The Great Reconciliation?

What is the best way to reconcile the results for these three polls?

I’m tempted to just say “cognitive dissonance.”  The initial effort heuristic makes great sense, and the medical estimate seems about right.  But that in turn implies that past and current coronavirus efforts (public and private) are grossly excessive.  Indeed, do we even spend five hours per year fighting flu?  If so, why should we spend more than twenty five hours per year fighting coronavirus?  But almost no one feels comfortable with that relaxed attitude, hence the dissonance.

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Escaping Paternalism Book Club: Rizzo and Whitman’s Final Response

This is the final response by Mario Rizzo and Glen Whitman, authors of Escaping Paternalismfor my Book Club on their treatise.  Don’t forget to review the book on Amazon!


We want to thank Bryan one more time for hosting this book club, which has been entertaining and enlightening for both of us.  Although the discussion has naturally gravitated toward points of disagreement, in truth we and Bryan are largely on the same page.  It’s worth enumerating some of our many points of agreement, most of which relate to the policy application of behavioral findings:

  • The policy readiness of behavioral research has been greatly oversold. Much less is known about the “standard biases” than we have been led to believe.
  • The importance of incentives and learning has particularly been neglected by behavioral economists looking to use policy to correct alleged irrationality.
  • Behavioral paternalists have also severely neglected the role of self-regulation and mutual self-help. Bryan questions the extent and efficacy of these self-regulatory measures, but he surely agrees that they exist and are relevant to policy judgments.
  • The policy-relevance of behavioral findings is hobbled by the problem of local knowledge. Both the biases themselves and their self-regulation are context-dependent and individualized, which creates big problems for “one-size-fits-all” policymaking.
  • The policy-relevance of behavioral paternalism is further hobbled by the interaction of biases, which can offset each other. It’s a mistake to judge the “wrongness” of a single bias in isolation, and thus also to attempt to correct a single bias in isolation.
  • Practically speaking, behavioral paternalism provides vague scientific cover for those who would propagate “the feel-good seat-of-the-pants paternalistic policies governments wished to adopt anyway” (Bryan’s words, which we quite like).
  • The problem gets even worse if policymakers are afflicted by the same biases that regular people are accused of holding. For reasons including the perverse incentives of politics and Bryan’s own “rational irrationality,” we can expect people to indulge their biases more often in the political sphere, often with deleterious consequences.
  • Slippery slope effects are real, both in general and in paternalist policymaking specifically, and the indulgence of biases in the political sphere further greases the slope.

Even outside applications to policy, we and Bryan agree on quite a lot.  Specifically:

  • Behavioral paternalists have been too quick to deem people irrational, using a strict application of the neoclassical model of complete and transitive preferences. This model allows no room for people to change their minds or discover their preferences over time.
  • It is perfectly reasonable and rational to allow some inconsistencies to exist in your mind. As Bryan says, in a sentence we wish we’d written ourselves, “Trying to make all your beliefs consistent is as foolish as trying to keep your house perfectly clean.”  We would only amend this to allow for inconsistency of preferences as well as beliefs.
  • The evidence supporting the existence of many supposed biases is not as unambiguous as it seems, and we do not understand their operation as well as we’ve been led to believe. Some things that are called “biases” may be nothing of the kind. (Bryan doesn’t buy our reasoning in every specific case, but he seems to agree this is sometimes true.)

So where do we and Bryan differ?  There are various small points of difference, but the most important and persistent is that (consistent with the literature) we adopt a subjective theory of value, whereas Bryan believes in a form of objective welfare.  We have trodden this ground well in previous posts, so we’re inclined to let it lie here.

However, we do wish to respond to one specific point from Bryan’s most recent post.  Once again, he invokes the case of children.  But this time, his point is not that children might be inclusively irrational (a point we have conceded), but that, in trying to shape our own children’s behavior, we are revealing our own support for objective welfare!  Needless to say, we disagree.  The reasons are complicated, but the primary one is that most of the ways we control our children fall in category of “dealing with people who don’t actually understand the world yet.”  In Bryan’s specific example, he imagines “a bright child [who] stubbornly insisted that he wanted to play with a loaded gun after you thoroughly warned him of the risks.”  We would indeed intervene in this case.  But we would do so in large part because we don’t actually believe they genuinely grasp the risks, regardless of how bright they are or how much they insist.  Yes, this is a paternalist impulse – appropriately directed at a child rather than an adult – but it doesn’t prove the existence of objective welfare.  (There is much more we could say about this example, and the justification for paternalism for children in general, but we need to end this somewhere.)

In any case, our disagreement with Bryan about objective welfare confirms the wisdom of our having given the book a nested “even if” structure.  At each stage of the book, we essentially say, “Even if you don’t agree with the arguments so far, we’re now offering you an additional and independent argument for resisting paternalism.”  Bryan finds the book’s early arguments only moderately persuasive, but the later arguments strongly persuasive.  That works for us!  (We suspect that different readers might be more persuaded by the earlier arguments.)

As a final observation, we would note that Bryan’s personal anti-paternalism relies to a great extent on his libertarian (and specifically Huemerian) political philosophy.  That’s fine, and we have a good deal of sympathy for that point of view.  But as we say in the book, we are not philosophers, and therefore we focus on our comparative advantage:  conceptual and consequentialist problems with behavioral paternalism.  We endeavor to offer argumentation for the anti-paternalist position that doesn’t require one to come from a libertarian philosophical perspective.  In many respects, our book is an immanent critique of behavioral paternalism, and it’s one we hope will cause even non-libertarian supporters of that position to reconsider.

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It’s Complicated: A Syllogism

Consider this general syllogism:

 

Issue X is complicated.

Perspective Y’s position on X is not complicated.

Therefore, Perspective Y is wrong about X.

 

It’s a solid argument, and one we can apply to endless pressing issues.

 

For instance:

Gender relations are complicated.

MeToo’s position on gender relations is not complicated.

Therefore, MeToo is wrong about gender relations.

 

Or:

Relations with Russia are complicated.

Russia hawks’ position on Russian relations is not complicated.

Therefore, Russia hawks are wrong about Russian relations.

