Is too much salt bad for you? That used to be the conventional wisdom, but more recent scientific research has suggested the emphasis on salt is misplaced. No matter. As Walter Olson notes, the Food and Drug Administration appears to be moving ahead with plans to force gradual reductions in the salt content of processed foods. Among other things, the FDA is concerning the adoption of federal targets for gradual salt content reductions to wean consumers from their taste for salt. But reducing salt content will do more than alter food’s flavor. It can affect texture and perishability as well. Surely the FDA has better things to do than obsess over the salt content of processed foods. But if the FDA persists, I suppose it just means these (no relation) will get more use.
Archive for the ‘Paternalism’ Category
Famous economist Steven Levitt, coauthor of Freakonomics, recently described his “daughter test” for assessing paternalistic policies:
Most of the time there is broad agreement as to which activities should be made criminal. Almost no one thinks that theft or violence against innocents is socially acceptable. There are, however, a few activities that fall into a gray area, like illicit drugs, prostitution, abortion, or gambling. Reasonable people can disagree as to whether it is appropriate to prohibit such activities… A common feature of these gray-area activities are that they are typically “victimless” in the sense that, unlike a theft or murder, there is no easily discernible victim of the activity…..
I’ve never really understood why I personally come down on one side or the other with respect to a particular gray-area activity….
It wasn’t until the U.S. government’s crackdown on internet poker last week that I came to realize that the primary determinant of where I stand with respect to government interference in activities comes down to the answer to a simple question: How would I feel if my daughter were engaged in that activity?
If the answer is that I wouldn’t want my daughter to do it, then I don’t mind the government passing a law against it. I wouldn’t want my daughter to be a cocaine addict or a prostitute, so in spite of the fact that it would probably be more economically efficient to legalize drugs and prostitution subject to heavy regulation/taxation, I don’t mind those activities being illegal.
It’s easy to poke holes in Levitt’s “daughter test.” If I had a daughter, I wouldn’t want her to not go to college. Does that mean college attendance should be mandatory for anyone with the requisite academic skills? I wouldn’t want my daughter to advocate racism or communism. If forced to choose, I’d much rather have a daughter who uses marijuana or cocaine than one who is a racist or communist. Does that mean that the government should ban racist and communist speech?
Levitt’s “daughter test” is useful, however, in highlighting an important aspect of paternalism. Many of its advocates, including some sophisticated scholars such as Levitt, too readily generalize from their own personal values and use those preferences as justification for prohibitionist policies.
As economist David Henderson points out, this displays intolerance towards others with different values. What is best for me – or my daughter – may not be best for everyone. Whether the costs of a risky activity outweigh the benefits varies greatly from person to person. That’s true even of dangerous or potentially addictive activities such as drinking, gambling, skydiving, smoking, or using currently illegal drugs. People differ widely in the degree of enjoyment they get from these kinds of activities, and also in the amount of risk they are willing to bear. For example, economist Kip Viscusi’s research found that smokers are just as aware of the risks of smoking as nonsmokers (both groups actually tend to overestimate the danger to health). Where the two groups differed was in their degree of risk-acceptance. Smokers, predictably, are much less risk-averse than nonsmokers.
Even worse, Levitt’s approach ignores the harmful indirect effects of prohibition. Even if the health risks of illegal drugs are very great, it doesn’t follow that the War on Drugs is justified. That policy kills thousands of people every year, imprisons hundreds of thousands more, and undermines family values in poor inner city communities. These costs far outweigh the health risks posed by illegal drugs themselves, especially if many of those risks are born by users who knowingly accept them.
Finally, as Will Wilkinson recognizes, Levitt’s approach indicates a flaw in the currently popular idea of giving experts the power to enact paternalistic policies based on their “objective” scientific judgment. This idea ignores the possibility that even the best experts – including top scholars like Levitt – will base paternalistic policies in large part on their personal values rather than science. Levitt should be commended for openly acknowledging this influence. He explicitly recognizes that his values override his professional judgment as an economist when he acknowledges that the “daughter test” leads him to support drug prohibition “in spite of the fact that it would probably be more economically efficient to legalize drugs and prostitution subject to heavy regulation/taxation.” Many other experts may not be as self-aware as Levitt is, and some might not be as honest.
