A Political Justification of Nudging

Nudge policies are typically justified from paternalistic premises: nudges are acceptable if they benefit the individuals who are nudged. A tacit assumption behind this strategy is that the biases of decision that choice architects attempt to eliminate generate costs that are paid mainly by the decision-makers. For example, in the case of intertemporal discounting, the costs of preference reversal are paid by the discounters. We argue that this assumption is unwarranted. In the real world the costs of reversal are often transferred onto other individuals. But if this is the case, the biases create externalities, and nudges are best justified from a political rather than paternalistic standpoint.