 

Could people misuse this syllogism as an excuse to dismiss any view they don’t like?  Sure.  But it probably matters not, because there’s an infinite supply of such excuses.

Could people use this syllogism to swiftly dismiss views that aren’t worth their time?  Once again, sure.  And that’s a good thing, because we’re running short on time already.

 

 

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Escaping Paternalism Book Club: My Final Response to Questions

I’m now ready to wrap up my side of the Escaping Paternalism Book Club; Rizzo and Whitman will have the last word, coming soon.  Hope you enjoyed the ride!

Response to final questions:

Knut Heen:

When the unit of measurement is cash, discounting is standard practice and non-controversial.

When the unit of measurement is utils, discounting is somehow highly controversial.

This is a surprisingly complex issue, but I think I handle it pretty well here.

Denver:

(This question is for anyone)

What argument would it take, or what evidence would you have to see, to conclude that paternalism is justified, at least to some extent?

As usual, I appeal to Mike Huemer’s libertarian presumption.  If the social benefits of paternalism substantially exceed their social cost (by a factor of say 5), then paternalism is justified.  My case for autonomy closely parallels my case for pacifism, which goes like this:

1. The immediate costs of war are clearly awful.  Most wars lead to massive loss of life and wealth on at least one side.  If you use a standard value of life of $5M, every 200,000 deaths is equivalent to a trillion dollars of damage.

2. The long-run benefits of war are highly uncertain.  Some wars – most obviously the Napoleonic Wars and World War II – at least arguably deserve credit for decades of subsequent peace.  But many other wars – like the French Revolution and World War I – just sowed the seeds for new and greater horrors.  You could say, “Fine, let’s only fight wars with big long-run benefits.”  In practice, however, it’s very difficult to predict a war’s long-run consequences.  One of the great lessons of Tetlock’s Expert Political Judgment is that foreign policy experts are much more certain of their predictions than they have any right to be.

3. For a war to be morally justified, its long-run benefits have to be substantially larger than its short-run costs.  I call this “the principle of mild deontology.”  Almost everyone thinks it’s wrong to murder a random person and use his organs to save the lives of five other people.  For a war to be morally justified, then, its (innocent lives saved/innocent lives lost) ratio would have to exceed 5:1.  (I personally think that a much higher ratio is morally required, but I don’t need that assumption to make my case).

Inverting this: If the costs of paternalism are low, and the long-benefits are large and fairly certain, paternalism is justified.  Otherwise, not.  In the real world, of course, all three conditions rarely hold, especially for adults.  And as Rizzo and Whitman emphasize, when we calculate costs and benefits, we should always include the burden paternalism imposes on responsible people, as well as the dysfunctionality of actually-existing paternalist policy.

Last, let me reply to Rizzo and Whitman on objective welfare, point-by-point:

We should emphasize that Bryan’s position was not our primary target in the book.  Many behavioral paternalists (i.e., new-school paternalists) explicitly disavow the notion of objective welfare, even if they sometimes unwittingly slip into that frame of mind.  Like most economists, behavioral paternalists embrace the subjectivism of preferences and personal values.  We have met them on that playing field.

Do behavioral paternalism “sometimes unwittingly slip” into that frame of mind?  Or do they habitually do so?  RW’s exegesis of this literature convinces me of the latter.

By contrast, although Bryan is not a paternalist, he shares the old-school paternalists’ fundamental value judgment:  that some people’s preferences are just wrong, and they would be better off if corrected.  This is a philosophical position we do not share, so perhaps we should simply agree to disagree.

You may not share this philosophical position explicitly.  But if you monitor your daily thinking, how consistently do you avoid it?  If a bright child stubbornly insisted that he wanted to play with a loaded gun after you thoroughly warned him of the risks, would you really deny that you make him better off by giving him what he needs instead of what he wants?

Furthermore, what if we interpreted “better off” as “having a happier long-run emotional state?”  This hardly seems like an abuse of the English language.  Would you still deny that some people “would be better off if corrected”?

However, Bryan also suggests that we, too, have accepted some notion of objective welfare.  In response to a passage in the book where we concede – for the sake of argument – that we could indulge our intuition in certain very extreme cases that people are acting irrationally, Bryan responds:  “I agree that ‘intuition’ (or just ‘common-sense’) says this.  The reason, though, is that ‘well-considered well-being’ is a thinly-veiled version of objective well-being.  The morbidly obese are plainly acting in accordance with their own preferences, but they are acting contrary to their own long-run happiness.”

On this point, we strongly beg to differ.  Well-considered well-being is not just thinly veiled objective well-being.

Logically, these are different concepts.  But in practice I say that virtually everyone – Rizzo and Whitman included – uses “well-considered well-being” as a place-holder for “objective well-being.”

We dispute the notion that anyone who thinks carefully enough will choose Bryan’s personal values!  On this front, the behavioral paternalists are right:  the appropriate standard of well-being is the one you would impose on yourself.  If the morbidly obese person looks at his life and genuinely concludes, “You know, all thing considered, this is the life for me,” we, as economists, have no objective basis for saying otherwise.  If there are legitimate grounds for deeming this person irrational and possibly in need of help, it’s because his behavior is making him worse off from his own perspective.

Perhaps we “as economists” have no objective basis for condemning a life of morbid obesity.  But how about as philosophers?  As human beings?

We would also observe that the appeal to “common sense” is potentially tyrannical – not in Bryan’s hands, but in the hands of those who don’t share his libertarian value commitments.

Of course.  And as I said, acknowledging the existence of China is potentially tyrannical, too.  As long as we deny that China exists, it makes no sense to impose trade barriers on China.  But the wise course is not to deny the obvious, but to acknowledge the obvious, then argue for the controversial.

Common sense is often shorthand for “what we happen to like.”  Laden with social desirability bias, common sense can become a cudgel for imposing one’s own values on others.  Which is not to say we should never apply common sense; again, we might be willing to indulge that intuition in some extreme cases.  But it is playing with fire, so to speak.

Most of this, too, is common sense.  “People are quick to define their personal tastes as common sense” is common sense!  But that doesn’t mean we should reserve intuition for “extreme cases”; it means we should carefully weigh intuitions.  Appeals to common sense underlie all science, so we might as well embrace it.

