Lab Notes #10: On Libertarian Paternalism and the Power of a Nudge

Happy sweet 16 to libertarian paternalism: a concept introduced by behavioral economist Richard Thaler and legal scholar Cass Sunstein to argue that it’s both possible and legitimate for private and public institutions to set up structures that affect behavior while also respecting freedom of choice. Think, for example, of the automatic enrollment of new employees into a company’s 401K plan, from which employees are free to opt out of. 

In Nudge: Improving Decisions about Health, Wealth, and Happiness (2009, 2nd ed.), Thaler and Sunstein make compelling arguments about the fallibility of human desires and cognition. The prospect of a nudge in the right direction led municipalities to apply soda taxes to sugary beverages a few years back, and now new research answers some compelling questions, including: 

  • What were the effects in Philadelphia, the poorest of the top-10 cities (overall pop.) in the US?
  • Did the soda tax go far enough?  
  • When should a nudge become a shove?  

The soda tax goal: decrease consumption of sugar sweetened beverages (SSBs), since folks at the American Heart Association and the American Academy of Pediatrics determined that SSB consumption is a major contributor to obesity, cardiometabolic disease, and dental caries. Every other American drinks SSBs daily, and consumption rates are even higher in low-income communities.

A new study finds that in Philadelphia (tax est. in 2017), some folks headed into MD and NJ for soda, but that the overall reduction in taxed beverage sales was 38%–which is great news, if you want to nudge people away from behaviors closely associated with type 2 diabetes. 

In Berkeley, CA, the first city to tax SSBs, SSB consumption decreased, and water consumption increased–which is great news, as a new JAMA study suggests that SSBs and fruit juice belong in the same family on the food pyramid:

“The nutrient content of 100% fruit juices and SSBs is very similar. While 100% fruit juices contain some vitamins and phytonutrients that are missing from most SSBs, the predominant ingredients in both are sugar and water.” 

So, in the domain of sin taxes, when does a nudge suffice? When do humans need a shove? See the cigarette warning on Marlboros in a duty-free shop in Munich, Germany: 

Or the label in use in Canada since 2011: 

US labels about “can cause mouth cancer” or “can be addictive” appear subtle, in contrast. And, for what it’s worth, smoking rates in the US and Canada are 14% and 15%, respectively–and, in Germany, it’s 24.5%!

Maybe there is a good case for subtlety in the nudge economy.

Thanks for stopping by. Enjoy!