Escaping Paternalism

Rationality, Behavioral Economics, and Public Policy

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I think I put this book on my get-at-library list thanks to a post by Ilya Somin at the Volokh Conspiracy blog hosted by Reason.

It's a good book, I'm sure. Only problem is that it was way above my senior dilettante level at many spots in the discussion. Example (page 92, leading off a section titled "Intertemporal Trade-Offs and Time-Discounting Inconsistencies"):

The standard neoclassical model of time discounting is exponential. This means that an outcome at time t is evaluated now (t = 0) as δtu(x), where δ is a constant discount factor and u(x) is an undated utility function defined on outcomes.

Now I almost get that, because I see the t up there in the exponent. But pretty much I have to nod and read on.

So caveat lector, this is a very high-level academic discussion. I swear, I looked at every page.

The authors, Mario Rizzo and Glen Whitman, have undertaken to refute the underpinnings and conclusions of economists and psychologists who wish to influence public policy to encourage the citizenry into better behavior. You know, like your parents did. Specifically, your dad, hence "paternalism". Sometimes it's even dubbed "libertarian paternalism", in order to imply that such policies are "not really" coercive: they're simply designed to encourage you to make better choices, according to your own values and goals. Sin taxes, making retirement saving vehicles opt-out instead of opt-in, government warnings on potentially unhealthy products, are just three examples.

The leading book in this field is the best-selling Nudge by Thaler and Sunstein. (Which I really should read to get at least some of the other side of this discussion.) The authors disdain the marketspeak of "nudge". Why not "push" or "shove"? Or an entirely different metaphor (see the cover): puppet and puppeteer?

The authors note paternalism's underpinnings in neoclassical choice theory, whose mathematical axioms were posited in the 1940s by John von Neumann. They note that those axioms, while plausible, were primarily developed to allow well-behaved "utility functions", which go on to be useful in heavy economic theories. But they were also seized upon to give a rigorous definition of "rationality". Which gave rise to a regular cottage industry of psychologists revealing how people, in various ways, departed from that definition, and were hence labeled as "irrational".

And obviously those "irrational" folks need help from the rational. For their own good.

The authors point out that rationality is much fuzzier in practice than in theory. The thought processes deemed "biased" by the shrinks can often make sense outside the artificial von Neumann axioms. So there may be more holes in the foundations of paternalism than its advocates would admit.

There are a number of other pitfalls: paternalistic public policies are designed by human beings, not von Neumann machines; they are subject to the same biases and fallacies as the folks they want to "nudge". Worse, they have little skin in the game; they have minimal incentives to design optimal policies even if they could.

And they probably can't, for reasons popularized by F. Hayek decades ago: they lack the requisite knowledge, which is highly dynamic, scattered and tacit throughout society.

And finally, there are slippery-slope issues: suppose"libertarian" nudge A "works" (for some criteria of "working"). Won't that encourage policy makers to get even better results via slightly less libertarian nudge B?

Or suppose nudge A does not "work". Given what you know about bureaucrats, do they just give up at that point? Or do they say, "well, the actual problem was that we were too libertarian"?

As I type, I see failures all around of paternalistic policies. Most notably COVID-related ones: a large fraction of citizens aren't vaccinated, despite being incessantly "nudged" to do so. And there's the whole drug prohibition thing… You'd think all those smart nudgers whould have figured out how to get better success by now.

All in all, a fine book which (unfortunately) won't sell as well as Nudge. I can't do justice to all its arguments here.


Last Modified 2024-01-19 5:42 PM EDT

URLs du Jour

2021-12-26

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  • Great minds think alike. Unfortunately… George F. Will notes that not-so-great minds also think alike. National conservatives and racial identitarians have a common enemy: Individualism. His column notes an 1961 essay by Michael Oakeshott, “The Masses in Representative Democracy”

    Oakeshott understood in 1961 that modernity’s emancipation of the individual from the “warmth of communal pressures” did not exhilarate everyone. Indeed, in 2021, U.S. “national conservatives,” who are collectivists on the right, recoil against modernity in the name of communitarian values, strongly tinged with a nativist nationalism and with a trace of the European blood-and-soil right.

    These “national conservatives” have an unacknowledged kinship with their collectivist cousins on the left, the race identitarians. Their critical race theory subsumes individualism, dissolving it in a group membership — racial solidarity, which supposedly has been forged in the furnace of racist oppression.

    Today’s progressives, who fancy themselves the vanguard of modernity, are actually modernity’s enemies. In progressivism’s jargon, History is a proper noun designating something autonomous. People “on the right side of history” propel History toward a knowable destination. It is known by theorists whose special insight makes them society’s rightful rulers.

    Their supposed insight is that all of life is a power struggle between History’s helpers and History’s hinderers. In the previous two centuries, progressives expected that the proletariat, purged of false consciousness and infused with revolutionary consciousness by instruction in true theories, would wage the class struggle. This would be History’s propellant. Individual identity would mean nothing; class membership would mean everything.

    Resist demands that you sign up with either Team Scylla or Team Charybdis.


  • The airing of grievances commences in 3…2…1. Seantor Rand Paul has released his 2021 ‘Festivus’ Report. From the intro:

    Happy Festivus! How can 2021 already be coming to a close? What a year it’s been. It seems like just yesterday when the national debt was $20 trillion, but now the U.S. has managed to breeze past $28 trillion! And, it’s safe to say that some big changes have occurred since last year’s Festivus Report. Mask mandates, travel restrictions and lock-downs were lifted across many parts of the country. President Biden was inaugurated. Inflation has skyrocketed. The Kardashians finally ended their TV show after 14 years. “Dad bod” was officially added to Webster’s Dictionary. And how about the Federal government? Well, unsurprisingly, it managed to keep spending money we don’t have on things we don’t need.

