Putting a Spanner in the Works: What Sludge Is and How It Impedes Optimal Decision-making

The Oxford Dictionary defines sludge as thick, soft, wet mud or a substance that looks like it. In behavioural economics, sludge is the opposite of a nudge.

Nudging consists in structuring environments to guide better decisions that will benefit people or society, while preserving freedom of choice. For example, placing fruit and vegetables at eye-level shelves and chocolates and crisps at lower levels promotes healthy eating.

The nudging method harnesses individuals’ common cognitive biases, including limited attention and the principle of least effort, to benefit people rather than to harm them. The method was pioneered by Nobel Prize-winning economist Richard Thaler and his long-standing co-author Cass Sunstein, professor at Harvard Law School. Thaler and Sunstein refer to nudging as ‘libertarian paternalism’. After their book Nudge: Improving Decisions about Health, Wealth, and Happiness was published in 2008, governments in many countries started applying nudging in practice. For example, colouring recycling bins with additional coding (blue for paper, orange for plastics, etc.), which is a heuristic-based (link in Russian) nudge prompting people to act as usual, helps them quickly remember the purpose of each bin. This has enabled governments to set up recycling systems – a social initiative that benefits the environment.

Another material result of promoting the nudging concept is a wide use of default options. Setting default options has become a common practice used to enrol employees in pension plans and automatically schedule people for regular health check-ups and seasonal vaccinations. Since individuals tend to avoid difficult decisions, while giving consent to a pre-selected option requires less cognitive effort than declining it, such nudges help people save more and take regular health check-ups. Additionally, as individuals tend to stick with the same choices for many years, which is referred to as status quo bias, they maintain the selected options (1, 2).

However, understanding how to encourage individuals to make better choices based on their cognitive and psychological patterns also provides knowledge of how to hamper these decisions in order to benefit another party, often a choice architect. Specifically, default options may be exploited to sell extra paid services that individuals do not need, while status quo bias generates enormous profits for companies: e.g. subscriptions that are hard to cancel are in fact a trap for customers.

This is how sludges emerge, acting as barriers which complicate choices that benefit people.

Thaler describes sludge as misuse of nudge theory. In his article ‘Nudge, not sludge’, published in 2018, Thaler writes that sludges are essentially ‘nudging for evil’. Nudging gently removes barriers, whereas sludge adds intentional friction. The purpose of sludge is obstructing the path towards the best choice so that an individual would rather abandon it. It is common knowledge how hard it can be to jump through bureaucratic hoops, such as collecting a package of documents for a specific government agency to approve a social payment or benefit that a person is entitled to according to law. Searching for the ‘unsubscribe’ button can be cumbersome and frustrate even an emotionally stable person.

Sludge and nudging both exploit the same cognitive biases. However, in contrast to nudging, sludge is used not to help people but rather to mislead them, drain mental resources and energy, and make them abandon their rights or benefits. In addition to psychological costs, sludge involves quantifiable implications, including direct and indirect losses in welfare, productivity, and the economy as a whole. This is shown by Sunstein in a dedicated paper released in 2019, which was then complemented with new facts and details, culminating in the book Sludge: What Stops Us from Getting Things Done and What to Do about It, published two years later.

The curse of sludge: billions of wasted hours

The consequences of sludge are quite serious, Sunstein notes. According to his calculations, in 2015, residents of just one country, the United States had to spend nearly 9.8 billion hours on paperwork. Many of these hours are best categorised as ‘sludge’, understood as friction, reducing access to important licences for businesses and to social programmes and benefits for individuals. He estimated that, if the 2.7 million citizens of Chicago were to work 40 hours a week engaged in just one task of filling in federal forms, then by the end of the year, they would have completed less than half of them. If an hour of work is valued at $20, the losses fromы sludge in the USA in 2015 alone can be estimated at $195.6 billion.

Sludge explains low take-up rates for many federal and state programmes, Sunstein argues. For example, 15% of the Americans eligible for the US Supplemental Nutrition Assistance Program (SNAP) do not receive support due to a complicated enrolment process. This is also the reason why 20% of the US residents eligible for the earned income tax credit do not claim it. The credit’s calculation complexity, combined with dozens of pages of allegedly useful guides, discourages about five million potentially eligible taxpayers from claiming the credit each year, resulting in nearly $7 billion in unclaimed benefits annually.

By creating obstacles for new businesses, e.g. requiring to collect statements and licences for almost six months, sludge hinders innovations and new jobs and, consequently, economic development. Specifically, one study shows that German start-ups spend an average of around nine hours per week on administrative tasks, such as filling in documents required by law, reporting, etc. As a result, nearly half of these firms were forced to increase the prices of their products as well as had less time for innovation and research. Instead of productive jobs, they had to create useless ones specifically for administrative tasks. Administrative burdens are often called the ‘time tax’. According to a study by OECD economists published in 2026, bureaucratic sludge is directly associated with weaker labour productivity and business activity. According to their estimates, the increase in regulatory costs in the USA from 2012 is associated with a decline in labour productivity of 0.5%.

