20 September 2010
The coalition government has recently set up a ‘nudge’ unit in the Cabinet Office, which aims to make use of new theories in behavioural economics to help the government design environments which create the right incentives for British people to behave in a more socially integrated way (e.g. less binge drinking, save more, eat less fat), or for companies to overcome their short run focus for long run gains which benefit society (e.g. spend more on R&D). The danger is that this powerful ‘nudge’ concept is being used to ‘fudge’ the much greater Governmental role that society currently needs.
The nudge idea is that market incentives, rather than laws and regulations, should be used to change behaviour. Gordon Brown is seen as the Regulator, Cameron the Nudger. Studies have shown that Nudging may increase the amount of vegetables children eat at schools by arranging food in particular way.
Nudging is powerful as a complement not a substitute to having serious laws and regulations. It should be a ‘different’ way to achieve a goal from the use of laws but without the laws society will crumble. It would, for example, make no sense to scrap the laws against drunk driving and simply nudge people not to do it. Furthermore, while useful for issues like getting people to urinate inside rather than outside urninals in public toilets (studies have shown that drawing a fly in urinals nudges men towards this socially important result), it is less useful for the major concerns of society in transformational periods as the current one. For example, if the Government wants the UK to lead in the international race around clean/green technology (something it often gives lip service to), this requires very high levels of government investment—as all previous technological revolutions have witnessed from the internet to biotech— and serious Industrial Policy, a word that has unfortunately fallen out of fashion since Thatcher.
Industrial Policy means government having a vision about where it wants British industry to go and backing this up with heavy infrastructural investments, strengthening university research, nurturing science parks, facilitating credit for smaller companies.
It is not enough to ‘nudge’ companies to spend more on green tech, e.g. through subsidies. Company investments must happen alongside government investment, and the latter should be on a large scale if it is to have any effect...For example, the government’s Green Investment Bank promised to help release £2 billion when energy experts claim that £400 billion is needed. All this while China, which invests rather than nudges, is building one power station a week.
What is needed is for the UK’s aging energy infrastructure to be rebuilt. We need the research base of the best British universities to be strengthened. Instead we are getting major budget cuts (in infrastructure, universities, schools) and trendy talk about nudging. A very dangerous fudge.