The “rule of experts” approach to paternalism has various other flaws as well, some of which I described here and here.
Opponents of the constitutionality of the individual mandate have emphasized that upholding the mandate would give Congress the power to mandate virtually anything, including forcing people to eat broccoli. Northwestern law professor Andrew Koppelman appears to agree, but argues that this slippery slope is nothing to worry about:
One of the most rhetorically effective arguments that has been made against President Obama’s health insurance mandate is that it places us on a slippery slope to totalitarian government. If the federal government can make us buy insurance, what can’t it do?…
The Broccoli Objection, as I will call it, rests on a simple mistake: treating a slippery slope argument as a logical one, when in fact it is an empirical one.
This basic point was made long ago in Frederick Schauer’s classic article, Slippery Slopes, 99 Harv. L. Rev. 361 (1985). Schauer showed that any slippery slope argument depends on a prediction that the instant case will in fact increase the likelihood of the danger case. If there is in fact no danger, then the fact that there logically could be has no weight. For instance, the federal taxing power theoretically empowers the government to tax incomes at 100%, thereby wrecking the economy. But there’s no slippery slope, because there is no incentive to do this, so it won’t happen.
Similarly with the Broccoli Objection. The fear rests on one real problem: there are lots of private producers, including many in agriculture, who want to use the coercive power of the federal government to transfer funds from your pockets into theirs. But the last thing they want to do is impose duties on individuals, because then the individuals will know that they’ve been burdened. There are too many other ways to get special favors in a less visible way.
Koppelman makes an interesting point. But I think it ultimately fails for two reasons. First, even if Congress would never actually enact the broccoli mandate, the fact that it could so under the same logic as the health insurance mandate highlights a logical flaw in the argument made by defenders of the latter. It strains credulity that a constitutional text that gives Congress the power to regulate interstate commerce gives it unlimited authority to force people to buy products they don’t want, even within the borders of a single state.
Second, I think that Koppelman is right to point out that slippery slope scenarios must be evaluated based on their actual likelihood of occurring, as opposed to merely the logical possibility. But I think the likelihood of this is much greater than he admits. It’s true that subsidies are easier to hide from the voters than purchase mandates. But the latter have their own advantages for politicians and interest groups. For example, in a time of tight budgets, a purchase mandate can transfer money to a favored industry without requiring additional government spending or tax increases. It’s very hard for the federal government to directly transfer as much money to an industry as it would get from forcing millions of new customers to buy their products.
Moreover, there is a wide variety of ways that purchase mandates could be sold to the public. Congress need not admit that they’re intended to help powerful interest groups. They could instead be defended as efforts to stimulate the economy by helping a vital industry (the same justification as was used to justify government bailouts of the banks and auto industry). Forcing people to purchase broccoli or other food could be defended as a public health measure. Indeed, paternalists of both the “libertarian” and traditional varieties have successfully advocated numerous coercive regulations on precisely those kinds of grounds. There is no reason why they couldn’t use similar strategies to justify purchase mandates. An alliance between well-intentioned paternalists and industry interest groups is precisely the kind of “baptist-bootlegger” coalition that has often been successful in the past. Given widespread political ignorance, voters will often be hard-pressed to tell whether such proposals will really increase public health or not.
Finally, it’s important to emphasize the sheer range of interests that come into play here. The logic of the pro-health care mandate argument can justify virtually any mandate to purchase or do anything. This opens the door to the machinations of a extraordinarily large number of interest groups. It seem very likely that at least a few of them will figure out a way to take advantage of the opportunity. Even if I can’t figure out exactly how to do it, interest group leaders and other professional political strategists probably can.
Indeed, at least one industry interest group already has managed to do it. After all, the health insurance mandate was included in the health care bill in large part because insurance companies support it, and in spite of the fact that President Obama had strongly opposed the idea when Hillary Clinton proposed it during the 2008 presidential campaign. Where the insurance industry leads, others might well follow.
