Evaluating Obama Advisor Cass Sunstein, and His New Book Nudge

by: Matt Stoller

Fri Jul 25, 2008 at 15:06

I'm reading Nudge: Improving Decisions About Health, Wealth, and Happiness, which is a book by Richard Thaler and Cass Sunstein about applying behavioral economics to public policy and personal questions.  As we move from the Reagan era into something different, free market fundamentalism is being supplanted by behavioral economics as the dominant economic mindset.  Behavioral economics looks at people not as rational actors with perfect information looking to maximize income, but as human beings who make emotional decisions that cannot be divorced from their social context.
Matt Stoller :: Evaluating Obama Advisor Cass Sunstein, and His New Book Nudge
The new economics of the coming era is based on sustainable energy development and companies like Google, which are not competitors in a free market system but world-changing emergent institutions that are part of an ecosystem of companies that cooperate, compete, and learn from each other.  Game theory, psychological experiments, and agent-based modeling are part of the way we will look at the world.  You can already see the changes in politics, not just Moveon and the netroots, but Drew Westen and George Lakeoff and their analysis of framing.

I blogged earlier this month about the terrific book No One Makes You Shop at Walmart by Tom Slee, an activist and programmer who goes at free market fundamentalism using game theory and behavioral economics.  The evil twin of his book is Sunstein and Thaler's Nudge.  Sunstein is an important influence on Obama, serving as a legal advisor as well as being married to Sam Powers, an important foreign policy advisor to Obama (they met on the campaign).  His prominence in the next administration is why I was curious about Nudge.

Sunstein is a prodigious legal scholar, putting out books at a stunning clip.  Usually what he does is package a set of ideas from another sector into a marketable and media digestable recipe, and Nudge is no different.  The authors go through the standard litany of important concepts; anchoring, herding, biases, imperfect information, defaults, incentives, and feedback.  Anchoring, for instance, is the concept that the first price you hear for an item is forever the price associated with that item.  If someone tells you a diamond is worth $5000, it is a luxury item and getting one for $4000 is a deal.  If someone tells you a piece of artificial condensed carbon is worth $50 for industrial uses, you'll feel ripped off if someone puts a price tag of $60 on the same stone that was a steal at $4000.  The Tipping Point basically told this story, but better.

Still, these are important ideas, because they undermine the notion that free markets exist as neutral arbiters, showing markets as artificial constructs with important regulatory choices built into them.  This is a newly emergent set of ideas, and who controls their interpretation will control the public policy choices they imply.  As we move into an era where free market fundamentalism dies, it's important to keep our eyes on the framers of the new intellectual moment.  Ideas can be used to prop up the corrupt system we have now, or to renew it.  Sustein and Thaler are firmly on the side of propping it up.  In chapter 6, for instance, Sunstein and Thaler go into a long discussion of savings rates and the importance of opt-in versus opt-out strategies for getting people to save more for their retirement.  This, though, is how it's framed, on page 103.

As all politicians know but few are willing to admit, we will eventually have to bite the bullet in order to make Social Security solvent, through some combination of tax increases or benefit cuts.

That is exactly 100% out of the conventional wisdom from the 1960s conservative movement, which treats Social Security as a ponzi scheme.  It is unsupported by evidence, as the 'insolvency' date for Social Security keeps being moved up every few years, but it is the way that Sunstein supports his theory of 'libertarian paternalism', which is an updated version of the DLC mantra that we must find a solution between a socialist regulatory state and a free market. Here's how Nudge explains this philosophy and its political viability.

Libertarian paternalism, we think, is a promising foundation for bipartisanship.  In many domains, including environmental protection, family law, and school choice, we will be arguing that better government requires less in the way of government coercion and constraint, and more in the way of freedom to choose.  If incentives and nudges replace requirements and bans, government will be both smaller and more modest.  So, to be clear, we are not for bigger government, just for better governance

The notion of 'nudges', or various things government and business can do to control human behavior without Stalinist regulation, is not new or particularly interesting.  For instance, labor unions and business are locked in a multi-million death struggle about card check, which is simply a way of voting for or against labor representation.  Labor wants to be able to use petitions or voting, business wants just voting.  More examples include voter ID laws that help suppress the vote, ballot designs that privilege one candidate over another, and urban design and sidewalks that encourage or discourage driving.  Yet more examples include economic assistance to low income women to reduce abortions, or the fight over abstinence-only education to lower the rates of STDs.

