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Economic man is a myth, but ‘nudging’ is a distraction

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The University of Chicago’s Richard Thaler recently won the Nobel Prize for his contributions in behavioral economics, much of which centers on challenging rational choice theory.

“Renowned for his use of data to observe and predict how people behave in the real world,” writes Derek Thompson, “Thaler’s career has been a lifelong war on Homo economicus, that mythical species of purely rational hominids who dwell exclusively in the models of classical economic theory.”

Victor Claar has helpfully summarized Thaler’s work at length, noting his popular framework of “nudge units, which provide a government mechanism for prodding us into “making choices that are better than the ones we might make otherwise.” Claar rightly challenges us to consider the risks of promoting the government as “nudger-in-chief,” and Rev. Ben Johnson offers at least one example of the type of destruction that “nudging” sometimes promotes. Alas, as economist David Henderson reminds us, we’d do well to apply Thaler’s same theory of irrationality to the nudgers who nudgers.

This isn’t to say that behavioral economics as a science is of little value, nor that its applications will only lead to economic disaster. Indeed, in its most basic intellectual assumptions, Thaler’s “lifelong war on homo economicus” offers a healthy correction: Man is not a robot.

In many ways, the economic planners of yore have ignored that reality, using rational man as in put that distorts our public policy, perverts our incentives, and lead to economic ruin. In turn, this leads us to ignore the social and spiritual side of the human person, excusing away our thoughts and affections at the mercy of a cold and limiting earthbound order.

What’s more important, however, is whether those lessons are applied before and beyond the battles about public policy and government intervention.

In Thaler’s case, the goal of “nudging” comes next, distracting us from the broader implications. In doing so, he risks the same mistakes of the rational-choice theorizers, but in the other direction, treating humans as pawns to be moved or consumers to be manipulated.

So if “nudging” isn’t the obvious next step, how are we to respond in a world wherein economic man is now myth? As Father Sirico writes in the concluding chapter of his book, Defending the Free Market, we do so simply by pursuing and preserving freedom (and using that freedom rightly):

In real life, people are motivated by much more than what economists describe as “maximizing utility” – especially where “utility” is understood in narrowly materialistic terms. The economic truth of economic man is true enough (you ignore human self-interest and the laws of supply and demand at your peril), but it is not the whole truth about who human beings are.

Any man who was only economic man would be a lost soul. And any civilization that produced only homines economici to fill its markets, courts, legislative bodies, and other institutions would soon enough be a lost civilization. Familial love, voluntary dedication to philanthropy and faith, the creation of art and music would be at their most minimal level, and whole sectors of life would completely vanish…

The good news is that by rolling up our sleeves and digging for the truth, by retrieving a right understanding of the human person, we can turn things around. The tradition that gave birth to a morally animated liberty—not merely the power to do what one wants but the right to do what one ought(as Lord Acton observed)—is not a tradition of mere utility, selfishness, pleasure-seeking, or determinism. Freedom rightly understood is not a license to behave like spoiled adolescents but rather the noble birthright of creators made in the image of God. As long as we refuse to sell this birthright for a mess of materialist pottage, hope remains.

As humans created in the image of God, destined to glorify him in all that they do, our actions will often depart from the tidy boxes and categories of modern academia and economic science, even in the case of Thaler’s cutting-edge paths to “predictability.”

Psychology matters, but how do we account for the roles of Word and Soul and Spirit? Thaler and others in his pioneering discipline are doing us a great service in dismantling false notions of economic man, but how we respond to that reality demands a great deal more than good psychology and clever political game-playing.

It requires freedom, and with that freedom, the will to choose love – “rationally,” “irrationally,” and otherwise.

Image: Behavioural Economics, Chatham House (CC BY 2.0)

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Joseph Sunde is an associate editor and writer for the Acton Institute. His work has appeared in venues such as The Federalist, First Things, The Christian Post, The Stream, Intellectual Takeout, Foundation for Economic Education, Patheos, LifeSiteNews, The City, Charisma News, The Green Room, Juicy Ecumenism, Ethika Politika, Made to Flourish, and the Center for Faith and Work. Joseph resides in Minneapolis, Minnesota with his wife and four children.

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