To be very clear, we don’t dispute the existence of objective standards.  In principle, we can objectively define the choices that will maximize health, or lifespan, or long-term financial wealth.  But how should those things be weighed against other values, such as spontaneity, indulgence, and hedonic pleasure?  That is a matter of personal preferences and values.

Again, this sounds good, but I doubt Rizzo and Whitman even try to consistently apply it.  If a precocious child used this framework to defend his choice to play with a loaded gun, RW would still veto him for his own good.  And wisely so.

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Escaping Paternalism Book Club: Rizzo and Whitman Response, Part 3

This is the third of a series of responses by Mario Rizzo and Glen Whitman, authors of Escaping Paternalismfor my Book Club on their treatise.

Once again, we’d like to thank Bryan for hosting this book club.  We also appreciate the many insightful contributions in the comments section.  In this post, we’ll discuss a handful of questions raised over the course of the book club but especially in Bryan’s last installment.

But first, a personal request.  If you’ve read the book, we would truly appreciate your reviewing it on Amazon!

And now for the remaining topics…

 

Revisiting Falsifiability

In our earlier reply on this topic, we may have taken the question too literally.  For many, “falsifiability” is simply a shorthand way of asking Is this claim scientific? or Is this claim supported by evidence?  And we believe the answer is a clear yes for both questions.  There are mountains of evidence for inclusive rationality.  It takes the form of people engaging in all manner of self-regulatory behaviors, from mental budgeting to diet plans to self-reward-and-punishment schemes to environmental structuring to mutual support groups.  It takes the form of people learning over time.  It takes the form of people reducing their “biases” in response to higher costs and indulging them more in response to lower costs (a phenomenon that Bryan himself identified and named).  It takes the form of behavioral economic research revealing tendencies that – shorn of unwarranted normative judgments – evince the existence of non-standard preferences.  And so on.

Some might reply, “What you’re doing is seeking confirmation rather than falsification.”  But these are in fact two sides of the same coin.  Scientific hypotheses quite often generate predictions about the existence of certain phenomena.  If a thorough search fails to turn up examples of such phenomena, then eventually that failure is deemed a falsification.  For example, evolutionary biologists hypothesized – on the basis of primitive marsupial fossils in South America and contemporary marsupials in Australia – that transitionary marsupial fossils would be found in Antarctica (which at one point connected South America to Australia).  This hypothesis led to explorations that did indeed find such fossils.  But what if these explorations had turned up nothing?  With enough failures, biologists would eventually have had to move on to other, better-supported hypotheses.  That’s how falsification works in evolutionary biology:  a search for confirmatory evidence that might not materialize.

The process is similar in the study of human decision-making.  If the search for inclusively rational behaviors had turned up nothing, we would have had to reconsider our position.  But it didn’t turn out that way.

 

Children and Opiate Addicts

Even if inclusive rationality is generally correct, there is still the question of its limits.  Are there any exceptions?  This, we think, is what Bryan really wants to know when he asks about falsifiability; hence his frequent references to children and opioid addicts.  We are happy to take these as probable exceptions, at least in many instances.  Why do we hesitate to go beyond “probable”?  Because we are experts in neither child psychology nor opioid addiction.  What we know of them from general awareness and personal observation tends to support that hypothesis, but we don’t want to oversell our understanding.

We also suspect that, in both cases, the story is more complex than “these people aren’t rational.”  It seems likely that some child and addict behaviors can be explained as the result of peculiar but not irrational preferences.  Other behaviors, especially for children, can be explained as mere ignorance about how the world works (kids don’t necessarily understand that throwing a tantrum won’t make the broken toy fix itself) or testing the limits of their power (maybe the tantrum will motivate Mom and Dad to go buy a new toy).  None of this means genuine irrationality isn’t also involved – only that teasing out its role could be a difficult undertaking.

Could other exceptions be found?  Sure.  Some varieties of mental illness might qualify.  There might be some specific behaviors even in “normal” (adult, non-addicted, mentally healthy) people that would qualify.  But if our research has taught us anything, it’s that rationality is more complex than you think and often appears where you least expect it.  Behavioral economists have found countless “gotcha” cases of alleged rationality – but then closer examination forces us to say, “Hmm, maybe not.”  The inclusive rationality approach forces analysts to have some humility, and to examine more carefully rather than indulging the impulse to find fault.

 

Objective Welfare

Bryan’s overarching perspective comes out most clearly in Part 5 of the book club.  Here, he makes clear his support for a notion of objective welfare.

We should emphasize that Bryan’s position was not our primary target in the book.  Many behavioral paternalists (i.e., new-school paternalists) explicitly disavow the notion of objective welfare, even if they sometimes unwittingly slip into that frame of mind.  Like most economists, behavioral paternalists embrace the subjectivism of preferences and personal values.  We have met them on that playing field.

By contrast, although Bryan is not a paternalist, he shares the old-school paternalists’ fundamental value judgment:  that some people’s preferences are just wrong, and they would be better off if corrected.  This is a philosophical position we do not share, so perhaps we should simply agree to disagree.

However, Bryan also suggests that we, too, have accepted some notion of objective welfare.  In response to a passage in the book where we concede – for the sake of argument – that we could indulge our intuition in certain very extreme cases that people are acting irrationally, Bryan responds:  “I agree that ‘intuition’ (or just ‘common-sense’) says this.  The reason, though, is that ‘well-considered well-being’ is a thinly-veiled version of objective well-being.  The morbidly obese are plainly acting in accordance with their own preferences, but they are acting contrary to their own long-run happiness.”

On this point, we strongly beg to differ.  Well-considered well-being is not just thinly veiled objective well-being.  We dispute the notion that anyone who thinks carefully enough will choose Bryan’s personal values!  On this front, the behavioral paternalists are right:  the appropriate standard of well-being is the one you would impose on yourself.  If the morbidly obese person looks at his life and genuinely concludes, “You know, all thing considered, this is the life for me,” we, as economists, have no objective basis for saying otherwise.  If there are legitimate grounds for deeming this person irrational and possibly in need of help, it’s because his behavior is making him worse off from his own perspective.