How sludge aggravates behavioural traps

In terms of behavioural economics, the most interesting aspect of sludge is its impact through cognitive biases. One example is status quo bias that may both help develop useful habits and discourage people from taking on effortful tasks that require them to deviate from the default, such as cancelling a subscription. Another example is present bias, which can lead to a focus on the short term and procrastination, although a delayed decision would benefit individuals in the long run. This tendency means that, prioritising between taking no effortful actions today, e.g. filling in multiple forms, and receiving a social benefit in a year, present-biased people often prefer immediate comfort. ‘The future often seems like a foreign country – Laterland – and people are not sure that they will ever visit. It is often tempting to put off administrative tasks until another day,’ Sunstein explains.

The temptation is so great that people tend to postpone even relatively simple procedures although they would deliver economic rewards. In 2014, US researchers Joshua Tasoff and Robert Letzler described an experiment in which subjects were to fill out lots of paperwork and mail in the forms to the researchers within 30 days for a monetary reward. The paper forms were provided to subjects by the researchers. Additionally, subjects in one of the groups had to print out the certification page with the personal code, enclose this page, and send in the form, while the second group was not required to do that. Although nearly 80% of subjects in both groups were initially optimistic about their results, only around 30% of subjects in the first group mailed in the forms. The percentage in the second group was almost twice as high. Removing one of the stages for the second group reduced both the costs involved (time and effort to find a printer and paper) and the likelihood of errors (e.g. the risk of losing the printed page), thus increasing the percentage of mailed-in forms. Nevertheless, the difference in the experimental design had no effect on subjects’ initial perceptions, that is, people tend to ignore small but real costs in their planning.

This experiment shows that task simplification, i.e. sludge reduction, is an efficient way to overcome inertia. It also explains why brands promising a rebate after a customer proves a qualifying purchase (e.g. by emailing the check) receive claims from less than 40% of their customers, while just promising a cashback boosts firms’ sales considerably. The vast majority of buyers are optimistic about their ability to get a rebate but fail to factor in the related costs.

Sludge works through exhaustion, argues Tom de Bruyne, a behavioural psychologist and the author of the book Gamechangers about behavioural interventions. Every extra form field, every extra step, every extra click increases the probability that someone gives up. Sludge is the result of systems built without ever considering the cost of navigating them.

Just as nudging, sludges do not prohibit alternatives. Intentionally incorporated into the choice architecture, sludges simply hinder people in choosing alternatives. When companies want people to choose a certain option, they make the choice as simple as possible, while when they want you to abandon your choice, they create obstacles, Sunstein notes. Sludges do not prohibit anything – they exploit limited attention. Establishing complicated and ‘unnoticeable’ bureaucratic requirements, companies and governments are thus profiteering from consumers’ inattention, while people incur real financial losses that they are unable to recognise when making a decision.

Ignorance or bad intent?

Sludge can be unintentional when designers fail to predict difficulties that an individual might face because of the choice architecture. Sunstein gives an example of Medicare Part D, the US federal drug coverage programme for seniors, designed so that the participants can choose their own private insurance plan. To do this, they need to explore the available options and a complex system of insurance coverage and premiums. Many of those for whom this programme is intended are simply unable to perform such analysis.

A paper by Columbia University and Harvard University professors Peter Bergman and Todd Rogers, published in 2017, describes an experiment carried out in 12 schools of the District of Columbia. When parents were notified that receiving text-message alerts about their children’s academic progress required giving their consent, the parent take-up was only 1%. However, automatically enrolling parents (a default option) resulted in 96% adoption and notably improved student achievement. The authors conclude that experience and expertise in a relevant domain (in this case, in education) may not result in accurate knowledge about behaviour change decisions.

Some sludges are created to address real problems, but impose intentionally strict restrictions on beneficiaries. For example, the SNAP application process takes over five hours, including two trips to local offices, while after enrolling, recipients must repeatedly prove their eligibility. Stricter verification standards were introduced by US states because they can be penalised by the federal government for issuing benefits to ineligible people, while they face no penalty for failing to serve those who qualify.

How sludge exacerbates social inequality

In their book Scarcity: Why Having Too Little Means So Much, published in 2013, MIT professor and leading international expert in behavioural economics Sendhil Mullainathan and Princeton psychologist Eldar Shafir explain that a chronic lack of money, time, or attention is not merely a deficit of resources but a profound psychological state that changes how people see the world, forcing the mind into a state of tunnelling. Focused on one big problem, the human mind – with its limited mental capacity – ignores all other important areas of life and long-term consequences of a person’s actions, which Mullainathan and Shafir refer to as cognitive scarcity.