    Readers of the Platinum Pig Awards may recall my Penny Plan Balanced Budget. Only a few years ago, we could have balanced the budget by cutting only one penny off every dollar spent by the Federal government - now, we need to cut 5. 2021 began with Congress spending even more money and approving a $3.5 trillion Budget Resolution. I attempted to lessen the blow by introducing a series of 48 amendments, including my Five Penny Plan, which unfortunately did not pass. The speed in which our debt is growing means we need ever more vigorous solutions to solve this growing problem.

    You’d almost think the government’s annual New Year Resolution is to spend more and more money. Well, it is! Meanwhile, the Congressional Budget Office (CBO) projects more than $1.2 trillion in deficits for Fiscal Year 2022. In fact, CBO states Congress spent $6.8 trillion in Fiscal Year 2021, $266 billion more than FY2020. Why continue to recklessly spend taxpayers’ money when debt held by the public is already at 103% of GDP?

    This year, I am highlighting a whopping $52,598,515,585 of waste, including a study of pigeons gambling on slot machines, giving kids junk food, and telling citizens of Vietnam not to burn their trash. No matter how much money’s already been wasted, politicians keep demanding even more. But don’t worry, I will continue to fight against government waste. So, before we get to the Feats of Strength, it’s time for my Airing of (spending) Grievances!

    I have a lot of problems with federal spending, and now you’re gonna hear all about them!

    Should you need it: the Wikipedia page about Festivus.


  • I fervently hope this is the last stupid Slashdot story for 2021. It mainly quotes from Politico: Potential DOJ Suits Against Apple and Google Delayed Amid Budget Woes.

    The Justice Department is still months away from deciding whether to sue Apple or file a new suit against Google over antitrust concerns, POLITICO reported Thursday, citing two people familiar with the discussions -- a question facing new financial complications after the collapse of President Joe Biden's social spending bill. From a report:

    DOJ antitrust prosecutors had earlier aimed to wrap up their probes of the two tech giants by Dec. 31, culminating years of scrutiny by the department into Apple's App Store and Google's command of the online ad market. But now the decision on going to court is likely to come in March or later because of continued discussions about where to file and who will make the call, the two people told POLITICO. They spoke anonymously to discuss internal DOJ deliberations. Another major concern for the department is the likely expense of a court battle with the two companies, each of which has a market value exceeding $1 trillion. That issue became more fraught this week when Sen. Joe Manchin (D-W.Va.) torpedoed Democrats' Build Back Better package, which would have given DOJ a $500 million boost for antitrust enforcement.

    Yes, friends: if only the DOJ had gotten its hands on that extra $500 million, they could have ushered us into a glorious age of trust-free economy, where we'd all be safe from the capitalist depredations of Apple and Google!

    According to this document, the entire budget request for the DOJ's Antitrust Division for FY2021 was $188.5 million. And that was a 13.1% increase from FY2020.

    Obviously, an extra $500 million would put a lot of nicer cars in the DOJ parking lot.

    I don't want to get into a discussion of the folly of antitrust. But how much money do you need to spend to point to the clearly stated law that says doing X is illegal, then find some clear and convincing evidence that shows Apple/Google did in fact do X?

    Obviously, that's not something you can do in antitrust land.

    But the stupid Slashdot story also put me in mind of past tales of government fiscal woes planted by beneficiaries of government spending.

    Hey, anyone out there remember the "sequester"? Back in 2013? Good times, man. Back then, I noted a CBS News story that was in full-bemoaning mode: Sequester threatens health research projects.

    Professor Laura Niedernhofer at the Scripps Research Institute in Florida believes her team of 40 scientists can find a drug to diminish the impact of old age. The drug won't keep you young, she says, it would make the old less frail.

    "My hypotheses would be that there would actually be drugs that would simultaneously dampen osteoporosis, dementia, maybe some fatigue and muscle wasting all at the same time," she said.

    But her funding is in trouble because of automatic budget cuts. The National Institutes of Health (NIH) has warned that despite the promise of her research, new grant money won't be approved.

    I still kind of like my comment from back then:

    OH MY GOD. Professor Laura was RIGHT ON THE VERGE of discovering a MIRACLE DRUG that would SAVE US GEEZERS from ALL SORTS OF INFIRMITIES. And all she needed was A BIT MORE GOVERNMENT MONEY, and it would have pushed her RIGHT OVER THE GOAL LINE and SAVED US ALL.

    But now that MIRACLE DRUG will be LOST FOREVER. It's HOPELESS, thanks to the SEQUESTER.

    And from later in the CBS News article, a guy who's been in the news a bit lately is quoted:

    Dr. Francis Collins is the director of the NIH. He calls the budget cuts "sand in the engine" in the search for medical discoveries in every area -- cancer, aging, Alzheimers, diabetes.

    To reach $1.6 billion in cuts, Collins says the NIH will turn down one thousand of the best new research proposals from the nation's leading labs and medical schools.

    "Medical research in America will be slowed by this, advances that could have happened sooner will happen later or perhaps not at all ... And this is what wakes me up in the middle of the night," Collins said.

    The cuts will impact Collins directly. He's still a research scientist on diabetes and aging, and he said his personal experiment will be cut.

    "We're part of the NIH, so the sequester will hit this laboratory with a 5 percent cut."

    Dr. Collins calls cuts to medical research shortsighted. Here's an example: Collins says the NIH is close to finding a universal flu vaccine that could stop every flu strain and last for 3 years. That kind of vaccine could save the economy tens of billions, but might be delayed as the NIH saves 1.6 billion.

    And here we are, nearly 9 years later. That stop-every-strain "universal" flu vaccine was LOST FOREVER thanks to that 5.5% NIH budget cut back in 2013.


Last Modified 2024-01-19 5:47 PM EDT