Thaler and Sunstein create new language to describe people who design the defaults in various systems, such as 'choice architect', but once again, this is not even close to a new idea.  Bookshops have been charging money for retail placement for years; want your book at eye level, that'll be extra.  No, the real point of this book is not to teach anyone about behavioral economics, but to enforce a Beltway orthodoxy that is anti-government to the core.

Here's how Thaler and Sunstein describe how appealing this idea is to politicians.

Libertarian paternalism with respect to savings, discussed in chapter 6, has received enthusiastic and widespread bipartisan support in Congress, including from current and former conservative Republican Senators such as Robert Bennett (Utah) and Rick Santorum (Pa.) and liberal Democrats such as Rahm Emanuel.

Rahm Emanuel a liberal?  On what planet?  He's a war supporter, a supporter of retroactive immunity for telecom companies, and wants to maintain the hedge fund loophole allowing hedge fund managers to retain more of their earnings than ordinary citizens.  For Sustein and Thaler, Emanuel is a liberal because it's useful for Emanuel to be a liberal in the kabuki world that is the Beltway, where government is just too darn big.

If Sunstein and Thaler were serious about the concept of 'Nudges', they would have tackled the most difficult and largest part of government - the Defense Department.  Surely, if the concept of a 'Nudge' were so powerful, and government did not need to mandate and enforce, war would be unnecessary.  After all, bombing Iraq or invading Afghanistan is not exactly a nudge, it's more of a sledgehammer.  And the DoD probably has ample places where Nudges would cut down on the amount of force it would have to prepare to use.  The entire surveillance state, with costly surveillance techniques like metal detectors, would also be a ripe target, or perhaps the war on drugs.  But no, these are untouchable subjects, even though Sunstein argues that government is too big and ineffective with its mean Socialist mandates and rules.  

Ultimately, behavioral economics is going to take over from free market fundamentalism because markets are only one useful tool in governing a society.  We're not there yet.  And Sunstein, who is as Beltway oriented as they get and probably in line for a Supreme Court appointment or a very senior position of influence in the Obama administration, shows us why.  

I'll leave you with a quote from Sunstein and Thaler from page 253, which could have been ripped from Jimmy Carter, Gary Hart in the 1980s, Bill Clinton in 1992, or Barack Obama today.

Ever since Franklin Delano Roosevelt's New Deal, the Democratic Party has shown a great deal of enthusiasm for rigid national requirements and for command-and-control regulations.  Having identified serious problems in the private market, Democrats have often insisted on firm mandates, typically eliminating or at least reducing freedom of choice.  Republicans have responded that such mandates are often uninformed or counterproductive - and that in light of the sheer diversity of Americans, one size cannot possibly fit all.  Much of the time, they have argued on behalf of laissez-faire and against government intervention.  At least with respect to the economy, freedom of choice has been their defining principle.

What else is there to say about this book except that Sunstein and Thaler think that the Republican Party is pro-choice?

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there is no crisis (4.00 / 4)
remember the old web site there is no crisis? it was taken down too soon. it never occurred to us that a Dem president would go after it.

great research

Freedom of Choice? (4.00 / 3)
Given the choice, what percentage of the population would opt out of Social Security for a personal savings account (as Bush et al promoted)? About 0.8%? Of course, it would increase if benefits were reduced and withholding increased, but that's not much of a choice.

It's distressing to see Obama throw his lot in with this bunch just 'cause they went to the same grad school and they're the nearest economists to hand or something.

Toda, when he was barred from visiting Landsruhl, Republicans, spinning it as snubbing the troops, called him "out of touch." Maybe, on the economy, he is.

Meanwhile, what does Samantha Powers see in this Sunstein guy?  

Excellent analysis, Matt. (4.00 / 6)
Sunstein is no progressive.  I think people must strengthen the progressive elements in the Obama coalition (unions, environmentalists, civil libertarians) and prepare to battle people like Sunstein who may hold power (or their ideas be accepted) in an Obama administration.

To do so, we must elect BETTER Democrats like Jeff Merkley and Darcy Burner.

I see you picked up on how Sunstein (and Obama) often redefine the political spectrum as to turn centrists into liberals and write off anyone left of center.  

It will take a long time to reclaim the Democratic Party.  I hope under Obama we can start doing work for the future. If we can pass ECFA, unions can grow.  

Sunstein's way is destined to failure. When it does, we need to have a real progressive movement with ideas ready to offer an alternative.  That did not exist in 2008, but can in the future.      

