Nudge: Improving Decisions About Health, Wealth and Happiness Richard H Thaler and Cass R Sunstein Yale University Press, 224pp, £18

David Cameron was right to have put Nudge on his summer reading list. Probably not since David Osborne and Ted Gaebler's Reinventing Government in 1992, with its mantra of "steering, not rowing", which stimulated the outsourcing of public services and use of Private Finance Initiative contracts, has a book attracted so much political attention. The authors are said to be advising Barack Obama's team and ambitiously suggest that what they brand "libertarian paternalism" offers a real Third Way.

What Thaler and Sunstein do is to describe how "choice architecture", both good and bad, is pervasive and unavoidable, from the positioning of food in a supermarket to decisions on whether to design opt-in or opt-out pensions and organ donor schemes. Choice architects can preserve freedom of choice while also nudging people to make better decisions, particularly in difficult situations, where they don't get prompt feedback or there are delayed effects. If that sounds dry, the book certainly isn't, and is littered with mostly US examples from saving schemes and buying a house to getting married and even eating habits.

Is there anything groundbreaking in all of this? Well, yes and no. We all know smart people can make bad choices. Human beings are not desiccated calculating machines who always behave rationally. We can be lazy, ill-informed, prone to bias; we find it difficult to resist temptation and often need to be nudged to do the right thing - or even anything. What I think is new and would be innovative is the challenge to policymakers to be systematic and explicit in the way they construct this choice architecture, which may not be as straightforward as it sounds.

Much of the analysis in the book assumes it is obvious in which direction people should be nudged. It makes some fairly safe bets (less smoking, less alcohol consumption, better medical care). But in many areas there is no single "right" answer, which is why public debate and consultation remain critical, something about which the authors say very little. And sometimes more than a nudge is needed. Health warnings on packs of cigarettes are a nudge, but I still think it right to ban smoking in public places.

In perhaps the weakest section, on the environment, the authors favour incentive-based approaches over command-and-control regulation, extolling "cap and trade" schemes (such as the EU's Emissions Trading Scheme, which I strongly support but they don't mention). They ignore the fact, however, that this requires regulation, and it is a big stretch to call such schemes a nudge or consistent with libertarian paternalism, as they are hardly "easy and cheap to avoid".

Moreover, there are countless examples in the environmental and health and safety fields where I believe nudges are simply inadequate. You do need Clean Air Acts, pollution controls, safety in the workplace legislation. One of Thaler and Sunstein's dozen nudges - special licences for motorcyclists who do not want to wear helmets - clearly reminds us that they come from the Milton Friedman Chicago School tradition.

Intriguingly, the authors don't ask what happens when people realise they are being nudged. As they note, businesses have been indulging in some of these practices for decades. Some of us may respond to them, while others may exhibit a degree of wearied acceptance. But it is also quite possible that many people might dislike the prospect of being deliberately "manipulated" by government, even if they agree with the intentions. And what one political party might see as a well-intentioned nudge, for another could be perceived as a piece of manipulation on a par with supermarkets putting sweets at the checkout.

Governments are not neutral. Decisions on whether to legislate or nudge are political decisions, and underpinning those decisions are political values. Labour needs to talk about its values more if we are to rebuild the support of the British people. If David Cameron wants to embrace libertarian paternalism, which states that "our goal is to allow people to go their own way at the lowest possible cost" - a "one-click" opt-out on society - then we should expose his lack of ambition and vision. In truth it's little more than "Government, get out the way", with a few clever extra knobs on.

Don't get me wrong, Nudge is an important book. Its strength lies in bringing an understanding of how people think to policymaking in a systematic way. But good government is about a lot more than nudging. We cannot just leave it up to economists - even behavioural economists - to design choice environments. (And if you like Nudge, by the way, I would seriously recommend reading the work of Daniel Kahneman.) Ultimately, Nudge is more convincing as a reminder of the subtleties that can be involved in the design and execution of public policy than in its claim to have discovered a "third way" spanning left and right.

Ian Pearson MP is the minister for science and innovation at the Department for Innovation, Universities and Skills

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