Efficiency Criteria for Nudges and Norms

Public Choice, Forthcoming

Vanderbilt Law Research Paper No. 19-14

37 Pages Posted: 26 Apr 2019

See all articles by W. Kip Viscusi

W. Kip Viscusi

Vanderbilt University - Law School; National Bureau of Economic Research (NBER); Vanderbilt University - Department of Economics; Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Strategy and Business Economics

Date Written: April 18, 2019

Abstract

This article outlines benefit-cost criteria for nudges and behavioral norms for a wide range of policy situations. The principal benefits from well-designed policies usually derive from promoting efficient behaviors, but there also may be counterpart costs generated by discouraging efficient behaviors. The distinguishing economic characteristic of nudges is not only that they are less intrusive interventions that nudge rather than mandate behavior, but that they exploit additional policy dimensions other than financial incentives. Policies utilizing financial incentives have a cost advantage over nudges to the extent that they involve financial transfers, which are not net social costs. Failure to understand this cost distinction has led to overestimation of the cost-effectiveness of nudges compared to financial incentives. Financial incentives are flexible and can be varied continuously on a single dimension. Nudges usually involve indivisible components, but their stringency sometimes can be varied by utilizing nudges on multiple policy dimensions.

Keywords: Nudges, norms, behavioral economics, benefit-cost analysis, efficiency, cost-effectiveness

JEL Classification: D61, D91, H40, K23, H23

Suggested Citation

Viscusi, W. Kip, Efficiency Criteria for Nudges and Norms (April 18, 2019). Public Choice, Forthcoming; Vanderbilt Law Research Paper No. 19-14. Available at SSRN: https://ssrn.com/abstract=3378717

W. Kip Viscusi (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States
615-343-7715 (Phone)
615-322-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Vanderbilt University - Department of Economics

Box 1819 Station B
Nashville, TN 37235
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

Vanderbilt University - Owen Graduate School of Management

401 21st Avenue South
Nashville, TN 37203
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

Vanderbilt University - Strategy and Business Economics ( email )

Nashville, TN 37203
United States

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