Two points (4.00 / 4)
First, this is part of the long tradition of the philosopher king with the person making the suggestions (Plato/Sunstein) always appointing themselves as the benevolent ruler.

Talk about hubris!

Second, blogger Bruce Webb has made a second career out of demolishing all the SS going broke talk. If you want to read the details start here:


There is only one proven system of governance and that is democracy. It works poorly, but it's the best we have at the moment. The problem in the US is not too much democracy, but too little. Between a rigged electoral process controlled by big money interests and a military/industrial/congressional sector that controls 54% of the federal discretionary budget there isn't much room for the people to control their destinies.

Policies not Politics

Freedom of choice (4.00 / 2)

The free market crowd does, indeed, repeat "choice" as their mantra (as well as efficiency).  

I've seen it happen repeatedly in the context of insurance market failures, and have always been struck by the irony and the lack of cognitive dissonance given the much more authoritarian views held by many on social issues.

Lest we forget, Milton Freidman, who was exalted in life and has been deified in death by the Right, co-wrote a little tome entitled "Free to Choose."

They all ignore the paradox of choice, which can result in paralysis, as well as informational asymmetry and the opportunity costs that confront us in the course of our busy lives.  

Sunstein has repeatedly said (4.00 / 7)
that he thinks investigations into Bush's crimes, such as warrantless wiretapping, would be a bad idea, saying that it would "criminalize" public service. As if torture and illegal spying are any kind of public service.

He is a typical Beltway mandarin, stroking his metaphorical beard while uttering sage pronouncements on "bipartisanship" and "moderation" that bear no relationship whatsoever to reality.

In some ways he is even more despicable than Bush. Bush at least has principles (warped ones), but ones he faithfully adheres, while Sunstein has no principles, beyond the continued comfort and advancement of himself and those like him.

To borrow a biblical line: "I know thy works, that thou art neither cold nor hot. Would that thou wert cold or hot. Because thou art lukewarm, and neither cold nor hot, I will spew thee from my mouth!"

Oh, You Are Soooo Close To How I'm Framing My Sunstein Post! (4.00 / 3)
I'm going with Dante, rather than the Bible, but since you bring it up, I think I'll steal a bit from you as well.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
Do you mean .. (0.00 / 0)
the post below(which I'll read in a second) .. or one you are posting tomorrow?

[ Parent ]
Tomorrow! (4.00 / 1)
God willin' and the creek don't rise!

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
I can't wait .. (0.00 / 0)
and Sunstein sounds like a real ass

[ Parent ]
I can't wait. I wrote on Sunstein and Nudge just (4.00 / 1)
a little bit after reading the New York Times Review of Books review by John Cassidy on June 12th http://www.nybooks.com/article... have mentioned it every week on my Saturday talk radio show in Montana.  Today I have on Glen Ford and then Charles Derber, but I'd love to have you on Paul.  Love your stuff.

A chill went down my spine as I watched Cass Sunstein on "Democracy Now".  Thank God, Glenn Greenwald was on the first half.  Amy doesn't have the killer instinct that Glenn does.

"Nudge"? Nudgonomics is just more repackaging of the Uncle Miltie Friedman Flim Flam aka feudalism.  It's just one more marketing scheme to rationalize selfishness. It's middle brow ideas like Tom Friedman, Fareed Zakaria and David Brooks gussied up like some big new intellectual idea.  HA!

This is why I have always been very very skeptical of the vaunted Obama "judgment".  The guys around him are bad dudes.
Smiley Face Facists.

[ Parent ]
I'm flattered! (0.00 / 0)
Steal away.

[ Parent ]
Criminalising public service (4.00 / 2)
If sending Bush to prison makes those like him, who have no respect for laws and see power as something you use to exploit others, more reluctant to stand for office then how is that a bad thing?

Those with criminal tendencies shouldn't be performing public service, except possibly in a correctional facility.

Forgotten Countries - a foreign policy-focused blog

[ Parent ]
I've ended by latest essay with your quote and (0.00 / 0)
attributed it to you.  Most excellent.

[ Parent ]
yet behavioral economics can be a radical idea (4.00 / 4)
I think you should turn this into a full fledged book review and get it out there.  You impressively read in between the lines here, and I think turn up a strong C.W. streak.

