Nudging society to consume—the aggregate consequences of consumption nudges

Abstract

Abstract Government nudging, towards say healthy or sustainable behaviors, is often criticized as harmful to individual autonomy. Yet free markets naturally give rise to pervasive consumption nudging by private actors. Such nudging, for instance in the form of advertising, can affect not only behavior but also the social dynamics that shape preference formation. Despite much controversy, both the normative implications and aggregate consequences of this remain unclear. Here, we develop the suggestion, made by several prominent economists, that private nudging contributes to continuous aggregate consumption growth. We argue that such a positive net-effect of private nudging, on both individual and aggregate consumption, is not only real, but cumulative. We further argue that the use of “observed consumption” (i.e., revealed preference) as a proxy for preference satisfaction elicits the cultural evolution of ever more sophisticated nudging. The upshot is that free markets give rise to an emergent system-level force, as if there were an invisible paternalist who, regardless of the intentions of any market participant, incessantly nudges individual and aggregate consumption to increase. This has profound implications, for individual autonomy and democratic self-governance, particularly in the light of issues such as climate change, obesity, or increasingly sophisticated digital nudging.

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