and don't save enough. Rather than thinking things through, we rely on misleading rules of thumb - and we are heavily influenced by how choices are presented to us and what we think others are doing. Instead of making "rational" choices (see box), we "go with the herd" or stick doggedly to the status quo. In short, we are less like Mr Spock and a lot more like Homer Simpson.

How does that insight affect policy?
To persuade irrational beings to do the right thing, argue the book's authors - Richard Thaler, a behavioural economist, and Cass Sunstein, a law professor - you must slyly coax them into doing it. So you can't leave it to the free market to come up with the optimum solution (the traditional neo-liberal response) any more than you can rely on the "Big Clunking Fist" of state regulation. Instead the authors advocate a third way, "liberal paternalism", based on the use of "gentle non-intrusive persuaders" which they refer to as "nudges".

What sort of nudges do we encounter in everyday life?
At the simplest level, the self-help level, nudges consist in the use of reminders. If you want to save money on electricity bills, buy a Wattson, a device that tells you how much energy you're using in your home. If you want to lose weight, write down what you eat. A more subtle variant is to make small alterations in what the authors call "the architecture" of choice: thus, dieters should serve themselves on smaller plates. At the commercial level, nudges often take the form of implicit instructions. Managers at Amsterdam's Schiphol airport, eager to reduce cleaning costs in the men's loos, had a fly drawn on the porcelain of each of the urinals - a behavioural nudge that has improved the accuracy of penile aim by 80 per cent. In each case, a key attribute of the