But I think behavioral economics still has more radical than conservative potential, a point you sell short a bit -- most b.e. insights go to destructing the rational actor myth that is central to neoclassical economics.  It will take a while to work out, and will unfortunately be worked out mostly by people with phDs, but the whole structure of economics that made the cold war, the washington consensus, and the idea of efficient markets possible is slowly being taken apart.  

What's still missing from the picture -- and will probably never make it either into the sanitized academic worldview or centrist political one -- is the idea of power that works to perpetuate itself, and can also work against the market on the progressive side.  Instead, Sunstein et al posit society as a neutral collection of individuals whose choices are what we should focus on, and have to guide because they're not always rational.  On the other hand, this notion meshes more and more with our increasingly technologized consumerist society, which loves the idea of choice and delivers it to you in every way.  It's not a coincidence that Obama has spoken about an "iPod government."  

But I hope there are some progressives out there who are working to turn b.e. into a progressive vision.  

I Salute Your Fortitude, Matt! (4.00 / 4)
I've got a a little something-something to say about Sunstein myself, just based on the Democracy Now! interview earlier this week.  But to actually read a book by him?  Well, I haven't done that in about 6-8 years.  Once a decade is pretty much my limit, I think.

You're a real mensch.

A couple of quick comments.

(A) Still worth reading is one of the first popular books to seriously deal with behavioral economics--not as a main subject, but as an important source of insight--Everything for Sale: The Virtues and Limits of Markets, by Robert Kuttner, one of the co-founders of The American Prospect. One of the interesting things I still remember vividly from reading it when it came out a dozen years ago was that it turns out that economics students tend to act a lot more like "rational economic actors" than real people do.  Talk about deep brainwashing!

Needless to say, Kuttner was very much about using behavioral economics to deconstruct market orthodoxy--along with plain old ordinary data, which never has fit that well with conservative economics.

(B) Sunstein is beyond idiotic when it comes to characterizing the New Deal approach to governance, in several fundamental ways:

(1) The regulatory state long predated the New Deal.  In fact, the Progressive Era was the period in which the faith in command-and-control style reforms as a silver bullet probably reached its peak.

(2) The New Deal included a wide range of different sorts of approaches, of which universal mandatory programs were pretty much limited to Social Security and the minimum wage--though both were far from universal in practice, as they excluded pretty much all of the black South, for example.

(3) Much of the New Deal involved "nudge"-style social adjustments, but on a massive scale that was actually capable of delivering substantial results.  For example, the restructuring of the mortgage markets, which brought about the 10-, 15- and then 30-year mortgage which enabled a vast expansion of homeownership, was not the result of a command-and-control approach, but rather a dramatic change in the incentive structure.  Similarly, the government didn't force the banking system to adopt a system of controls that protected depositers.  They simply told the banks, "if you want federal insurance for your depositers, here's what you'll have to do."  It was a nudge, albeit a very strong one.  The continued success of Democratic policies throughout the post-WWII era depended on much more of the same--most notably, the GI Bill.

(4) The real argument isn't between "command and control" and "nudges", it's between an effective combination of "command and control" (such as the Clean Air Act, minimum wage law, Social Security, etc.) and powerful egalitarian nudges on the one hand, versus namby-pamby minimalist "New Labour"/"Third Way" nudges that don't get in the way of corporatist neo-feudalism on the other.

So, like I said.  Sunstein's beyond idiotic.  And I salute you for being willing to tackle him head-on!

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

grrr arggh! (4.00 / 1)
Sunstein was horrible on Democracy Now.

Finally I just turned to my husband and said "I am flippin the channel, I can't watch this fucker anymore."

[ Parent ]
Sunstein is given credence for what reasons?? (4.00 / 2)
From Glenn Greenwald's blog:


But -- similar to Fein's point regarding Jay Rockefeller, Jane Harman and comrades -- Sunstein has long been one of the most vocal enablers of Bush radicalism and lawlessness, having continuously offered himself up over the last seven years to play the legal version of the TNR role of "even-liberal-Cass-Sunstein-agrees-with-Bush."

Jonathan Turley on KO's Countdown:

I don't get why we should pay attention to Sunstein.

Remember when Lieberman was the "go to liberal?" (4.00 / 1)
And here's the money quote:
No, the real point of this book is not to teach anyone about behavioral economics, but to enforce a Beltway orthodoxy that is anti-government to the core.

Bingo!  The take over of the Democratic Party of labor is complete.  These fake democrats are running it.  Rahm Emmanuel a liberal?  Ha!

