« Links for 10-31-15 | Main | 'The GOP Circus: Truth-Defying Feats' »

Saturday, October 31, 2015

Nudgies

This is from Richard Thaler:

...Many companies are nudging purely for their own profit and not in customers’ best interests. In a recent column in The New York Times, Robert Shiller called such behavior “phishing.” ...
Some argue that phishing — or evil nudging — is more dangerous in government than in the private sector. The argument is that government is a monopoly with coercive power, while we have more choice in the private sector over which newspapers we read and which airlines we fly.
I think this distinction is overstated. In a democracy, if a government creates bad policies, it can be voted out of office. Competition in the private sector, however, can easily work to encourage phishing rather than stifle it.
One example is the mortgage industry in the early 2000s. Borrowers were encouraged to take out loans that they could not repay when real estate prices fell. Competition did not eliminate this practice, because it was hard for anyone to make money selling the advice “Don’t take that loan.”

    Posted by on Saturday, October 31, 2015 at 11:08 AM in Economics, Market Failure | Permalink  Comments (45)


    Comments

    Feed You can follow this conversation by subscribing to the comment feed for this post.

    -->