I'm heartened to see that Richard Thaler, co-author of my favorite pop-economics / psychology book of recent years - Nudge - is being retained by the new government in the United Kingdom in a so-called "nudge unit". The fundamental hypothesis of the book is that by better framing choices for their citizens, governments can encourage personal decisions that are better for both individuals and society. The authors rely on recent findings in behavioral science to construct a theory on "choice architecture" that results in better outcomes. Examples cited include placing dessert at the end rather than the beginning of the line in school cafeterias and making retirement savings and health insurance plans opt-out rather than opt-in.
Of course as Thaler and Sunstein are economists, the arguments are made to emphasize incentives. And because goverments play a critical role (in the shaping) but the fundamental decision is left with the individual, they refer to this approach as "libertarian paternalism".
Here in the United States, Sunstein is already an adviser to the White House, but I've yet to see any examples of how this theory has been translated to policy. In Britain, the newly-elected conservative government is hoping that Thaler can help effect change initially in the realm of public health, tacking societal challenges such as obesity, alcoholism, and limited organ donation.
The aim of the unit ... is to explore ways of encouraging citizens to behave in social ways relying on market incentives, as opposed to regulations.
This is an approach that I support. In complex arenas such as savings and health, people are bombarded with decisions daily and often take the choice that is easiest or the default rather than thinking about the issue thoroughly. This is human. Governments should recognize this reality, however, and frame these decisions thoughtfully themselves (they are usually the ones to frame them anyhow). It's a public policy approach that's both free-market and smart.