[ Parent ]
I worry that an Obama administration (4.00 / 1)
will result in a Sunstein Supreme Court nomination. I'd feel better about voting for him if I could get it in writing that it won't happen. But that won't happen.

Sunstein is not THAT bad (4.00 / 1)
If anything, Matt's post discusses how Sunstein exhibits a centrist, pro-market view of liberalism.  But he IS a liberal, perhaps more so than anyone on the Supreme Court.  Read one of his books.  Or if not, just read the titles and you'll see!  (e,g, "The Second Bill of Rights").

In the academic legal world, he pretty much defines what it means to be center-left.  When the time comes, we'll be able to scrutinize well the supreme court choices available.  But I think Sunstein would make a gread addition to the court, and could surprise with a very liberal legacy (one also that would be intellectually formidable, as Scalia has been for the right).

[ Parent ]
yes he is that bad (0.00 / 0)
and his view of women is even worse.

[ Parent ]
AliceDem please cite material (0.00 / 0)
I would really like to know.  I read some stuff of his from the late 80's early 90's....about Madisonian deocracy.  My hazy memeory was that it seemed decently liberal...but he certainly doesn't seem that way now and hasn't for quite a while.

I did find something he wrote about Justice Ginsberg's dissent in Gonzales v Carhart which upheld the Fedral Abortion Ban of 2003...He approvingly said that Ginsberg was right to criticize it.  He also approved Ginsberg's view that abortion rights should have been and should be based on the arguements of equality and liberty....which was one of Sarah Weddington's original arguments which the court turned down.  That standard is a much better standard...though I have to say I thought his view on the privacy standard in Roe did not fully get what Justice Brandeis said about being "private in one's person"

So that was encuraging I thought.  But he is very changeable and subject to fashion in law...as though he's trying on this year's new hat in terms of legal theory.  

In terms of women, he left a long term relationship with a brilliant but older philospher for this brilliant but much, much younger woman.  That is revealing in and of itself.

"Incrementalism isn't a different path to the same place, it could be a different path to a different place"

[ Parent ]
You are calling .. (4.00 / 1)
Scalia intellectually formidable?  I am glad I am not drinking anything as I type this.

[ Parent ]
Well, I Guess It's Actually True (4.00 / 2)
that Sunstein is as intellectually formidable as Scalia is.

Which is to say, both are a joke.

What's not true is that he's as much a man of the left as Scalia is a man of the right.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
Well, it actually IS true that Scalia is intellectually formidable (0.00 / 0)
As in, unlike your run of the mill Supreme Court justice, Scalia has had a lasting intellectual legacy that influences law professors and judges across the land.  It is a right-wing ideology, about textualism, originalism, and conservatism, but is one that has been very influential in the legal world.  In law schools across the country, Scalia opinions are read with extra attention and receive more discussion than any other member sitting on the bench.

So, that's what I meant.  Of course, you can just laugh at him as a buffoon, but he has a lot of power, and has wielded it effectively for his purposes.  No current Justice has left a comparable liberal legacy (probably have to go back to Brennan).

btw, formidable: "inspiring fear or respect through being impressively large, powerful, intense, or capable"

[ Parent ]
thanks (0.00 / 0)
This was a very interesting post (it's Samantha Power without an s - Sunstein recently left the University of Chicago to go to Harvard to be with his new bride Power who teaches at the Kennedy School).  

This is huge. Keep this going, Matt. (4.00 / 1)
As we move into an era where free market fundamentalism dies, it's important to keep our eyes on the framers of the new intellectual moment.  Ideas can be used to prop up the corrupt system we have now, or to renew it.  Sustein and Thaler are firmly on the side of propping it up.

In "Shock Doctrine" Naomi Klein quotes Miltie Friedman "Only a crisis --actual or perceived--produces real change.  When that crisis occurs, the actions that are taken depend on the ideas that are lying around."  

Naomi calls the Chicago Boys "shapeshifters".  They just repackage the same old flim flam and are doing it now as they hang on to what Sheldon Wolin in his new book calls "inverted totalitarianism".  (Democracy Incorporated:  Managed Democracy and the Specter of Inverted Totalitarianism."  Dense but excellent book about how we are being managed as we become more and more like the world in WALL-E ruled by the "Big N Large" Corporation.

We must become more vocal and make voices like Greenwald's, blackagendareport, and the voices here be heard.  We need our ideas to be the ones that the the next administration picks up.  But I am not hopeful that we can expose all the  flim flam before November.  


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