Sludge is directly associated with cognitive scarcity. First, sludge intentionally creates cognitive scarcity through excessive frictions. Barriers set up by sludge force even rational people into cognitive tunnelling, narrowing their attention and thus preventing them from making optimal decisions.

Second, when confronted by sludge, people having cognitive scarcity are simply unable to find a way out of this cognitive trap. These are usually people suffering from time scarcity or poor people. When asked to solve an economic problem, people facing economic distress experience fluid intelligence (the ability to think logically and solve novel problems) and self-control diminution – these are often individuals for whom government agencies develop social programmes. Sludge disproportionately affects people with the weakest digital skills or the smallest cognitive bandwidth to push through bureaucracy, that is, those individuals who are already vulnerable, Tom de Bruyne argues.

Thus, sludges have distributive effects, exacerbating inequality. Sludge often involves unfamiliar material (an individual needs to understand the registration process and, in many cases, learn how to navigate an online software only used in that process) and uncertainty (e.g. the rest of the process or its outcome is unknown). In contrast to wealthier people, who are able to hire a lawyer, more vulnerable individuals simply give up, losing access to social benefits, tax deductions, healthcare services, and education grants. Administrative sludges thus act as a mechanism of social exclusion.

When sludge is reasonable

Most administrative barriers, such as mailing in paperwork, tiresome queues, non-transparent approval processes, and other bureaucratic frictions, prevent many people from receiving benefits to which they are entitled. Therefore, sludge often has costs far in excess of benefits. Nevertheless, sludge may have good reasons in some situations, Sunstein notes.

The first reason is protecting the integrity of social programmes. Sludge collects the information needed to ensure that only those who are actually entitled receive a benefit and thus helps prevent fraud and unjustified expenses. Sludge enables government authorities to make informed decisions when providing social aid.

Second, sludge can be a sorting mechanism. Imagine that Taylor Swift is performing at UT Austin the night after next, Sunstein suggests. The venue is not big enough for everyone who wants to attend. How to sort access? This can be done by imposing an ordeal on people, e.g. a line. Those who start standing in line at approximately 3.30 p.m. will have concert access. Time – like money – can measure intensity of need or desire. Some sludge may be justified in government programmes to ensure that benefits go to those who actually need them, the researcher argues.

Third, sludge can be reasonable as a way to curb impulsiveness, thus helping protect a person against an emotional decision. For example, a cooling-off period, which is a pause that banks introduce between the date of the application for a loan and its disbursement, allows the individual to assess all pros and cons of an additional financial burden. Banks’ text messages requesting authorisation of a payment or a code confirming a payment transaction may be sufficient to somewhat dampen the impact of emotions, thus allowing consumers to renege on impulse purchases. Prompts to a user who has forgotten to fill in the subject line, such as ‘send without a subject?’, intentionally interrupt the brain’s automatic system and force the engagement of the analytical system. This is also the purpose of a message from the operating system requesting the user to confirm the deletion of a file.

Fourth, sludge protects privacy. Government officers receive a lot of personal data from people, specifically they have information about people’s careers, incomes, and dealings with the law. Banks likewise hold a great deal of personal data. The logic goes that they should be allowed to use these data to automatically complete parts of mandatory forms in order to reduce the administrative burden on people. However, personal data may be shared for improper purposes, and therefore, it is essential to thoroughly assess the pros and cons of such a decision, Sunstein warns.

In most cases, however, these arguments seem more attractive in theory than in practice. In other words, sludge may be reasonable, but only technically, whereas in reality, it almost always overwhelmingly results in excessive bureaucracy, Sunstein argues.

Sludge audits as a practical solution

There is some good news: sludges are manageable. To this end, we need a quantitative cost-benefit test or a qualitative test if a quantitative test is not possible, Sunstein suggests. The researcher provides an example of what the US Citizenship and Immigration Services (USCIS) did five years ago. USCIS issued a notice asking what barriers and burdens people faced when dealing with the office and marched through all 7,000 comments it received. The result was USCIS’s rule, issued in 2022, that increased the automatic extension period for employment authorisation from 180 days to 540 days. American employers danced in the streets because their workers could continue working rather than going to file. The workers themselves were not dancing, but they did breathe a big sigh of relief, Sunstein comments.

He considers that regular sludge audits at all large companies and government agencies might help address sludge-related problems. Such audits may help estimate how much time is spent on sludge, how many people eligible for services tend to give up, and who is hurt the most by sludge. Sludge audits do not aim just to reveal the problem, but to show where sludge may be eliminated or at least mitigated.

Time is the most valuable resource for people. Reducing sludge gives people more time, opportunities, freedom, development prospects, and ultimately, welfare.