Monday, 14 July 2008

A 'nudge' in the right direction?

George Osborne writes on 'nudge theory' in today's Guardian. As argued elsewhere, Cameron's Conservatives are busy hoovering up a whole range of concepts borrowed from social psychology in order to build an ideological platform.

Non-state, collectivism is the approach and it's characterised by local interventions by voluntary groups and behaviour influencing public policy. The rather cheap point to make, but I'll make it anyway, is how does all this tally with lecturing people about 'good. bad. right.wrong'? We'll come back to the glaring inconsistency another time.

Osborne provides three examples of how 'nudge theory' can work in a political context: encouraging energy efficiency, paying people to recycle (he strangely gives a US example when other European countries have been doing this for decades), and discouraging people from getting into store card debt. The latter example doesn't seem to follow his argument unless he is saying that customers are being nudged into getting into debt so they need a cool off people to un-nudge themselves. All three sound like sensible and workable policies.

A couple of things strike me about the argument though. Is Osborne just using 'nudge' as another word for incentive? It seems that the authors of 'Nudge', Thaler and Sunstein, mean something different to incentive. They refer to 'nudge ' as an act of social persuasion. Paying people the more they recycle is not social persuasion. It is economic incentive. A very different thing and something we are very familiar with in politics. Tax credits work in exactly this way: they incentivise people to work.

The other thing that strikes me is that these are all really neat ideas. They are also pretty micro. They are the sorts of ideas that local authorities should be coming up with and implementing. A Conservative government is going to need something a little more macro if its to deal with (in their words) 'social breakdown', environmental degradation, and economic woe.

George Osborne is Shadow Chancellor. It is to economic difficulties that his attention should be focused. He completely fluffed the ball on Northern Rock. He has no identifiable analysis about why we are facing an economic downturn and what the response should be. The Tories have no proposals about how we can get the housing market going again both in terms of sales and construction, or the regulatory architecture that a modern economy needs in an age of global and free financial flows. It is a huge gap in the Tory platform. They can get away with blaming the Government for only so long. At some point, they will have to reveal their hand.

So perhaps, I could respectfully suggest, rather than fiddling around with nifty think-tank-esque ideas inspired by the latest fad in social psychology, Mr Osborne needs to go back to some economic basics? By far the biggest service he could offer to his Leader would be to knuckle down and come up with a credible alternative economic plan. Thanks for the ideas, now back to the day job.

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