ABSTRACT
If citizens make bad decisions, should it be the responsibility of governments to use insights from behavioral economics to nudge their behavior in a more desirable direction? Such ‘nudging’ has been applied in countries around the world to increase pension savings, organ donation rates and affect energy consumption in homes. As one goal of governments is to enhance their citizens’ well-being, nudging may be justified, but it remains a matter of considerable debate (e.g., how can we know people’s true preferences?). In this chapter, we describe some of the ways ‘nudging’ is applied, and, also, some of its problems. We discuss why nudges are often more effective than simply using information, incentives or regulation to change behavior. For example, social incentives and pre-commitments can help to make people adhere to their goals and not to give in to temptations of immediate gratification. Behavioral insights teams around the world now help governments to design and evaluate behavioral policies. We further discuss how some governments and organizations have highlighted the value of taking into account subjective (i.e. self-reported) well-being – acknowledging that satisfaction, a sense of purpose and flourishing are vital components of the true wealth and health of the nation.
