Should Policies Nudge People To Make Certain Choices?
The Wall Street Journal's ECONOBLOG has a very interesting debate between economists Mario Rizzo (NYU) and Richard Thaler (Chicago) on the following question:
Driven by research in behavioral economics that suggests people don't always act in their own best interests, some economists are arguing for new policies that would challenge traditional "hard" tools for changing behavior, such as sin taxes and outright bans. Such policies would often rely on default options that nudge, steer and coax — but don't force — individuals to make certain choices. Is this sensible governance?The debate concerns the merits of so-called "libertarian paternalism" promoted by Thaler and Cass Sunstein. In the exchange, Mario questions the merits of this approach as well as whether it is fair to characterize it as "libertarian." You can comment on the WSJ website here.
I agree that outright prohibition is more distasteful, but the risk of incentive approaches is clear: they encourage more numerous intrusions because the cost is better hidden.
Say the government gave every taxpayer a $10,000 incentive for not smoking. Compare that to the case that the government fines every smoker $10,000 -- that's coercion. But the two cases are financially indistinguishable: a non-smoker ends up $10,000 better off than a smoker.
In Thayer's example, companies that complied with some directive were excused from some onerous paperwork. Another way to say it, companies that refused to comply had onerous paperwork inflicted on them.
The fallacy springs from the belief that there is some sort of natural "base state", and incentives are an offer to improve your situation from that base state while coercion is a threat to worsen it. For no reason I understand, people find that line of argument convincing -- stores have "10% off, this week only" sales all the time, but none would be foolish enough to warn customers "11% permanent surcharge, starting next week", even though it amounts to the same thing.
It is not obvious to me what natural limits there are, or what clear internal logic may be found, that demarcate the range of choices or behaviors open to "nudging". I suspect that these "libertarian paternalistic" procedures will quickly become a convenient camouflage for truly coercive measures by common-variety traditional paternalists. Indeed, we already see exactly that, without the "libertarian paternalist" justification tagged on; I suspect such interventions will only accelerate if a consensus is reached that paternalism really is a form of liberty after all.
What is the difference between mandating a 3-day escape clause on commercial transactions, after which the transaction goes through exactly as requested, and mandating a 24-hour waiting period for abortion, necessitating two days off work and possibly an overnight stay out of town (in the vast majority of counties with no abortion provider), resulting in an absolute barrier for women who do not have the liberty or money to meet that challenge posed "in their best interests"? What is the difference between imposing a trivial barrier to opting-out of a retirement plan, and making the safest method of abortion at a certain point in pregnancy entirely illegal, on grounds that some women might happen to feel regretful about it later (grounds which the adjudicating authority openly acknowledges are based on no factual evidence)? Libertarians might argue that the former, in each case, is intended to promote decisions the agent themselves approves of, while the latter is intended to prevent the decision that agent prefers, but that is chopping the logic awfully finely. (The whole point to this procedure, apparently, is to encourage choices <i>that otherwise would not have been made</i>, so what, in principle, distinguishes supportive "nudging" from hostile obstructionism - especially in a society in which regulatory obstructionism is part and parcel of much policy-making?)
The idea in general sounds good to me, but I am dissuaded by the obvious potential for abuse. The last thing we need is more ways to create structural roadblocks to people making and executing their own choices.
I think that this is clearly coercing the *seller*, but your abortion comparison and your remark about the decision the agent approves of makes it sound like you think it's coercing the buyer. The buyer is not forced to use the escape clause, so it has no effect on an unwilling buyer unless the seller would have made the buyer a better offer if the buyer agreed to forego the escape clause. This scenario seems very unlikely to me.
I would be interested in hearing more from you about how such modest proposals will "grease" the "slipperly slope." I don't buy your concern about the logical difficulties here, because I simply do not think that arbitrary bright-line rules offer as much protection as you seem to suggest. In fact, I tend to think that arbitrary bright-line rules actually have the potential to threaten our liberty, because they prevent important problems from being addressed and thus create massive dissatisfaction with the status quo. You cannot always expect that the response to a bright-line rule that prevents serious problems from being addressed will be as moderate as you would like, after all. If there is an essentially non-coercive means to solve a serious problem (a cooling off period to combat pushy salesmen that apply heavy pressures onto consumers and who make a mockery of the idea of "consumer choice" in a free market), I would think that liberty is more secure when that problem is solved, since that problem is no longer a source of discontent with the system -- discontent that may not manifest itself in such a moderate and reasonable way.
