When Should Governments Invest More in Nudging? Revisiting Benartzi et al. (2017)

Review of Law and Economics (Forthcoming)

U of Penn, Inst for Law & Econ Research Paper No. 22-36

27 Pages Posted: 19 Aug 2022 Last revised: 10 Oct 2022

See all articles by Avishalom Tor

Avishalom Tor

Notre Dame Law School

Jonathan Klick

University of Pennsylvania Carey Law School; Erasmus School of Law; PERC - Property and Environment Research Center

Date Written: August 12, 2022

Abstract

Highly influential recent work by Benartzi et al. (2017) argues—based on comparisons of the respective effectiveness and costs of behavioral interventions (or nudges) versus traditional instruments—that nudges offer more cost-effective means than traditional interventions for changing individual behavior to achieve desirable policy goals. These authors further argue that nudges' cost-effectiveness advantage means that governments and other organizations should increase their investments in such instruments to supplement traditional interventions. Yet a closer look at Benartzi et al.’s (2017) own data and analysis reveals that they variously exclude and include key cost elements to the benefit of behavioral instruments over traditional ones and overstate the utility of cost-effectiveness analysis for policy selection. Once these methodological shortcomings are corrected, a reassessment of key policies evaluated by the authors reveals that nudges do not consistently outperform traditional interventions, neither under cost-effectiveness analysis nor under the methodologically required cost-benefit analysis. These illustrative findings demonstrate that governments should strive to conduct cost-benefit analyses of competing interventions, including nudges, to implement the most efficient of the available instruments.

Keywords: Behavioral regulation, cost-benefit analysis, cost-effectiveness analysis

Suggested Citation

Tor, Avishalom and Klick, Jonathan, When Should Governments Invest More in Nudging? Revisiting Benartzi et al. (2017) (August 12, 2022). Review of Law and Economics (Forthcoming), U of Penn, Inst for Law & Econ Research Paper No. 22-36, Available at SSRN: https://ssrn.com/abstract=4189136 or http://dx.doi.org/10.2139/ssrn.4189136

Avishalom Tor (Contact Author)

Notre Dame Law School ( email )

P.O. Box 780
Notre Dame, IN 46556-0780
United States

Jonathan Klick

University of Pennsylvania Carey Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
2157463455 (Phone)

Erasmus School of Law ( email )

3000 DR Rotterdam
Netherlands

PERC - Property and Environment Research Center

2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
219
Abstract Views
1,136
Rank
263,415
PlumX Metrics