We would also observe that the appeal to “common sense” is potentially tyrannical – not in Bryan’s hands, but in the hands of those who don’t share his libertarian value commitments.  Common sense is often shorthand for “what we happen to like.”  Laden with social desirability bias, common sense can become a cudgel for imposing one’s own values on others.  Which is not to say we should never apply common sense; again, we might be willing to indulge that intuition in some extreme cases.  But it is playing with fire, so to speak.

To be very clear, we don’t dispute the existence of objective standards.  In principle, we can objectively define the choices that will maximize health, or lifespan, or long-term financial wealth.  But how should those things be weighed against other values, such as spontaneity, indulgence, and hedonic pleasure?  That is a matter of personal preferences and values.  Most importantly, tradeoffs among competing values – some or all of which may have a claim to objective – are what is important in any policy evaluation. We cannot say, for example, that people are undersaving if we do not know the appropriate tradeoff between present and future “objective goods” at the margin.

 

Overapplication of “Irrationality”

A recurring theme of the book is that the term “irrational” has been applied far too broadly.  “Irrational” is not a synonym for “wrong,” “undesirable,” “ill-informed,” or any number of other negative qualities.  “Rationality” and “irrationality” relate specifically to the suitability of means to ends – that is, how well people match their choices to their goals, whatever those goals might be.  At least, that is how we use them in the book.  The need to distinguish irrationality from other negative things comes up in Bryan’s fourth book-club post:

RW embrace glorious candor.  If we fully embrace their “inclusive rationality,” RW freely admit that we can no longer impugn paternalists as irrational.  I’d add, however, that RW expose their opponents’ irrationality so convincingly that we should reject inclusive rationality.  Many beliefs are arrant folly, and relabeling this arrant folly as “inclusive rationality” is bending over backwards for no good reason.

We would not want to be accused of supporting “arrant folly”!  But it’s worthwhile to recognize that arrant folly can nevertheless be rational.  We lay out the reasons why in the chapters on political economy and slippery slopes, but here’s the short version:  Even fully rational policymakers can support bad policies.  This can happen for numerous reasons.  They may lack good information.  They may not have absorbed the wisdom of our book!  They may care only about what appeals to a rationally ignorant public.  They may expect never to bear the long-run consequences of their policies.  They may expect to be rewarded for the up-front benefits or illusory benefits of their policies.  They may expect to receive greater status and larger budgets in administering such policies. They may enjoy exercising control over others.  They may belong to (or take contributions from) interest groups that benefit from paternalistic policies.

Furthermore, as we emphasize in the book, even “irrational” contributors to bad policy – such as action bias, overconfidence, and confirmation bias – are not clearly irrational.  They are tendencies with low costs and sometimes notable benefits to policymakers.  This is Bryan’s own “rational irrationality” in action:  the political arena does little to discourage, and much to encourage, the indulgence of our biases.  And we don’t have to concede they are genuine biases to make this point!  Some biases are just nonstandard (but totally relatable) preferences, such as “I enjoy feeling like I’m right, and I dislike admitting I’m wrong.”  If we conclude that so-called biases like these are in fact inclusively rational, that doesn’t excuse the resulting bad policy.  See above:  even fully rational policymakers can support bad policies.

Finally, policymakers may not share our values.  They may implicitly or explicitly believe in a notion of objective welfare (as Bryan does) and weight it heavily enough to outweigh pragmatic concerns.  They may not share Bryan’s libertarian value commitments, which do a lot of the work in helping him reach anti-paternalistic conclusions despite his belief in objective welfare.  We disagree with those who arrive at paternalism in this way, but we wouldn’t call them irrational.  In the book, although some of our arguments may invoke libertarian values, for the most part we endeavor to provide reasons to resist paternalism that could persuade people who don’t share our ideological priors.

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Escaping Paternalism Book Club: My Response to Questions

Thank to everyone who’s participated in the Escaping Paternalism Book Club. I just left my review on Amazon, and encourage readers to do the same.

I’m also happy to take one last round of questions on Escaping Paternalism, and suspect that Rizzo and Whitman are up for an encore as well.  If you have any remaining or Big Picture comments or questions, please share them in the comments for this post.

For now, here are my responses to some earlier questions.

Matt:

Hazlitt takes an economic model of willpower. The will is simply that which we choose to do at one time and which has won out over competing desires. Given many short term desires may conflict with long term goals, the difficulty lies in keeping the long term vision/goal front of mind so that acting that way is not ‘dethroned’ by shorter term desires. So far, this seems like a fairly standard view. We aim at the best, but trip up on the way. This would be deemed irrational – we haven’t chosen correct means to achieve our ends.

But Hazlitt doesn’t call this irrational behaviour. It is not, as Rizzo and Whitman describe the behavioural economists’ view, a failure to choose effective means to achieve given, subjective ends. In Hazlitt’s view, it is that the long-term goal was poorly chosen. If, when the time comes to pay the price – to sacrifice by giving up something – and we choose not to give up that thing, we have chosen a goal that we were not willing and able to pay the price for. That is, we desired the long term goal, but did not demand it. Therefore, willpower is about what we demand – which is the product of how we value some things relative to others. Are we choosing goals in alignment with our values?

So, is a preference only useful in considering whether behaviour is rational or not if we are willing to pay the price for it, ie that we demand it? Are preferences assumed to be the things we demand, not desire? How does this idea relate to Rizzo and Whitman’s book? Thanks.

Hazlitt’s idea fits well with my view that most alleged “self-control problems” are driven by Social Desirability Bias.  People say they want socially approved things, but their actions reveal what they actually want.  When someone says, “Nothing means more to me than my family” after drinking away the rent money, the correct interpretation is that they prefer alcoholic beverages to their family’s well-being.  Why claim otherwise?  Because it sounds better.  Yes, actions speak louder than words – but as long as some people fail to accept this truism, expect the flow of flowery verbiage to continue.

SaveyourSelf:

“I say the rational discount rate for utility is no time discounting at all.”

Isn’t that like ignoring compounding interest? Wouldn’t that be irrational, or at least unintelligent?

