Why ‘nudge theorist’ Richard Thaler makes for BJP's poster boy of economics
To a regime carrying out its “war against cash” and trying everything under the sun to push the mandatory-voluntary universal “authentication” system that is Aadhaar, just how useful is a newly “Nobel”-stamped American “behavioural economist”, whose psychologisation of economics to “market” state policies better, has been one of the most influential trends in the recent advances in economics and financial technologies?
A rather difficult question, but has a rather short answer: very, very, very.
Richard H Thaler winning the latter-day Nobel, or the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, on Monday, October 9, 2017, has been championed by the ruling Bharatiya Janata Party as a certificate for Modi’s demonetisation. Amit Malviya, BJP’s IT cell head tweeted a screenshot of Thaler’s tweet on November 8, 2016, saying: “This is a policy I have long supported. First step towards cashless and good start on reducing corruption.”
Richard Thaler just won the Nobel for Economics.. pic.twitter.com/oUvSGO0dbX
— Amit Malviya (@malviyamit) October 9, 2017
While Malviya’s leaving out the “Really? Damn!” part from the extended conversation that Thaler had with a Twitter user, who alerted him that Modi government introduced Rs 2,000 note after demonetising the Rs 1,000 note and reintroduced Rs 500 note in a new design, was (rightly) lampooned as the BJP’s attempt to piggyback on Thaler’s brand new Nobel fame, there’s little to rejoice in this particular expose. Because Malviya was, for a change, absolutely justified in advertising Thaler’s name for Modi’s demonetisation.
Nudge Theory and the (cashless) Big State
Richard Thaler and Cass Sunstein’s 2008 book Nudge: Improving Decisions about Health, Wealth and Happiness, which informs the now famous Nudge Theory of economics, coincided with the great Wall Street crash and the credit bubble bust of 2008. The behavioural economists theorised that human beings aren’t “econs”, or perfectly rational intelligences maximising profit in every financial decisions, but biased entities with their own prejudices, who make choices that may not be all that profitable.
Human beings need "nudges", or tiny tweaks in state policies which make complicated decision-making easier (actually by eliminating it). This was applied in the UK pensions policy, and in Spain to have all citizens automatically enroll for organ donation, because both involved an active opt-out from universal policies. As UK saw more private pensions rise, nudge theory got a respectability unprecedented in recent times, and came to define a major element of how governments “market state policies” designed to make citizens feel good about them but actually increasing the wealth of the old and new financial technology (fintech) elite.
Basically, nudge theory was fusing age-old marketing and advertising techniques of businesses with the state policies at the highest, national and transnational, levels. Some economists have underlined this to say why behavioural economics is really marketing science, and is a glorified promotional mechanism to help the Big State reap more dividends – electoral, narrative, strategic – by doing far less but talking much more about it. This is about running a country like a private company, a corporation, but scoring pseudo-moral points out of it.
Nudge theory and NITI Aayog
The Behavioural Insights Team, also known as the “Nudge Unit”, was the organisation behind the UK pensions policy tweak, and its main aim was to apply nudge theory – behavioural economics and psychology – help government policy “save” money, while appearing to be doing more for the public. In September 2016, the Economic Times reported how NITI Aayog, which replaced the UPA-era Planning Commission, tied up with Britain’s Nudge Unit, to “sensitise people at the grassroots towards the government’s flagship programmes such as Swachh Bharat, Jan Dhan Yojana, Digital India … through social messaging and new ad campaigns”.
The report added that NITI Aayog “[had] tied up with the Bill & Melinda Gates Foundation to set up a ‘nudge unit’ that would work towards bringing about behavioural changes and recommending policy corrections to make the programmes more effective”. Now, nudge theory itself is about using behavioural economics and the state’s financial psy-op to “improve government policy and services while minimising expenditure”. No wonder then that a relentless blitzkrieg of ad campaigns on TV and social media has effectively replaced hard governmental work in India, with the fine use of nudge theory by NITI Aayog and the Modi government.
Nudge theory and Aadhaar/war on cash
Richard Thaler had tweeted how he’s been a staunch supporter of going cashless and reducing corruption, what was advertised by Malviya on Twitter, and retweeted by quite a few BJP leaders and public figures. In fact, Sweden’s central bank, Sveriges Riksbank, that sponsors the Economics Nobel, is at the forefront of the worldwide “war against cash”.
A number of major policies that shaped the Modi government’s narrative since his election in May 2014 – such as transforming Aadhaar into a staggering, mandatory, universal digital “authentication” programme from a voluntary identification platform intended for welfare services, demonetisation and the insistence on cashless payment, as well as the Goods and Services Tax – have a common feature: war on cash. While demonetisation’s “execution” might be problematic for Thaler, at least officially, his nudge theory is absolutely in sync with the shaping of the cash-is-bad global narrative.
The war against cash has already garnered massive criticism from the civil rights groups and the loose coalition of activists worldwide, who are fighting back the financial technology elite’s ripping off the poor and the middle classes for inglorious profiteering. There are those who have been expressing their growing concerns on how a cashless society exacerbates the wealth divide, widening the existing gulf of inequality even further.
However, cashlessness and going digital is also intimately connected with worldwide, ubiquitous, universal surveillance, as has been pointed out umpteen number of times in case of Aadhaar. Welfare economist and civil rights activist Jean Dreze has repeatedly pointed out how Aadhaar is a privacy nightmare, and a portal to massive surveillance. Dreze also elaborated how a Panopticon-like Aadhaar crushes democratic dissent and manufactures consent (very much part of nudge theory) with a “series of lies, myths and fictions about the project”. The series of myths and fictions, in the case of Aadhaar and demonetisation, of course involved corruption and black money, something Thaler himself mentions in his tweet.
Thaler’s unquestioned theoretical and practical support for cashlessness and digitisation is hardly innocent. There have been reports by those digging into the dirt of this transnational surveillance regime that Aadhaar database via UIDAI-certified private authentication entities can be accessed by American intelligence agency CIA, as well as the surveillance agency NSA.
Richard Thaler has successfully marketed what’s basically elementary sales and marketing into a full-fledged, Nobel-stamped economic theory now defining state policies in India, America, Australia, in addition to United Kingdom. While India is reeling under Modi regime’s disastrous economic performance, UK and US are dealing with Brexit and Trump respectively.
But this is what happens when public policy decides to nudge itself into becoming bubbles of advertisement, helping massive private players and the governing elite in the process. This is exactly what is happening under the Modi-led BJP government in India. Essentially, what APCO did for Modi’s electoral prospects, catapulting him to the pinnacle of 2014 Lok Sabha elections, the nudge unit within NITI Aayog is doing for governance.
Richard Thaler is BJP’s poster boy of economics, rightly so. And, that’s the bitter truth. For a change, Amit Malviya was spot on.