Who are you calling a libertarian paternalist?

  • by helga
  • 01/09/2015

libertarian paternalism

Recently I’ve been focusing on social marketing, behavioural economics and the work of ‘nudge units’ around the world. Each to their own, right?

There’s a full reading list at the bottom of this post for those interested in digging deeper into these topics.

(A note to the more distracted folk: I’m talking about social marketing and not social media marketing here – that’s a completely different theme.)

Social marketing and behavioural economics

First a quick recap.

Social marketing refers to applying marketing concepts, methodology and best practice to a social cause, as opposed to purely for-profit. The main aim is to get people to change behaviour and take action for their own good or society’s at large – better health, a sustainable environment and so on.

Behavioural economics could be considered a sort of subset of this, comprising of psychological studies, rules of thumb and research techniques which social marketing can make use of. It uncovers real human reactions, exposing common biases and typical ‘irrational’ behaviour when we’re faced with economic decisions.

Loss aversion is a typical example – we’re much more sensitive and averse to losing something we already have, than inclined and prone to gaining something new, even if its value is technically the same. In various tests across the globe, the results have been consistent: we’re roughly twice as unhappy with the thought of missing out.

We can then use this type of knowledge to boost social marketing efforts, designing choice systems where we make it easier for people (‘nudging’ them) to choose the option that is in their own best interests (e.g. healthier products placed on supermarket shelves at eye level; default opt-in for organ donations, etc).

Public vs private

Why do I keep coming back to social marketing? Because, as I said in my last post, I prefer to help with creating, promoting, selling and distributing products and services that I actually care about. I admit this sounds a bit naive but also fairly inconspicuous – I mean, don’t we all want to work for companies and brands we like?

As it happens, for better or for worse, many of the most innovative and desperately needed products and services are within the realm of what used to be ‘public’ services or ‘social’ goods. Let’s be clear that the cost of such goods can be borne in a variety of ways and under different business models, and not necessarily sponsored by governments and taxes. However, let’s also be clear that not all products and services can be delivered successfully within a typical for-profit model.

(Have a look and explore the definition of merit goods if you disagree. Things like healthcare will always be dodgy territory for advocates of a pure free market. Would you really like to live in a place where people are completely free to choose and/or couldn’t afford crucial vaccines and healthcare?)

But how can we resolve the paradox of using marketing, firmly anchored in a free market, for-profit, libertarian tradition, and a do-gooder’s presumption of knowing what’s best for other people or society at large?

In the context of social causes, using the word ‘marketing’ can be odd and even negative.

So to start off, I’d like to articulate one key idea I uphold, which I hope will set the tone for subsequent posts:

Both public and private organisations, for-profit or not-for-profit, can do ‘social’ marketing – as long as they demonstrate strong governance, firm ethical guidelines, and follow robust disclosure and transparency rules.

Libertarian paternalism

This idea relates to another favorite of mine. The concept of libertarian paternalism, associated with behavioural economics, underpins the legitimacy of nudging people’s behaviour for their own good, or society’s at large. First introduced by Thaler and Sustein (see book Nudge listed below), libertarian paternalism proposes that it’s legitimate for public and private organisations to ‘nudge’ people into changing behaviour while also respecting their freedom of choice. For example, ‘nudgers’ could change the default position when you start a new job and automatically enrol you into a workplace pension unless you opt out, as the UK government has recently done.

But if indeed we claim to be using marketing techniques and nudges backed by behavioural economics for social good, how can we be sure to know what is best for each person, or for society at large?

Does the UK government’s nudge unit act primarily in people’s best interests, or is their main driver to enable and support the government’s specific priorities and policies – which are, by definition, subject to wide debate and hence under plebiscite every four years?

From a cold and dry perspective, the work of a right-wing government’s ‘nudge unit’ could be just part of a wider policy of public cuts (as presciently put forward in this article in The Economist) – but critics could argue that this would never be in the best interests of its most vulnerable target audiences.

Or, at the opposite end, can we really trust a private organisation using behavioural psychology and advertising strategies, when their ultimate intent is to sell us a specific product/service?

The answer: strong governance, ethical guidelines and full disclosure

To smooth the polemic, I argue that no organisation, public or private, can claim to be totally impartial or just acting in people’s best interests. It doesn’t really matter if it’s 100% funded by private shareholders, or 100% funded by taxpayers’ money.

But as long as they can demonstrate that they are operating under strong governance structures and ethical guidelines, and follow robust disclosure and transparency rules, ALL types of organisation can use marketing and behavioural economics for social good. The answer lies in fully disclosing intentions, methods and gains – not in separating initiatives between ‘good’ and ‘evil’ based on being sponsored by public or private entities, or along traditional political divides.

It’s up to time, well-backed evidence and scrutiny from the target audiences to ultimately prove a choice as the right or wrong one.

There are, alas, boundaries and limitations to using social marketing and nudges to achieve good social outcomes… We’ll always need regulations and ‘up-stream’ efforts to tackle big collective challenges. Not everything can be solved via less coordinated social marketing efforts and small nudges – sometimes we do need clearer do’s and dont’s! The devil lies in defining the boundaries.

I’m not interested in caring about people

When I hear the term ‘libertarian paternalism’, which is completely engrained in US politics and almost alien to someone born and bred in Portugal (that’s me), I picture Ron Swanson.

libertarian paternalismFor other fans of the sitcom Parks & Recreation out there – haven’t you wondered how could such a staunch libertarian end up working precisely for the public sector? How wonderfully delightful when fiction can portray, with such humour and brilliance, the cognitive dissonances of day-to-day life…

Here’s another unlikely plot for a hidden comedy gem: the joys and sorrows of a marketing do-gooder.

Reading list:

I will be summarising these sources and covering a few interesting discussion points over the next weeks – watch this space:

  1. NSMC’s starter for 10 (powerpoint presentations, case studies, reading notes – most free) – teaching materials for social marketing courses, a great overview of social marketing, what it is and how to use it
  2. Nudge (book) – a classic introduction to behavioural economics
  3. For those also in the pensions’ industry, there’s Save More Tomorrow too – Shlomo Benartzi’s book on behavioural economics applied to saving for retirement
  4. BIT’s report 2013-2015 (PDF – free)- recent report on what the UK’s Behavioural Insights team (aka the nudge unit) has been up to in the last years . Notice how much of it is just plain A/B testing and marketing techniques!
  5. Inside the Nudge Unit (book) – the book published by BIT last week (I’ve just ordered a copy)
  6. Behavioural economics in action (MOOC – free) – a great introduction to using behavioural economics on edX, by the University of Toronto

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