UPDATE: In the original version of this post, I forgot to link Andrew Koppelman’s post on Balkinization that I was responding to. I apologize for the error, which has now been corrected. Unfortunately, I was unable to fix it for several hours, because I had to catch a plane, and then could not access the internet while I was in flight.
UPDATE #2: I suppose I should note that my reference to Barack Obama’s reversal of position on the individual mandate in no way denies that Republican politicians are also often inconsistent, including, in some cases, on the very same issue. My point, rather, was that interest group influence played a role in pushing through the individual mandate (even in spite of widespread hostility to the idea), and could easily have a similar impact in enacting other purchase mandates in the future.
Mayor Michael Bloomberg and Gov. David Paterson have asked the federal government to bar New York City food-stamp recipients from using the benefit to buy sugary drinks, an effort to determine if the move would decrease obesity and diabetes problems.
The request, sent late Wednesday to the U.S. Department of Agriculture, could affect an estimated 1.7 million city residents who receive food stamps. As much as $135 million in federal nutrition benefits is used to buy sugar-sweetened drinks, the mayor’s office said. . .
Food-stamp users cannot use benefits to buy alcohol and cigarettes. The request asks that the USDA allow city officials to have two years to assess if sugary-drink purchases drop, as well as problems associated with diabetes and obesity, a mayoral spokeswoman said. The proposal would not affect the total benefits received, she said.
So is this an example of over-weening paternalism? Or is it a responsible limitation on government assistance?
The Food and Drug Administration is planning an unprecedented effort to gradually reduce the salt consumed each day by Americans, saying that less sodium in everything from soup to nuts would prevent thousands of deaths from hypertension and heart disease. The initiative, to be launched this year, would eventually lead to the first legal limits on the amount of salt allowed in food products.
The government intends to work with the food industry and health experts to reduce sodium gradually over a period of years to adjust the American palate to a less salty diet, according to FDA sources, who spoke on condition of anonymity because the initiative had not been formally announced.
Officials have not determined the salt limits. In a complicated undertaking, the FDA would analyze the salt in spaghetti sauces, breads and thousands of other products that make up the $600 billion food and beverage market, sources said. Working with food manufacturers, the government would set limits for salt in these categories, designed to gradually ratchet down sodium consumption. The changes would be calibrated so that consumers barely notice the modification.
The legal limits would be open to public comment, but administration officials do not think they need additional authority from Congress.
Some of the commenters on my last two posts criticizing libertarian paternalism accuse me of ignoring the possibility that such paternalism is justified by the supposedly superior expertise of government regulators. Actually, I have addressed this point in several previous posts, such as here and here. However, readers can’t be blamed for not taking the time to collect bits and pieces from previous posts scattered over a three year period. Therefore, it may be helpful to collect my thoughts on this point in a single post. To summarize, I think that the regulators’ superior expertise applies at most only to one-half of the relevant equation, that even with respect to that half it has serious drawbacks, and that consumers who need expert advice can usually do better by relying on the private sector.
I. Regulators Lack Expertise on the Subjective Benefits of Risky Activities.
Regulators may have greater knowledge than consumers about the health or safety dangers of risky activities. But they lack comparable knowledge of the benefits that consumers derive from those activities. A public health expert probably knows more than I do about the risks of drinking or smoking. But only I know how much enjoyment I derive from having a beer or puffing on a cigarette. This is especially true when we remember that preferences about such things vary widely. I get zero utility from smoking and (unusually for a Russian) very little from drinking alcohol. Many other people have very different experiences. With respect to the subjective benefits they get from risky activities, consumers actually have vastly greater expertise than regulators do. In a classic 1945 article, F.A. Hayek emphasized the importance of this constraint on expert knowledge:
It may be admitted that, as far as scientific knowledge is concerned, a body of suitably chosen experts may be in the best position to command all the best knowledge available—though this is of course merely shifting the difficulty to the problem of selecting the experts. What I wish to point out is that, even assuming that this problem can be readily solved, it is only a small part of the wider problem.
Today it is almost heresy to suggest that scientific knowledge is not the sum of all knowledge. But a little reflection will show that there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place. It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active cooperation.
