Sunday, February 08, 2009

The unbearable arrogance of the "Nudge-ers"

Behavioral economics has never been my favorite type of economics (for now neuronomics remains my absolute least favorite) but I couldn't describe succinctly exactly what bothered me so much.

Now I can.

It's the incredible arrogance of some of its practitioners. Really. Check out this NY Times story about the "Nudge" movement:

Let's begin with this:

"Mr. Thaler has found that people often don’t act rationally and in their own best interests, as is assumed by traditional economic models. He calls such idealized people “Econs,” as distinguished from “Humans.” Econs are walking computers, and behave according to the laws of classical economics; Humans are quirky, like the people you meet on the street. Humans may know that they should eat less and exercise more, but they often miss the mark. They may know that they should save more, but often don’t. And so, Mr. Thaler says, most of us would benefit from a nudge."

Ah yes, pity us poor, weak, misguided, humans. Lucky for us we have benevolent demi-gods like Sunstein and Thaler to shove us onto the path of enlightenment via their "libertarian paternalism".

Yes people, that's what they call it; libertarian paternalism:

"Nudging people for their own benefit in unobtrusive ways is part of what the co-authors call “libertarian paternalism,” a seeming oxymoron that links the notions of freedom from constraint and firm, well-intentioned guidance."

"Mr. Sunstein and Mr. Thaler say that this apparent contradiction is reconciled through what they call “choice architecture.” This is the deliberate imposition of structure in an environment — etching flies in a urinal — to induce people to make better choices. Consider a cafeteria where healthy foods like fruit and yogurt are placed in a prominent location, while junk foods are relegated to an out-of-the way spot. People are free to choose, but they are being nudged toward healthier decisions. "

So I would ask the nudge-ers: if people are quirky humans who don't know what's best for themselves, how in the world can you know what is best for them and exactly where to nudge them? After all, you are human too, aren't you?

This stuff is pretty much just trying to enforce a particular view of the world or pattern of behavior on others via implicit taxation. Paternalistic, yes, but libertarian? No.

Almost any economist, if asked how to curb some behavior or increase some other behavior will tell you they'd alter the incentives on the margin. This is not a new insight. What is new I think is the glee with which the Nudge-ers propose to use economics for social engineering. I can't see any way how it's not saying "We are better than you so we will make the rules of the game for you".


Anonymous said...

I see your point that it seems like a oxymoron, but your last sentence presumes that no one makes the rules for the game. Isn't there always some organization (politicians, lobbyists, religious orgs) that are in the position to make the rules.

For example, we all know that there is technology to improve fuel economy for cars, but lobbyists from domestic automakers have fought this for years. EVEN THOUGH there are undeniable and significant benefits for consuming less gas/oil. However, our choices regarding fuel economy have been restricted (until very recently with hybrids) by people with no public accountability.

Therefore, what if the government, rather than outlaw poor choices, at least make them less accessible? We still have the right to make them, but they will be more costly to make in some way.

My point is that I don't buy the benevolence that government says it will bestow on us, and I recognize this is a slippery slope, but in reality some individual or group will always be there to restrict the decision set.

Norman said...

Regarding the previous comment, I think one issue we have to address here is that yes, the choice set is restricted by the behavior of others (although I would question an assertion that there is a single organized group doing so).

If the choice set is restricted by economic agents, we can get a pretty good idea how and why: firms pursue profit, individuals pursue utility, albeit perhaps with some approximation errors (which seems to be the bulk of the behavioral contribution, trying to systematize approximation errors individuals make).

On the other hand, if the government or academics restrict the choice set, it's not at all obvious how or why they will do so. I am quite comfortable with the assertion that individuals acting may not act in their own best interest, even when they think they are. But saying one group of people knows how to correct for this means they must have knowledge of some independent standards of good that individuals don't. I've not seen a good case for this in any academic environment.

Anonymous said...

I think your response to my comment rather makes the point of the nudgers. As you state:

I am quite comfortable with the assertion that individuals acting may not act in their own best interest, even when they think they are.

It seems that the nudgers are concerned, for example, that unhealthy food - claiming to be beneficial in some way (low in fat, 100 calories, etc) is given prominent display by the retailer (and the retailer may be paid for this by the manufacturer), whereas the food that is actually "healthy" is placed out of the way or in a less prominent position. So I would interpret the nudgers as saying, like you did, even if people "think" they are acting in their best interests, they may not be due to advertising, product placement, pay to play, etc. So then, why not rearrange or restrict the decision set to assist people in making better choices.