Overall, I would suggest that a more nuanced view of "coercion" is necessary. Is a cooling off period coercion? On one level yes, because you can't sell your goods without complying with it. On another level no, because no one forced you to go into the business of selling goods to the general public anyway. But even if this is coercion, it is not really an important kind of coercion (like murder, rape, slavery, or locking your employees into the store at night, as practiced by Wal-Mart.) Instead, it is at most a minor imposition.
Also, what is the best definition of coercion? One definition might say that any attempt to substitute one's will for anothers is coercion. In this sense, a pushy salesman who applies heavy psychological pressure on a consumer is engaging in a sort of coercion. A cooling off period could then be conceptualized as a sort of self-defense.
But ultimately, my main point is this. Before one embraces fears about the slippery slope, one should think about which side of the hill is most slippery. If one were to reject solutions that were essentially or mostly non-coercive due to fears of slippery slopes, important problems might not be addressed. And as these problems are not addressed, demand for solutions may lead to political pressure that results in more radical solutions.
Doing nothing may be more of a slippery slope (and a bigger threat to our liberty) than taking reasonable and sensible steps to solve important problems that involve minor impositions.
If you accept the second version, a law mandating that all new cars' sale price be $5 each would not be coercion, since nobody's forcing anyone to go into the new car business.
That is an card-house of hubris, and I think Rizzo does a reasonable job of pointing that out (i.e. how is that the designers of the system rise above the foibles that Thaler/Sunstein decry).
This is the same problem that Chomsky always runs into - if the masses are always deluded by clever elites, then the only issue is which elite is in control.
I wasn't endorsing one definition over another. But just noting that these are two possibilities.
In fact, conservatives will use the latter definition of coercion when it suits them. If I say that employer X is coercing their employees, a common response is that the employees can just get other jobs if they don't like it. This ignores the damage that changing jobs can do to one's resume. It also ignores the fact that some people have to pay rent, and if they are living pay check to pay check, may not be able to afford to change jobs for quite some time. What if you have family depending on their income? It can be a very big imposition to have to change jobs. A much bigger imposition, than say, a three day cooling off period is for businesses.
If abusive actions by employers are not coercion even when changing jobs is extremely difficult and often entirely impractical, then I think it is fair to say that regulation are not coercive, when all that one needs to do to avoid such regulation is to change the business one is engaged in. In other words, the definition of coercion that is good for the goose is good for the gander.
In general, I think this demonstrates the flaw in having a simplistic binary conception where whether something is labeled as coercive or not is considered dispositive of the wisdom of a particular policy. Instead, it is better to look at degrees of imposition rather than binary conceptions. The fact that you can change jobs does make unreasonable employer actions less coercive. But let us not pretend that their is no coercion at all when an employer or an employee abuses their power in an employer/employee relationship. Likewise, surely there is less (rather than no) coercion involved when the government regulates business, when we keep in mind that a business person can always exit the business they are in and become an employee of some other business person or enter a business with different regulations.
In general, a binary conception that labels things coercion or not and then uses that superficial label as the sole factor in deciding whether a policy is a good one is an unwise approach.
Basically, there is nothing wrong or unwise with a 3-day cooling off period. But there would be something very wrong and very unwise with requiring cars to be sold for $5. In one case, you have a regulation that imposes a minor imposition on sellers to check abusive salesmen. In the other, you have a regulation that would literally destroy the market for cars. That these regulations would have drastically different results illustrates my point -- a simplistic focus on whether something can be labeled coercive (under some definition) is far from the whole story. Under one definitions, these both would be labeled coercive. Under another definition, neither would be labeled coercive. That they are labeled the same way even though they are drastically different is illustrative of the limitations of a binary conception of coercion, and perhaps the limitations of binary labels more generally.
Would it be hubris to make a law based on the assumption that people prefer not to be murdered?
It is not always hubris to make reasonable assumptions about what people desire. It not unreasonable to assume that most people prefer fitness to obesity, health to sickness, or financial security to financial insecurity. The advantage of nudging is that when these assumptions are incorrect in individual cases, their is a mechanism for individuals to opt out.
Furthermore, labeling those you disagree with rather than addressing the merits of their ideas is usually not persuasive. If you want to advance a policy of ignoring the real problems of real people, you could easily be accused of being heartless and selfish. Somehow, I doubt you would find such labels persuasive.