No.  This confuses prices with preferences.  I’m saying that you should not discount future utility merely because it is in the future, not that you should have flat consumption regardless of interest rates.   If you can earn interest by waiting, a person who does not discount the future might opt to wait.  Indeed, if you can earn interest by waiting, even a person who does discount the future might opt to wait!

Jason Ford:

Which is a worse problem overall: people discounting the future too much or not discounting the future enough? A lot of people have trouble optimizing for the present and thus put a great deal of weight on the future. They sacrifice happiness in the present for the promise of happiness in the future. For many people, this makes sense: The pains of pregnancy are worth it for the joy of a child. if you want a career in the military, the few months in boot camp make a lot of sense even if you’re miserable for that brief time.

A great and underrated question!  Ultimately I say that excessively discounting the future is the greater problem.  High discounting (better-known as “impulsivity”) leads predictably to all the canonical “social pathologies”: poverty, broken families, substance abuse, crime, and more.  Furthermore, impulsivity is much more common, especially among young people.  At the same time, I agree that a noticeable share of adults, perhaps 10-15%, are so future-oriented that they fail to enjoy life.  They accumulate much wealth but get little pleasure out of it.

Ghatanathoah:

I don’t think it’s reasonable to say objective welfare exists. It’s always possible to imagine a mind that does not want something, even if all real people want whatever it is.

I’m not saying that all humans want their own objective welfare.  I’m saying that objective welfare exists whether a human wants it or not.  Not all kids want to go to sleep, but all kids will have unhappier lives if they’re habitually sleep-deprived.

To be clear, when I say “happy” and “unhappy” I mean emotional states, not preference satisfaction.  We know them in ourselves directly via introspection and in others inferentially via facial expression, demeanor, and so on.

Alexander Turok:

If you really want to bite the bullet on anti-paternalism, I’d like to hear how Russia should have handled the alcohol epidemic during the 1990s. Should it have kept taxes low?

I say yes.  And instead of preaching to heavy drinkers to stop, I would have preached to families and romantic partners to shun heavy drinkers.

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You Will Not Stampede Me

During the last twenty years, I’ve lived through a series of public crises.  9/11.  The Iraq War.  The Great Recession.  The Syrian Refugee Crisis.  ISIS.  Systemic sexism (“MeToo”).  Systemic racism.  And of course COVID-19.

In each case, society’s demands have been the same.

First, hysteria.  We’re all supposed to embrace fear and anger as the leitmotivs of our lives.

Second, herding.  We’re all supposed to not merely refrain from criticizing the popular view, but to fervently join the chorus calling for action.

In each case, I have spurned the demands of society.  I refuse to get hysterical.  I refuse to herd.

For any specific crisis I downplay, strangers usually assume a left- or right-wing motive.  Against the War on Terror?  Leftist*.   Against #MeToo?  Rightist.

Those who know a bit about me suspect libertarian wishful thinking: I pretend the world is fine in order to deny the need for decisive government action.  In that case, though, shouldn’t I grant the severity of the problems – then blame the government?

A better story is that I’m a contrarian.  If most people are incensed about something, I go out of my way to be blasé.  To quote The Misanthrope:

What other people think, he can’t abide;

Whatever they say, he’s on the other side;

He lives in deadly terror of agreeing;

‘Twould make him seem an ordinary being.

Indeed, he’s so in love with contradiction,

He’ll turn against his most profound conviction

And with a furious eloquence deplore it,

If only someone else is speaking for it.

Though I love to read these immortal lines aloud, I deny that they describe me.  My position, rather, is that society is consistently wrong.

Though the details vary, there are two crucial constants: First, hysteria is absurd; second, herding is reckless.

Let me elaborate.  To paraphrase the world’s best graduation speech, trying to figure out what’s going while high on negative emotions is “as effective as trying to solve an algebra equation by chewing bubblegum.”  Of course, if you’re the sole person hysterical about your cause, you’ll probably do no harm.  But when lots of people are hysterical in the same way, they generally wreck havoc.

That’s right, I stayed calm on 9/11.  When Americans started calling for blood on 9/12, I saw horrible writing on the wall.  Though not as horrible as the writing turned out – without the Iraq War, we probably wouldn’t have had the Syrian Civil War, ISIS, the refugee crisis, Brexit, or Trump.

Aren’t the public crises I named extremely heterogeneous?  Sure, in some ways.  The Great Recession directly caused massive global harm.  Almost all of the damage of the War on Terror, in contrast, was indirect – the product of a massive overreaction to a statistically tiny evil.  Nevertheless, these diverse public crises also share crucial similarities.  Most notably:

1. Almost no one carefully measures the severity of these crises until the crisis is practically over.  Instead, what drives perceptions is availability bias – well-publicized emotionally gripping anecdotes.  The correlation between these anecdotes and the actual size of the problems is low at best.

2. Almost no one seriously asks, “What, if anything, would be a well-tailored response to this crisis?”  Instead, societies embrace action bias, rushing to “do something,” flailing about wildly, then gradually lose interest until the next crisis.  Perhaps we’re already doing enough about terrorism?  Will invading Iraq will make things worse?  Maybe we shouldn’t collectively punish refugees or males or whites because a few bad apples do awful, dramatic things?  If coronavirus is ten times worse than flu, perhaps we should make ten times as much effort to combat it, not a thousand times?  All reasonable questions, yet impotent in a crisis.

If I were in charge, would I have done so much better?  Though I’m well-aware of my own self-serving bias, I believe I would have done much better.  I wouldn’t have fought the War on Terror, not even in Afghanistan.  I would have met the Great Recession with nominal GDP targeting and labor market deregulation, not bailouts and fiscal stimulus.  I would have welcomed refugees from the Middle East.  I would have enforced existing laws against rape and murder, not start witchhunts for “systemic sexism” or “systemic racism.”  And I would have met coronavirus with moderate caution, not shutdowns or putting ten percent of the workforce on welfare.

Yes, perhaps I’m mistaken about one or two of these crises.  What clear, though, is that society’s method of certifying and addressing crises is deeply defective – and that’s highly unlikely to change.  While I’ve got to live with that, I get a small sense of comfort from staying aloof from the madness.  Staying aloof, and quietly thinking, “You will not stampede me.”

