Abstract
Highly influential recent work by Benartzi et al. (2017) argues—using comparisons of effectiveness and costs—that behavioral interventions (or nudges) offer more cost-effective means than traditional regulatory instruments for changing individual behavior to achieve desirable policy goals. Based on this finding, these authors further conclude that governments and other organizations should increase their investments in nudging to supplement traditional interventions. Yet a closer look at Benartzi et al.’s (2017) own data and analysis reveals that they variously exclude and include key cost elements to the benefit of behavioral instruments over traditional ones and overstate the utility of cost-effectiveness analysis for policy selection. Once these methodological shortcomings are corrected, a reassessment of key policies evaluated by the authors reveals that nudges do not consistently outperform traditional interventions, neither under cost-effectiveness analysis nor under the methodologically required cost-benefit analysis. These illustrative findings demonstrate that governments concerned with social welfare cannot simply assume the superiority of behavioral instruments and should strive instead to conduct cost-benefit analyses of competing interventions, including nudges, to identify the most efficient of the available instruments.
Funding source: Notre Dame Law School
Funding source: Israel Institute for Advanced Studies
Acknowledgments
This project benefited from the generous support of Notre Dame Law School and the Israel Institute for Advanced Studies to the first author and the insightful comments of participants at the Hebrew University of Jerusalem Law and Economics Workshop, the 2022 ND LAMB-Tel Aviv University Faculty of Law conference on Empirical, Behavioral, and Experimental Analyses of Law, and the 32nd Annual Meeting of the American Law and Economics Association. Isabella Wilcox and Margarete Tompkins provided excellent research assistance.
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Supplementary Material
The online version of this article offers supplementary material (https://doi.org/10.1515/rle-2021-0048).
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