Why do people always respond with this canard? We are talking about people making decisions for themselves that others view as inappropriate. How do you make the leap from that to murder?
What is the point of liberty if people are supposed to behave all the same? Freedom is only freedom when you are free to make choices that others deem "bad". No doubt you and I would agree on many such instances, but as long as the behaviour does not infringe on someone else, who's business is it?
The difference between saying that you can get another job if you don't like your employer, and that you can do something other than selling if you don't like three day waiting periods, is that one is done on a per-job level, and the other is done on a per-career level. The government didn't just say you can't keep working at this job if you refuse to give three day waiting periods. The government said that you can't work at a whole *class* of jobs. Only governments can do this.
This is completely false.
First of all, what is "tasty" is not objective.
If you stop eating sweets (including diet coke) for two weeks, your desire for sweets will decrease dramatically. Your tastes will change. Basically, it is challenging in the short run to change your diet, but later you adapt to a healthier diet. Also, with respect to exercise, as one becomes more fit, exercise becomes much easier and even addictive.
Most people who have unhealthy habits and are excessively sedentary would prefer to change their eating habits and their bodies. They just lack the initial discipline and often the time and resources to make important changes. If we could nudge them into making smart decisions, they would be happier and better off.
Changing a career can sometimes be easier than changing a job. If I own a restaurant, but do not like complying with health regulations, I can sell the restaurant and buy another business no subject to health regulations. I do not have to convince or beg anyone else to hire me, nor do I have to justify a job change on my resume to a skeptical employer.
The fact is that employers scrutinize your resume and they often think there is something wrong with you if you change jobs (obviously, depending on the industry). Changing jobs too often may be like a scarlet letter on your resume, dramatically decreasing your employability. Further changing jobs can be a real imposition. Often, people simply cannot afford the income loss associated with having to change, especially if they have families. There is a reason that people often take a lot of bullshit and abuse from employers, rather than changing jobs.
Furthermore, so what if you have to change careers. People who are laid off due to free trade have to change careers. When a business owner chooses to change careers because they choose to not comply with health regulations as a restaurant owner this is no more coercive than an employee having to change careers because their job has been outsourced. If anyone is coerced in these two situations, it is the employee, since they did not get to choose whether to change careers or not, whereas the business owner does get to choose whether to change careers.
More significantly, you aren't addressing the real point. When a restaurant owner has to comply with health regulations, this is not a serious imposition. A cooling off period likewise is not a serious imposition. But the bullshit that some employers inflict on their employees is a serious imposition. The funny thing is that it seems that some conservatives seem to want to label the minor impositions of government coercion, while labeling the major impositions of employers non-coercion. This arbitrary labeling process is not intellectually meaningful, but merely is an ex post justification of ex ante preferences.
I make thise leap to establish the principle that it is reasonable (not hubris) to assume something about the preferences of others in some situations. Having established that, we move away from any categorical rule saying that it is hubris to assume anything about the preferences of others, to a more nuances examination of when such assumptions are reasonable and wise and when such assumptions are unreasonable or unwise.
I would not deny that it is hubris to try to control or even try to merely influece all the decisions of others. What I would deny is that it is hubris to make reasonable and sensible assumptions about the preferences of others in some situations.
I agree that individuals should be free to make some decisions that others think of as being "bad," but I do not think they should be free to make every decision that others think of as being "bad." For example, I think it is "bad" for restaurants to serve food prepared in an unsanitary way using unsanitary facilities prepared by employees that do not wash their hands, even if such a business would survive in a market where people chose to eat there. I do not think that restaurant owners should have the "freedom" to save money at the expense of their customers health by not keeping their restaurants clean. For another example, I do not think that coal mine owners should have the "freedom" to provide inadequate safety precautions at the expense of their employees, even if employees are willing to work their without such safety precautions, due to their need for money to provide the necessities of life. Sometimes, people should not have the "freedom" to do what is considered to be "bad." Furthermore, I do not think that the word "bad" should be in quotes in many situations.
Freedom with wise and carefully chosen limits is not meaningless.
First of all, most decisions made by individuals affect others. It seems to me that the challenge you have is that when a decision by one person is said to "infringe" on another person is a very difficult one, and also one that is subject to much debate. Thus, even if I were to agree with you on this, this would hardly resolve many debates. Instead, I would end up arguing that a coal mine owner who fails to provide adequate safety precautions for mine workers is in fact "infringing" upon those workers. A libertarian might argue otherwise, since the mine worker is coerced by his need for food, shelter, and other necessities to work for the mine owner, rather than because the mine owner is holding a gun to his head.
