Category Archives: Austrian economics

An Austrian View on Nudge

Gary Galles on the Ludvig von Mises Institute site takes an Austrian, critical view at Thaler’s and Sunstein’s argument, presented in their book Nudge, that governments can increase economic welfare by paying greater attention to choice architecture. Choice architecture can help alter people’s behavior in a predictable, desirable way without restricting the options available or significantly changing economic incentives. Galles writes:

“While those interested in liberty should read those and other careful considerations of the theory behind Nudge, there is another fatal but overlooked flaw in the book’s argument. They begin by assuming that people’s current choices reflect the results when they are left alone to make them (i.e., reflecting self-ownership and voluntary market choices). That is why any shortcomings must be the fault of irrational individuals, who need paternalistic nudges to improve things. However, our current savings, organ-donation, and health choices are not those of free individuals; they are the choices made in large part because current government policies — taxes, regulations, mandates, etc. — impair incentives. They are government failures presented as market failures.”

Read Galles’ article