* I have even been publicly accused of being a “communist“!

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Krugman and Growth Agnosticism

Back in 2004, Robert Lucas famously remarked: “Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution.”

Ten years later, Paul Krugman replied:

It’s fairly common for conservative economists to try and shout down any discussion of income distribution by claiming that distribution is a trivial matter compared with the huge gains from economic growth. For example, Robert Lucas:

Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution.

The usual answer to this is to point out that we don’t actually know much about how to produce rapid economic growth — conservatives may think they know (low taxes and all that), but there is no evidence to back up their certainty. And on the other hand, we know how to make a big difference to income distribution, especially how to reduce extreme poverty. So why not work on what we know, as at least part of our economic strategy?

Krugman’s apparent embrace of this growth agnosticism is doubly puzzling.  After a lifetime of study, a brilliant Nobel laureate still lacks anything useful to say about fostering growth?  How is that even possible?

The puzzle amplifies, though, when you recall that Krugman has endorsed several specific policies with large, clear-cut growth effects.  Most notably:

1. Krugman strongly advocates housing deregulation.  The whole point of this literature is that housing regulation hasn’t merely made housing expensive; it has retarded economic growth by discouraging Americans from relocating to high-productivity regions of the country.  You could say, “This is only a level effect, not a growth effect,” but that’s a semantic quibble.  Regulation is now so strict that you could noticeably raise measured growth for decades with moderate deregulation.

2. Krugman has strongly advocated labor deregulation, at least in Europe and the Third World.  Again, the whole point of this literature is that labor regulation hasn’t merely made labor expensive; it has retarded economic growth by (a) keeping unemployment rates permanently high in many European countries, and (b) suppressing formal employment in many Third World countries.  While you can protest, “Moving French unemployment from 10% to 5% is a one-time gain, not a growth effect,” that’s semantics.  After labor deregulation, excess unemployment would still take many years to disappear; hence, measured growth would be markedly higher for years to come.

Furthermore…

3. While Krugman seems to oppose serious deregulation of immigration (for brow-furrowing reasons), he never questions the textbook logic showing that such deregulation would lead to massive increases in Gross World Product.  Indeed, the case for immigration deregulation is isomorphic to Krugman’s case for housing and labor deregulation: The status quo forces business to waste big golden opportunities.  The only difference is that estimates of the economic gains of immigration deregulation are much bigger.

What’s really going on?  Frankly, I think that Krugman’s growth agnosticism is just an act.  Intellectually, knows very well that governments could readily boost growth if they wanted to.  Emotionally, however, Krugman finds such reforms uninspiring.  Taking from the rich and giving to the poor is fun; freeing the rich and poor to cooperate for mutual benefit, not so much. Krugman thus reminds me of my friend and debate partner David Balan, of whom I’ve said:

Since my opponent is a serious thinker, I know that he actually agrees with much of what I’ve just told you.  So where does he go wrong?  Emphasis.  Yes, David favors allowing a lot more immigration and a lot more construction.  He grants that these policies will enrich society in general, and the poor in particular.  But none of this excites him.  Why not?  I’m no mind-reader, but my best guess is that David idolizes Big Government, and resents free markets.  So when he thinks about a grave social problem like poverty, he doesn’t want government to get out of the way and let the free market work its magic.  He wants government to heroically solve it with redistribution.  Even when he knows that government viciously victimizes the poor, he wants to hastily concede the point, then talk about redistribution at length.

On reflection, then, Lucas’ words are even deeper than they seem.  Focusing on questions of distribution doesn’t merely seduce and poison economic policy.  Focusing on questions of distribution seduces and poisons the minds of fine economists, too.

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Escaping Paternalism Book Club: Part 5

Summary

When you begin the final chapter of Escaping Paternalism, Rizzo and Whitman (RW) seem ready to rest their case.  They neatly recap their nested argumentative strategy:

We began this book with an extended critique of the neoclassical model of rationality, which behavioral economists have rejected as a positive model of human behavior but nevertheless have accepted as a normative standard…

The rest of the book could easily be read as a series of “even if” arguments: even if we accept neoclassical rationality as true rationality, behavioral science has not advanced far enough to answer a number of crucial questions for policymaking, such as the generalizability of behavioral results across different contexts and the applicability of laboratory results in the wild. Even if we had better research on those questions, policymakers would face practically insurmountable local and personal knowledge gaps that would hobble attempts at crafting paternalist policies that are effective and cost-benefit justified. Even if we could acquire such knowledge, policymakers have little incentive to do the hard work of crafting good policies, especially when interested parties (such as rent-seekers, moralists, and bureaucrats) can tilt the legislative and regulatory process in their favor – and so much the worse if policymakers are afflicted by any of the cognitive biases attributed to regular people. And even if we set all of these concerns aside, behavioral paternalism creates the risk of a slippery slope toward more extensive and intrusive policies that go beyond what has been justified by theory and evidence, resulting in ever greater restrictions on individual choice.

They also fault their opponents for dire intellectual negligence:

The reality of behavioral policymaking stands in sharp opposition to the rhetoric. Behavioral paternalists have frequently emphasized the need for evidence-based policy (Thaler 2015b, 338) that should be implemented in a cautious and disciplined manner (Camerer et al. 2003, 1212). Their confident tone often suggests that it is anti-paternalists who eschew evidence and rely on gut instinct for policymaking. To paraphrase the Bible, they behold the mote in the anti-paternalists’ eyes while neglecting the beam in their own. Consider this telling passage from Sunstein that purports to recognize the need for better evidence:

With respect to errors, more is being learned every day. Some behavioral findings remain highly preliminary and need further testing. There is much that we do not know. Randomized controlled trials, the gold standard for empirical research, must be used far more to obtain a better understanding of how the relevant findings operate in the world. Even at this stage, however, the underlying findings have been widely noticed, and behavioral economics, cognitive and social psychology, and related fields have had a significant effect on policies in several nations, including the United States and the United Kingdom. (Sunstein 2014, 11–12)

Notice the speed of the transition from the need for cautious collection of more research to a congratulatory discussion of policy impact. If the need for better research were taken seriously, surely the “significant effect on policies in several nations” would be cause for concern, not approbation.