This kind of ignorance might not be a problem for traditional paternalists, who sought to make individuals do the “objectively” right thing without reference to their own preferences. Libertarian paternalists such as Richard Thaler, however, emphasize that they seek to “make people better off as judged by themselves.”
II. Limitations of Regulators’ Analysis of Risk.
Even with respect to estimating health and safety risks, government regulators function under severe constraints. Regulators are not philosopher-kings who can implement whatever conclusions they reach through objective analysis. Rather, they are constrained by political pressure. In a democratic political system, regulators’ decisions will be heavily influenced by public opinion. And voters have very strong incentives to be ignorant about public policy and irrational in their analysis of the limited political information they do have. Both of these limitations of voters are likely to impose severe constraints on the quality of paternalistic regulation. Ironically, leading libertarian paternalist Cass Sunstein has done important work documenting the ways in which irrational public opinion reduces the quality of other forms of regulation (see e.g. here). Paternalistic regulation, libertarian or otherwise, suffers from this weakness as well.
Expert regulators are also vulnerable to interest group pressure. The more complex and technical the regulations they administer, the greater will be the opportunities for interest group lobbying and “capture” of the regulatory process, since rationally ignorant voters will have great difficulty in monitoring the experts performance. Ironically, expert regulators will be least likely to function as truly disinterested experts on precisely those issues where expertise is most needed.
Finally, government experts have major cognitive biases of their own, just as consumers do. And the regulators have less incentive than consumers to try to combat their own prejudices.
Given these three dangers, it is no surprise that government experts have a long history of making dubious risk analyses that were then used to justify costly and intrusive paternalistic policies that turned out to cause far more harm than good. As economist Edward Glaeser pointed out in his important 2006 critique of libertarian paternalism:
Paternalism has been used to justify government actions and rhetoric towards alcohol, drugs, homosexuality, religion-related activity, slavery, and even loyalty to the government itself. The nineteenth century crusade against alcohol brought Prohibition, which appears to have had only a modest impact on alcohol abuse while supporting a large, violent, underground alcohol-based economy. The fight against other drugs is more defensible, but the advocates of marijuana legalization argue that the costs of this government policy far exceed the benefits. Governments have attacked homosexuality for centuries and often used paternalistic rhetoric for doing so….
Most disturbing, governments are often persuaded that service to themselves is indeed the highest of callings, and that as a result for paternalistic reasons people should be induced to serve and be loyal to the government. In the United States, this form of paternalism has been pretty benign at least by world standards (pledges of allegiance, jailing critics of World War I). Places with fewer checks and balances, like Nazi Germany or Soviet Russia, turned to paternalistically justified prostate policies with awful results. Some paternalistic policies have had positive benefits, but much of the time, paternalism has been pretty harmful. Social welfare may be well-served by a general bias against paternalistic interventions.
III. The Advantages of Relying on Private Sector Experts.
None of this proves that we don’t need experts. To the contrary, there are many decisions where we can benefit from expert advice. However, the private sector offers a wide range of opportunities to avail ourselves of such advice without incurring the risks posed by government coercion. I addressed this point in more detail in one of my very first posts on libertarian paternalism:
[I]t is essential to recognize that individual consumers don’t have to rely on government for expertise. They can hire their own experts in the market or rely on more knowledgeable friends and acquiantances. When I get seriously ill, I go to a doctor. When I decide how to invest my money, I rely on the advice of friends who work in venture capital and investment banking. The real question is not whether we are going to rely on experts to help us make decision, but who gets to choose the experts and whether or not the experts will have veto power over the final decision on what to do…..
If instead of each individual choosing his or her own experts, there is a single set of specialists chosen in democratic elections, then the quality of the decision is likely to be impaired by political ignorance….
Of course the experts could instead be chosen by nondemocratic means and insulated from political pressure. Yet, in the absence of democratic control, it will be difficult to ensure that the experts are actually serving the interests of the people as opposed to their own. By contrast, experts hired in a competitive market have better incentives; they know that if they pursue their own interests at the expense of the consumer’s, they are likely to be out of a job……
Finally, both democratic and nondemocratic means of choosing government experts have a common weakness: both eliminate the option of dispensing with experts entirely. For some people, that may well be the best choice…
The second major shortcoming of government-appointed experts relative to those hired in the market is the fact that government coercion deprives the consumer of the right to make the final decision. If I hire an expert in the market, I retain the right to reject his advice and pursuing a different course of action. This is a vitally important option.