However, I would go even further than that. I believe we have affirmative duties to look out for one another. We are our brother's keeper. Thus, I approve of three day cooling off periods. I also approve of health regulations for restaurants and hospitals imposed by government rather than markets. I approve of safety regulations of mine workers who are not otherwise in a position to negotiate for these on their own. These are minor impositions that solve very important problems.
Which is about as classic a statement that it just isn't that important to them as you can possibly make.
Since no two people have the same utility "function", on what basis do you presume to decide what is best for them? You do so by projecting your own choices on to them. You simply assume that your opinion is more valid than their action. That my good man is hubris. It is the very same motive that drives evangelical fundamentalists; in your case it is to save someone's earthly health rather than their immortal soul.
sigh. Do you really think we have laws against murder based on the preference of people to not being murdered, even though they may actually behave in ways contrary to that preference? That we prevent murder by incenting people to not be murder victims? Is the damn-foolishness of your point obvious to you yet?
First of all, most decisions made by individuals affect others.
I was expecting this, and even thought about forestalling it, but I didn't want to be that presumptuous. I should have been. As you so eloquently put it above "this is completely false".
We are our brother's keeper.
And by gawd you will make your brother do what is in his best interest (as you see it) whether your brother agrees or not, right? Incentives are nice, but if that won't do the trick you aren't above coercing the proper behaviour if necessary, eh?
If sarcasm was a good substitute for intellect, I would find your responses to my comments to be both brilliant and worth responding to.
Let me list your responses which are empty and suggest how you can make them worth responding to.
Again, there is no substance here. A list of three sarcastic questions at which hint that you have a position on the subject yourself, but not statement of that position. No positive assertion on your part. And no addressing of the point I actually made. I suppose by sighing (the equivalent of rolling your eyes), you think that you demonstrate your intellectual superiority. I assure you, the opposite is the case.
I am glad that you anticipated a weakness in your argument. Unfortunately, you have done nothing to actually address the point or explain your position on this issue.
This comment tells me what you are against, but not what you are for. It also smacks of self-righteous contempt. Again, I notice that all you put forth are questions that suggest positions, not actual positions. It is nearly as though you are two cowardly to actually stand for something.
Let us recap. You have written seven sentences. Five of them are sarcastic questions where you cowardly fail too put forth your own position. In one sentence you say that you anticipated a particular argument that I made. In the next, you express disagreement but fail to explain why. Before any of these seven sentences, their is a self-righteous contemptuous sigh. In exactly zero of your sentences do you have any substance whatsoever.
Grade for your Response: F
In the future, if you want to have a conversation, do not be a coward. And do not be an asshole.
The response immediately before the one that was the subject of my last post is slightly better.
Compared to your other responses, this is refreshing. It actually asserts something. You put yourself out there, instead of cowardly hiding behind sarcastic question marks.
So, your assertion is that if someone lacks the discipline or the time and resources to do something, then it is unimportant to them.
First of all, the sole measure of whether something is important is not whether it is important to a particular individual. If someone abuses their body, allowing cholesterol to build up in their arteries as they become ever more obese, surely their untimely death from heart disease affects more than just themselves. For example, their children and other close family members will be greatly affected by these bad habits, both financially, emotionally, and spiritually.
Second, your response fails to take into account basic psychological reasons why people fail to exercise discipline. One common reason is poor self-esteem, low self-respect, and little or no belief in one's ability to succeed. Such dysfunctional thoughts are often fed by negative interactions with others.
Another reason that people fail to exercise discipline is because they were never taught to exercise it. To get what is really most important in life, one must make some short-term sacrifices. When people are surrounded by poor role models and have not been taught the virtue of discipine by their parents, their ability to make rational decisions is often compromised. Instead of considering the long term benefits of discipline and weighing them against the short term costs, people who are not taught to exercise discipline consider their short-term inclinations only. In other words, people do not make rational decisions.
When you argue that when people fail to exercise discipline, they are making a "classic statement" that the long-term benefits of discipline are "not important to them" it seems that an assumption implicit here is that we should defer to their "judgment." But this is not the case if their judgment is not rational. We have no reason to give absolute deference to the judgment of someone who makes dysfunctional decisions or has failed to adequately consider long-term costs and benefits as well as short-term costs and benefits. At the very least, there is nothing wrong with "nudging" them towards making a choice that takes into account the long-term as well as the short-term. If they have thought it out and disagree, they can always make a decision that disregards the nudge.
