What is the ‘social’ in behavioural economics? The methodological underpinnings of governance by nudges

Abstract

Behavioural economics builds on psychology rather than on sociology, and on cognitive science rather than the science of culture. The same is true for new behavioural scholarship in the legal discipline, whether this is referred to as ‘behavioural law and economics’ or ‘law and the behavioural sciences’. The result of a one-sided definition of a more realist research agenda in legal scholarship is an impoverished understanding of the ‘social’. In Thaler and Sunstein’s famous concept of nudging, social conformity appears as a property of the individual, which can be instrumentalized by social nudges. More generally, the cognitive strand of behavioural economics lends itself to strategies of regulatory ‘debiasing’, which suggests that it is possible to get down to pure preferences that are free from any distortions. While this approach neglects the endogeneity, or social contingency, of individual preferences, the social strand of behavioural economics is explicitly concerned with the dynamics of social interaction, or the effects of social interdependence. However, both strands of behavioural economics are still higher on methodological individualism, naturalism or positivism and lower on institutionalism, culturalism or constructivism than a genuinely sociological approach. More specifically, their understanding of the ‘social’ does not sufficiently account for the social embeddedness of both rational and irrational economic action. What is more, behavioural economics also lacks the means to reflect on the link between science and politics, which includes the question of why different models of economic man are attractive at different points in time. The conceptual move from rational to behavioural economic man bears distinctive policy implications, which are in line with the transformation of welfare capitalism towards ‘less state’ and ‘more market’. While the overall direction of this project gets blurred in Thaler and Sunstein’s branding of ‘libertarian paternalism’, it is evident in the adaptation of consumer policies, which proceeds under the imperative of market conformity. Accordingly, a strategy of nudging does not put into question the wider institutional context but offers a technical solution to what is defined as a problem of individual behavioural rigidities and cognitive biases in the market environment.

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