Economist Richard Thaler, a leading advocate of libertarian paternalism, has briefly responded to some of the points I made in my most recent post on that subject. In that post, I argue that advocates of libertarian paternalism implicitly rely on the assumption that regulators and voters are rational, while consumers and other private sector actors are not:
Ilya Somin gets the discussion off to a unhelpful start by claiming (a) that we consider regulators to be perfectly rational, when again we repeatedly say in the book that regulators are human just like everyone else and (b) that “regulators have no reliable way of estimating the benefits and costs that consumers derive from potentially risky products.” If he means “perfectly reliable” then fine, but that is not a sensible standard. Suppose that a crib is found to strangle babies that sleep in it, as happened to the child of friends of mine. I think it is pretty easy to guess that parents would not want to buy a crib that has strangled a dozen kids. Don’t you?
Thaler’s response, I think, misinterprets my argument. Of course I am well aware that Thaler and other advocates pf libertarian paternalism realize that regulators are “human just like everyone else.” Indeed, in my post I linked some important articles on regulatory irrationality by Thaler’s coauthor Cass Sunstein. The problem is that this recognition of regulators’ “humanity” gets lost in libertarian paternalists’ policy recommendations, where the implicit assumption of regulator rationality plays a crucial role. If the libertarian paternalists built in to their theory the fact that regulators cannot be expected to be more rational than consumers (and, for reasons, I indicated in my post are often likely to be less rational), then it is unlikely that they would continue to advocate government regulation as a good solution for consumers’ cognitive biases.
On his second point, I did not contend that a “perfectly reliable” estimate is required. Rather, I linked an earlier post where I argued that regulators don’t have anything close to an even partially reliable way of estimating the benefits that consumers derive from risky activities such as smoking, drinking, sky diving, and so on. They may know how great a health risk these activities pose, and thus have some way of at least roughly estimating their costs. But they can’t measure the utility that consumers get from doing these things. That is especially true when consumers’ tastes and preferences vary greatly. And it’s hard to have an accurate cost-benefit analysis when at best you can only estimate one side of the ledger.
Thaler’s example of the dangerous cribs somewhat obscures these points because it relates to children, a group we typically do not allow to choose for themselves on a wide range of issues and do not trust them to estimate their own utility. Paternalism with respect to adults is a different matter. Even in the case of the cribs, however, Thaler’s analysis obscures as much as it reveals. Assuming that a dozen children did die, one would still want to know how many that was relative to the total number of users, how good those cribs were relative to their competitors in other ways, and so on. A dozen dead children is, of course, horrible. But many more children than that are injured or die each year from activities such as taking baths and bicycle accidents. Yet that doesn’t mean that the government should forbid parents to allow their children to take baths and ride bikes. Some low-probability risks are sometimes worth tolerating even in the case of children.
The rest of Thaler’s essay is devoted to responding to others who can fend for themselves. However, I want to briefly note the significance of Thaler’s dismissals of the possibilities that paternalistic regulation might lead to “slippery slope” effects and that regulators might use their authority to impose their own personal preferences or those of the majority of voters. Thaler says that that’s not what he and his coauthors want regulators to do; he wants them to “choos[e] the choice architecture that is your best guess of what the participants would choose for themselves if they had the time and expertise to make an informed choice.” But once we recognize that regulators and voters are prone to cognitive biases “just like everyone else,” there is every reason to expect these and other negative impacts of expanded paternalistic regulatory authority to occur. Indeed, the assumption that our own preferences are right for everyone is one of the most common cognitive biases of all. The “best guess” of a cognitively biased regulator as to what others will choose if they were were well-informed is likely to be very similar to the regulator’s estimate of what he himself would do under such conditions. Thaler’s laudable desire that regulators avoid these pitfalls does not prove that they actually can or will do so.