First of all, utility function are simplified models of reality used by economists, not reality itself. No one calculates or knows their "utility" for all possible choices. Further, implicit in the use of utility functions as the sole criteria for making decisions is the idea that we should be utilitarians. But to the extent that you believe in deontological concepts, such as duty, a utility functions value in decision-making is reduced.
Second, static utility functions are not the best model of the real world. If you begin to exercise, as you become more fit, working out will begin to bring you more utility. In fact, many people who work out regularly become addicted to working out. That is, their utility function changes. Unfortunately, when deciding to work out or not, people have no way of knowing how their utility function will change if they exercise the discipline necessary to keep going to the gym. In essence, your argument is subject to criticism not only for glorifying and reifying utility functions in general, but also for reifying a particular type of utility function -- that is, the static utility function. But experience shows the peoples preferences and their perceptions and experiences of costs and benefits change and thus dynamic utility functions are the superior model of reality.
First of all, "nudging" does not override a persons deeply considered rational choices, but rather provides a default that one predicts most people would choose, if they were to actually go through the motions of engaging in a rational calculus.
Second, when individuals are not in a position to negotiate with someone who has more power, for example, an individual coal miner negotiating with a coal mine owner, their choices are sharply curtailed. Both by their inferior negotiating position and by ignorance and bounded rationality. It is not arrogance vis a vis the coal miner to curtail the negotiating space they are operating in, preventing them from "choosing" an unsafe work environment under pressure from a coal mine owner who is vastly more powerful. Further, government regulation can partially overcome the problem of bounded rationality be employing experts who do an in-depth study of the problem, in this case, coal mine safety. An individual coal miner often will not have the education or the ability or the resources to assess these issues without such assistance.
I am glad that you concede that I am a good man. Nonetheless, this is nothing more than an ad hominen attack combined with a deeply questionable analogy.
Overall, your response here is vastly superior to the one that follows. Out of 6 sentences, only two consist of useless ad hominen attacks. The other 4 consist of actual statements of position that can be assessed and evaluated. (Or help in the formulation of such statements, as in one sentence that is half assertion and half rhetorical question.)
Let me list your responses which are empty and suggest how you can make them worth responding to... Grade for your Response: F
Well, you have certainly shown me the error of my ways. There is no case to be made to a person of such pompous self-importance. LOL - grading my reponse?
Again, there is no substance here. A list of three sarcastic questions at which hint that you have a position on the subject yourself, but not statement of that position.
Sorry, but what is there to do but ridicule someone who conflates individual [prominently health] choices with murder? And rather than retreat from the analogy, forges ahead with it as demonstrating a "reasonable" basis. My position which appears so translucent to you is this - it is imbecilic to equate, in any way, incentives to "improve outcomes" of individual decisions with laws against murder. Is that clear enough for you? That was the point of the three rhetorical (and yes, sarcastic) questions.
So, your assertion is that if someone lacks the discipline or the time and resources to do something, then it is unimportant to them.
I wouldn't say it was entirely dispositive, but I think it's a pretty clear indicator; much better then your (and every other paternalists) attempt to fathom that person's true inner needs.
Let me give you a simple example: I'd be happy to be abnout 20 lbs lighter than I am. Which is my true preference - to continue with my diet/exercise regime in it's current state, or to make the necessary changes to lose the 20?
When you can discuss that without your imperious tone and silly forays into murder and coal mining, then we might have a basis on which to continue.
Since are incapable of understanding my point about murder or my purpose in bringing up this particular example, you choose to call me an imbecile. My point is simple. I am not conflating murder with health choices. We outlaw murder because we assume people prefer to not be murdered. Thus, in at least some circumstances, it is not hubris to make assumptions about people's preferences. Is that simple point too hard for you? If you don't like the example because you do not understand my purpose, you can just not address the point instead of obsessing over it and resorting to childish name calling.
I have no desire to have a discussion with you, given your failure to address any of my many substantive points combined with the fact that I have fully addressed all of the substantive points you have made. Your substitute for substance appears to be ad hominen attacks combined with questions where you don't yourself advance a position.
This question is another example of cowardice. You tell me. Why don't you actually adopt positions yourself? Answer your own question. Actually, in this case, don't bother. I am not going to continue this conversation with you given your rudeness (i.e. sighing combined with name calling) combined with your lack of substance.