Nudge: Welfare State Edition

Simplistic summary of a long debate on paternalism:

 

Hard Paternalist: Government should force weak human beings to do what’s in their own best interest.

Knee-Jerk Libertarian: No, that’s totalitarian.

Soft Paternalist: Government should nudge weak human beings to do what’s in their own best interest.

Thoughtful Libertarian: You define “nudges” so elastically that you still end up being pretty totalitarian.

 

Rizzo and Whitman’s Escaping Paternalism exemplifies the Thoughtful Libertarian position; indeed, as I’ve already said, they’ve probably written the best book on paternalism.  Only after the Book Club ended, though, did the following compromise position occur to me: Instead of using all means at its disposal to nudge people to do what’s in their own best interest, government should limit itself to using the welfare state to nudge its beneficiaries to do what’s in their own best interest.

Let’s call this “Ward Paternalism” – paternalism limited to people who are dependents of the government.  For example, rather than give welfare recipients cash to spend, a Ward Paternalist might give them food stamps instead.  Why?  To nudge them into buying groceries instead of alcohol.

Key point: Under Ward Paternalism, anyone who doesn’t want to be nudged can simply decline to become dependent on the government.  You can spend their own money your own way, no questions asked.  If, however, you ask taxpayers for help, the help comes with strings attached to encourage you to get your life in order.  He who pays the piper, calls the tune – and why shouldn’t the tune be, “Get your life in order”?

Soft paternalists often call their position “libertarian paternalism.”  Ward Paternalism, however, better fits the label, because Ward Paternalism preserves the right of independent adults to do as they please.  The restrictions are limited to those who opt in by pleading inability to support themselves.

Why, though, would anyone support Ward Paternalism?  Top two reasons:

1. While irresponsibility is not the sole cause of desperation, it is plainly a major cause.  The very fact that you’re asking for government help therefore raises serious doubts about your own prudence.  And it makes sense to focus paternalistic energy on you.

2. The standard moral constraint to leave others alone does not apply.  “Leave me alone, I don’t want your help” has great force.  “Help me, but don’t presume to tell me how to live my life” has little.

 

Before you dismiss it as an eccentric or arrogant position, notice that Ward Paternalism is already enshrined in a wide range of government programs.  Governments routinely redistribute in kind; they much prefer to hand out food, health care, schooling, or housing than cash.  Much of the reason, no doubt, is that governments want to make sure that children in poor families get food, health care, schooling, and housing even if their parents have other priorities.  The rest of the reason, though, is that governments are nudging the adults themselves to prioritize food, health care, schooling, and housing over alcohol, tobacco, drugs, and gambling.  The same goes for government pensions; you can’t start spending your retirement when you’re fifty, because the government wants to ensure that you won’t be starving on the streets when you’re seventy.  If an independent adult can fairly protest, “It’s my money and I’ll do what I want with it,” why can’t taxpayers just as fairly protest, “It’s our money and you’ll use it as we think best”?

What about the slippery slope?  Rizzo and Whitman powerfully argue for its potency.  Yet in this case, we face multiple slopes.  If we scrupulously avoid the slope where government uses conditional redistribution to dictate our lifestyles, we expose ourselves to the slope where government hands out money like a drunken sailor.  And in any case, attaching endless strings to government money is a sneaky route to austerity, a policy program that deserves our full support.  If government nudges the people aggressively enough to inspire a massive wave of declarations of independence, so much the better.

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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: 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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