UPDATE: I should note that in my initial post, I wasn’t sufficiently clear about the distinction between what libertarian paternalists understand in their own minds and what is built into their theory. In my view, they clearly do understand that regulators aren’t fully rational in the former sense, but have failed to incorporate it into their analysis in the latter. I am sorry for any misunderstandings this might have caused.
Cato Unbound has an excellent symposium on “libertarian paternalism,” the theory that argues that government should intervene to protect people against cognitive biases that lead them to make decisions that ultimately reduce their ability to achieve their own objectives. Advocates of libertarian paternalism argue that their approach is different from and superior to traditional paternalism, which imposes the paternalists’ own values on those subject to regulation. Overall, I largely agree with the criticisms of libertarian paternalism in the Cato symposium by Glen Whitman (here and here) and Jonathan Klick. However, I wish to focus on a different weakness of libertarian paternalism: the implicit assumption that voters and government regulators are not subject to serious cognitive biases of their own.
It may well be that private citizens acting in markets and civil society often make decisions that they later regret because of cognitive errors. However, regulators and voters are people too. They also might make bad decisions because of cognitive errors. Libertarian paternalist scholars generally ignore this possibility by implicitly comparing perfectly rational regulators with often irrational consumers. But there is no a priori reason to believe that the former are more rational than the latter.
I. The Cognitive Biases of Regulators.
Indeed, there are good reasons to believe that regulators are likely to be more susceptible to cognitive biases than private sector consumers. This is so for at least three important reasons. First, regulators are making decisions for others, not for themselves. As a result, they have less incentive to get them right. If regulators in the proposed Consumer Financial Protection Agency ban financial products that are of great value to consumers, the regulators themselves won’t suffer (unless they happen to want to purchase those products themselves). The less people have at stake in the decisions they make, the less incentive they have to control their cognitive biases.
Second, we are naturally more ignorant of the preferences of others than our own. Regulators have no reliable way of estimating the benefits that consumers derive from potentially risky products. When making decisions for other people, we are therefore prone to the cognitive bias of assuming that what they “really” want is what we ourselves would prefer in their place. It may, for example, be difficult for a health-conscious upper middle class regulator to believe that a consumer might genuinely prefer the pleasures of eating large numbers of cheeseburgers to the health benefits of a more balanced diet. Thus, he will be likely to put down decisions to consume huge numbers of cheesburgers to consumer “irrationality” and favor paternalistic anti-obesity regulations.
Third, regulators will be making decisions for thousands or even millions of consumers. This requires much greater information and analytical skill than the individual consumer’s task of deciding for himself or perhaps also his family. The more complex the task, the greater the temptation of trying to simplify it with cognitive shortcuts that are prone to bias and may well turn out to be misleading.
II. Voters May be Even Worse.
Of course expert regulators aren’t the only people with influence over paternalistic policies. In a democratic society, voters will have a lot influence too. And, as I have pointed out in previous critiques of libertarian paternalism (see here, here, and here), voters have strong incentives to be both ignorant about public policy and highly irrational in the way they analyze the limited political information they do have. Because the chance that any one voter will influence an electoral outcome is infinitesmally small, most voters have little incentive to either acquire much information about the choices before them or make a strong effort to control the irrational biases they may bring to its evaluation. By contrast, when consumers purchase products in the market, they know that their decisions are decisive and therefore have much stronger incentives to make rational choices.
Once we recognize that voters and regulators are also subject to cognitive biases and that they have only weak incentives to combat those biases, the case for libertarian paternalism is significantly weakened. What I find strange, however, is that prominent libertarian paternalist scholars have paid so little attention to this problem. Cass Sunstein, one of the leading academic advocates of libertarian paternalism, has written some brilliant work on regulatory irrationality in other contexts, including his excellent 2002 book Risk and Reason and an important 1999 article coauthored with economist Timur Kuran.
Lastly, it’s important to note that everything I have said above assumes that voters and regulators designing libertarian paternalistic policies have good intentions; that both are genuinely trying to adopt only those regulations that will help people correct their cognitive biases and more effectively achieve their goals. Once we recognize, as Whitman and I have pointed out elsewhere, that regulatory agencies implementing these policies are subject to interest group “capture” and slippery slope effects, the case for such regulation becomes weaker still.