Instead of heading home, however, RW return to the stage for a stunning encore.  They list, explore, and critique an encyclopedic list of intellectual “escape routes” for paternalists.  In order of appearance: revert to objective welfare paternalism; appeal to obviousness; shift the burden of proof; loosen the definition of paternalism; rely on the “libertarian condition”; invoke the inevitability of choice architecture; focus on the irrational subset of the population; rely on extreme cases,;treat behavioral paternalism as a “toolbox”; and invoke fiscal externalities.

Each of these sections is rich and wise.  Yes, if you make paternalism vague enough, “We’re all paternalists now.”  A silly game.

Is GPS really a form of paternalism? Sunstein thinks so. In fact, GPS is one of his favorite examples, and not just when it’s a gift. He even calls GPS an “iconic nudge” that should be seen as “a form of means paternalism,” and one that paternalists should seek to build upon (Sunstein 2015, 61–62). GPS is, of course, almost always self-adopted… Is consulting a map also a form of paternalism? A map does, after all, simplify the territory that it depicts in order to ease the process of finding things.

But GPS is not the most trivial example of alleged paternalism. According to Sunstein, a restaurant providing a low-calorie menu for its customers is (or can be) a paternalist nudge (2014, 2). According to Thaler, giving someone accurate instructions on how to get to the subway is a form of paternalism (2015b, 324). Text-message reminders from doctors (Thaler 2015b, 342) and credit card companies (Sunstein 2015, 518) are also apparently paternalism… As Sunstein and Thaler see it, any time someone gives helpful advice, provides useful information, or gives a friendly warning, that’s paternalism. The paternalist bar seems to be remarkably low.

Escaping Paternalism then provides a series of “friendly warnings” about how to spot dangerous paternalism:

We want to focus on the characteristics that distinguish innocuous interventions from more problematic ones, irrespective of the label attached. Here are several factors, often overlapping and highly correlated with each other, that will help us to distinguish the harmless activities from more troubling ones…

RW name the following criteria: self-imposed versus other-imposed; invited versus uninvited; competitive versus monopolistic environment; coercive versus voluntary; public versus private; and informative versus manipulative.  On the latter point:

When a Swedish maker of snus, a form of smokeless tobacco, petitioned to modify the warning label on its product to say that it carries “substantially lower risks to health than cigarettes,” the FDA rejected the petition even though the claim is true given current medical knowledge. Why? The primary concern seems to have been that “labels that indicate lower risk may tempt people, particularly young people, to use tobacco products that they might not have tried otherwise” (Tavernise 2015). We don’t know whether any behavioral paternalists weighed in on this particular issue, but it is indicative of how providing truthful information, even that which is clearly relevant to some consumers, takes a back seat when the regulatory focus is on changing behavior.

In short, behavioral paternalism has a complicated relationship with the truth. Truthful disclosures may be useful from a paternalist standpoint . . . but not necessarily. To judge whether a given piece of information is desirable, the paternalist must have some notion of how the targeted agent should behave, all things considered. Then information can be delivered – or obscured – in the manner most likely to nudge the agent in the supposedly correct direction.

None of these “escape route” sections is without its charms, but RW’s critique of the “inevitability” argument is my favorite.  Highlights:

If paternalism is inevitable, it’s pointless to discuss whether or not to be paternalistic, and instead we should focus on how and how much to be paternalistic. But in fact, only choice architecture is inevitable. That means we can ask about other ways, besides paternalistically, that choice architecture might be chosen.

Even this wording may be too narrow, as “chosen” implies a level of intentionality… It would be a mistake, then, to assume that undesigned choice architecture is simply arbitrary or random. Here is one simple example: goods displayed in public view in a store, particularly those with price tags, are available for sale to anyone who can afford the price. When this rule is violated, merchants will usually say so explicitly (“Display items not for sale”). This simple default rule, a kind of choice architecture, minimizes confusion and eases communication between potential buyers and sellers. As far as we know, this practice was never explicitly chosen by anyone.

Consider a more detailed example: the case of refunds and exchanges. In the United States, there is no general legal rule requiring merchants to let customers return goods for a refund or exchange. Although there are some exceptions, especially with regard to door-to-door sales, for most transactions merchants are free to make all sales final (Ben-Shahar and Posner 2011, 115–116)… Consumers assume goods can be returned in good condition during a reasonable period, unless sellers explicitly say otherwise…

Furthermore, the usual default rule is suspended in a number of familiar cases, undergarments and perishable foods being well-known examples. In these cases, most customers are aware that refunds cannot be taken for granted, even if the merchant hasn’t said so explicitly. These goods presumably differ from other goods because the goods in question “depreciate” quickly after sale or use. What all of these cases together suggest is an ongoing market for default rules. If all-sales-final were the universal default, we might suspect that consumers aren’t thinking carefully and sellers are simply taking advantage of them. But the variation of default rules tells a different story – one in which market default rules are responsive to the needs of both buyers and sellers.

Furthermore:

Even when defaults are chosen deliberately rather than evolving, there exist ways to decide among default rules that do not necessarily involve paternalism. Here are a few possibilities:

* Defaults may be chosen in line with conventional expectations. This has the advantage of not surprising or confusing people who have become accustomed to the usual rules…

* Default rules may be chosen in a minimalistic fashion – i.e., assuming that people are not making promises or exchanges unless they explicitly consent to them. This would rule out, for instance, a default rule that assumes for-cause termination, as that constitutes an additional promise on top of the simple agreement to exchange labor for compensation…

* Defaults may be chosen in line with the goal of minimizing transaction costs, which usually would mean minimizing opt-outs…

* Defaults could be chosen to minimize how much choosers infer from the rule. In other words, people are more inclined to infer advice or information from some defaults (or framings) than others…

Analysis

1. Big picture: Rizzo and Whitman’s Escaping Paternalism is probably the best book about paternalism ever written.  The authors demonstrate an old-school mastery of their subject, and pack the work with so much insight that you’ll keep learning new things if you read it five times.  This book is a more valuable contribution to human knowledge than the latest paper in the AER, or even the whole latest issue of the AER.

