Organizations and governments alike have increasingly embraced nudges: small changes to the decision environment that can influence the choices people make. A utility company promoting energy conservation can redesign its bill to include comparisons to more efficient households, nudging households to reduce their energy consumption. Firms that want to help their employees save for retirement can enroll them by default into optional savings plans, rather than requiring them to opt in. These nudges can be implemented at nearly no cost, explaining their popularity.

However, my colleagues and I show that there is a hidden cost to adapting such nudges: people, including policymakers, overestimate their impact and consequently become less supportive of other, costlier policies that have a larger impact. Rather than treating nudges as the complementary tools that they were intended to be, they risk being perceived as substitutes. As a result, changes that would ultimately do more good fail to be implemented.