I'm not saying I agree, or that this would work in practice, but I think my original concern is that there are people and things that restrict or influence our decision set all the time, so why not make it more transparent?

ALso- I just want to point out that I do not think there is one group that controls our decision set, and I apologize if I gave that impression. Although I do believe the Stone Cutters rule the world, or they will once the Chosen One exchanges the rock of shame for the stone of glory.

Tom said...

Anonymous (1) asks "Isn't there always some organization (politicians, lobbyists, religious orgs) that are in the position to make the rules." While phrased as a question, it seems to be an assertion.

Economics is the study of choices. To the extent that there are "rules," no economic considerations apply. For example, did Anonymous consult the rules about wasting time by posting on economics-themed forums? I'm quite certain Rulers would find better use of his time. Ah, but perhaps Rulers would not make an outright ban on this activity. I guess a micro-payment of $2 for visiting unapporved web sites would be a sufficient deterrent. But then, 30 days in jail is also a cost. How do Rulers choose?

Tom said...

I'll also respond to the unexamined assertion that "there is technology to improve fuel economy for cars" and (seperately) to "lobbyists from domestic automakers have fought this for years."

"We all know" this? Well sure -- you can improve fuel economy quite a bit by just under-powering a car. (It also cuts down on accidents, what with nobody able to go faster than about 35 mph.) I have also read that dimpling a car's skin like a golf ball will help. (Maybe not at 35, tho.) Here on an economics themed forum, we like to consider all the costs of things. (This very different from how Rulers think.) People value their time and 70 mph burns less of it than 35. Also, people value appearance and, perhaps, maintinace costs (ease of cleaning). I should note here that market research might kill a dimpled car without the need to actually make such a model and then fail to sell it.

Economics studies how people react to real and perceived costs and to what each one thinks he wants. Rules don't have to care about that -- as long as it appeals to a "higher value" like efficiency. And in the world of poliitics, one can blithely demand efficiency without bothering much about just what it is that one wishes to efficish.

Back to lobbyists who "fought this for years." Hell, they're just making rules. Isn't that what was wanted?

Anonymous said...

A concept we ( and especially 'behavioral economists')probably don't give enough consideration to is the value of making mistakes and realizing consequences. When I make a mistake, I learn something about that particular instance, as well as future situations which may be different but with similar characteristics. My mom taught me to do this, because she knew she couldn't look over my shoulder for the rest of my life. Of course, it would be easier to just blame somebody else when things don't go well, and get a law enacted.

Nathanael D Snow said...

Nudging means imposing other costs besides pecuniary ones.
Hiding the chocolates while revealing the yogurt really just makes the chocolate more expensive. The price is in time spent looking for sweets. Those who like chocolate will find it (search models), and once they do, the cost - to them - decreases. At that point hiding the chocolates only helps skinny people the way locking your door helps keep honest people honest.
But all of this imposes the cost of chocolates not sold on the purveyor of said candies.
All told, relative prices work.

Anonymous said...

"How do rulers choose?"

Sheesh, you'd think none of the commenters here had ever read anything on mechanism design, or political science, for that matter.

As for the maximal combination of arrogance and paternalism in economics, that clearly belongs to the econometricians, particularly the identification-Taleban gang Angus Deaton was railing about in his terrific, previously-posted-about paper.

Anonymous said...

I've got a nudge for them ... instead of withholding taxes from paychecks, make every single person pay on April 15th. Even the very poor would owe 7.5% for FICA. Almost no one will be able to pay on time and there will be mass uproar with front-page stories of choosing between paying the tax bill or buying food.

Unfortunately, they've already got most Americans excited for April 15th because they "get" money via refund.

Anonymous said...

It's true that orthodox econ obsesses about incentives too, but you seem to gloss over the nudgers' alternative account of how decisions are made, e.g., not according to the usual stilted ideas of rationality.

As far as excessive dirigism goes, from the standpoint of what passes for the left (including yrs truly), the nudgers are pretty weak tea.

So on count one I think you missed the boat, on count two you sound overwrought.

In any case I luv this blog.

-- Miracle Max