2. While RW insist otherwise, I reluctantly conclude that their “inclusive rationality” verges on unfalsifiable.   Given their level of expertise, their refusal to name a single definite example of irrationality in the world is telling.  They’ve raised their bar so high even they can’t meet it.

3. Still, RW rightly point out that mainstream economists are too quick to call others irrational.  Yes, saying, “People changed their mind,” is an unsatisfying explanation of human behavior.  Yet people really do change their minds, and they’re hardly “irrational” to do so.  Indeed, stubbornness is a greater cognitive flaw than flightiness.  To quote Emerson:

A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines. With consistency a great soul has simply nothing to do. He may as well concern himself with his shadow on the wall. Speak what you think now in hard words, and to-morrow speak what to-morrow thinks in hard words again, though it contradict every thing you said to-day.

4. While reading the book, I kept thinking about (a) kids; and (b) opioid addicts.  RW cover an immense range of topics, but gloss over the human beings almost everyone thinks should be treated paternalistically.  RW could have bitten the bullet and declared kids and opioid addicts to be “inclusively rational.”  Or they could have backed off and said, “Paternalism for such people clears the burden of proof.”  Disappointingly, they decline to take a stand.

5. RW have little patience for the “revert to objective welfare paternalism” escape route:

From our perspective, the very idea of objective welfare is implausible. No such thing as “welfare” exists until an individual mind comes into being. The individual mind generates values, desires, and preferences (typically through interaction with many other minds). And as it turns out, different minds can generate very different values, desires, and preferences. People are idiosyncratic; they want different things. And despite the many wants they have in common, they want the same things to a different extent. We see no plausible grounds for stepping outside of the mind to define what is good for it.

Despite my shared hostility to paternalism, I staunchly disagree.  The very idea of objective welfare is not merely plausible, but compelling.  (Even “inevitable”!)  Like everyone else, the homeless act on their own preferences; but almost all of them would have much higher objective welfare if they adopted a sober bourgeois lifestyle.  The same goes for children, alcoholics, drug addicts, and so on.  Left to their own devices, these impulsive humans generate “very different values, desires, and preferences.”  And left to their own devices, they ruin their lives.

6. RW convincingly accuse the “new paternalists” of being crypto old paternalists.

The apparent willingness of behavioral paternalists to favor some expressed preferences over others also colors the policy debate. They lend the veneer of science to what are in fact subjective judgments, giving policymakers the cover they need to implement policies based on prejudices and moralistic attitudes, such as the universal desirability of conventional virtues such as patience, moderation, and temperance.

So far so good.  But aren’t the new paternalists wrong for the right reason?  Namely: Despite RW’s incredulity, the conventional virtues of patience, moderation, and temperance are indeed universally desirable.  If someone taught their kids to be impatient, immoderate, and intemperate, you would baffled.  And if you had to quickly summarize the “root causes” of the miseries of homelessness, drug addiction, and so forth, isn’t the obvious answer that those who suffer fail to practice these bourgeois virtues?  This is no “veneer of science”; this is common-sense.

7. RW almost grant this point in their “Rely on Extreme Cases” section:

If you want to demonstrate the irrationality of human beings, one very simple strategy is to point to extreme cases: drug addicts whose actions destroy their lives, compulsive gamblers who lose everything they have and more, morbidly obese people who cannot even leave their homes. It is hard to believe that such people are acting rationally, even by the most permissive definition.

In these cases, perhaps we can safely indulge our intuition that their biases are truly damaging in terms of their own well-considered well-being, and if only they could see their situation globally they would truly wish to behave differently.

I agree that “intuition” (or just “common-sense”) says this.  The reason, though, is that “well-considered well-being” is a thinly-veiled version of objective well-being.  The morbidly obese are plainly acting in accordance with their own preferences, but they are acting contrary to their own long-run happiness.

Couldn’t you simply say, “The morbidly obese care about food more than happiness”?  You can and you should.  I’ve argued much the same about the “mentally ill.” But this doesn’t show that objective well-being is a myth.

8. If we concede that objective welfare exists, doesn’t this open the door to paternalism?  Sure, in the same sense that conceding that China exists opens the door to protectionism.  Logically speaking, the cleanest way to prevent a trade war with China is to deny that China exists.  This, however, is an absurd claim, and will at best convince your most dogmatic allies.  Similarly, the cleanest way to prevent paternalism is to deny that objective welfare exists.  But this, too, is an absurd claim, and will at best convince your most dogmatic allies.

9. What then is the reasonable position on paternalism?  Per Michael Huemer’s The Problem of Political Authority, we should begin with a strong but defeasible moral presumption against using coercion to increase objective welfare.  This is hardly an exotic libertarian position; in their personal lives, almost everyone holds such a presumption.  To justify paternalism, you have to show that the net benefits of paternalism are large, even after factoring in knowledge problems, public choice problems, slippery slopes, and all the other practical difficulties RW detail.

10. This Huemerian position explains why it is typically OK to treat your own young children paternalistically.  Why?  Because they’re incompetent, you really do know better, and you really do have their best interests at heart.  (And don’t forget, “My house, my rules.”)  The same goes for elderly relatives with dementia, though the bar should be much higher because the love of the old for the young is so much stronger than the love of the young for the old.

11. Doesn’t this justify actually-existing paternalistic government policy?  Hardly.  As RW explain, governments habitually use their powers with gross negligence – and plenty of earlier researchers document the collateral damage of policies like Prohibition and the War on Drugs.  Yes, the world is complex; but as long as there is a strong moral presumption against coercion, the complexity of the world tips the moral scales strongly toward inaction.

12. To return to my own nagging concern, what about the opioid addicts?  I say government should leave them – and their suppliers – in peace.  Why?  Yes, they’re acting strongly against their own objective welfare.  Yet this pales before (a) the classic economic arguments against prohibition, (b) RW’s pragmatic concerns, and (c) the strong moral presumption in favor of leaving strangers alone.  The case against parents forcibly placing their adult children in rehab for their own good is weaker, though even there we should be skeptical.  As the old joke goes, “How many therapists does it take to screw in a lightbulb?  Just one, but the bulb must want to change.”

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