UPDATE: I know some will argue that regulator and voter biases don’t matter much because libertarian paternalists advocate only noncoercive “nudges” that still leave the final decision up to individual choice. However, as Whitman notes in the Cato symposium and here, they in fact advocate many policies that go well beyond that. Moreover, one important consequence of voter ignorance is that voters are unlikely to make fine-grained distinctions between “libertarian” paternalistic policies and more heavy-handed ones. As a result, libertarian paternalist policymakers may find it very difficult to limit the scope of government intervention to the types of “nudge” policies they initially envisioned.
A reader sends me the following comment, further to the several VC posts on behavioral economics (initially occasioned by Andy Ferguson’s Weekly Standard essay):
One basic issue that this whole-”behavioral econ– good-or-bad?”
discussion seems to have neglected the following simple point: welfare
evaluation is much harder with “behavioral agents” than “rational
agents.”With “rational” agents we know that subject to tons and tons of
asumptions markets are great (first welfare theorem). And we have a
pretty good idea of what constitutes a market failure (externalities)
and when a “social planner” can help. Thus, there is a principled
econ case for certain forms of “social planner” intervention that we
know will raise welfare (whether a government can act as an optimal
social planner is another question).With “behavioral” agents, the basic issue is that people’s preferences
are at some level time-inconsistent. My self of today wishes that my
self of tomorrow would put money in to a 401(K) but my self of
tomorrow wishes it to be the next period’s self and etc. Thus, the
person sitting at today does *not* have the same preferences as the
person sitting at tomorrow. If you make the person of today put
money into a 401(k) *today* you make them worse off (since they wanted
to put money in a 401(k) tomorrow), but you make their yesterday’s
self happy. As a social planner, whose utility do you maximize?It’s not obvious how you do this. There are some attempts to work
this out in the literature (e.g. http://www.nber.org/papers/w13737)
but it’s not settled.I guess the main take-away is that claiming policy implications from
behavioral research is *much* harder than from other kinds of econ
research, so at some level behavioral people are jumping the gun a bit
in claiming that they have a new way to do policy; and this objection
is totally independent of worries about slippery slopes and whatnot.
That said, much of the actual-existing behavioral influenced policy
moves (e.g. doing stimulus through withholding rather than lump sum)
seems like a good idea since it is formally identical to what would
have been the status quo.
The paper cited at NBER is interesting, but I would add that this seems to me an area in which philosophy does have something to say. The problems of the self over time have been much discussed, and at least some of the leading arguments about “whose” utility you maximize have been formally adduced, including the proposition that this present-self, future-self, successive-selves way of thinking about things is appealing in part because it matches up to marginality analysis, but is not coherent as an account of identity. This is not an argument about values or an argument from moral philosophy; it is an argument about the nature of identity and self, and I think the philosophers of mind, identity, and such fields do indeed have something to say as to the conceptually valid and invalid ways of framing the issue of the self.
(In a quite different approach to the time-identity problem, framed as a matter of constitutional law and politics, I recommend highly Jed Rubenfeld’s short, compelling book, Freedom and Time: A Theory of Constitutional Self-Government. When it first appeared, I found it – with apologies to Jed – very smart but frankly weird. It has grown on me since then – grown on me a lot.)
Thanks to the VC reader for this thoughtful comment.
Todd’s right, Andy Ferguson’s Weekly Standard piece is excellent – whether one agrees with his ultimate take on it or not. The bottom line of the piece, however, is not simply a skepticism about the powers of social science – behavioral economics as the New Social Engineering. It is, rather, a broadly libertarian point, going to a crucial apparently methodological, but ultimately moral, difference between traditional economics and behavioral economics:
You can see how useful the notion of irrational man is to a would-be regulator. It is less helpful to the rest of us, because it runs counter to every intuition a person has about himself. Nobody sees himself always as a boob, constantly misunderstanding his place in the world and the effect he has upon it. Surely the behavioral economists don’t see themselves that way. Only rational people can police the irrationality of others according to the principles of an advanced scientific discipline. If the behavioralists were boobs too, their entire edifice would collapse from its own contradictions. Somebody’s got to be smart enough to see how silly the rest of us are.
Traditional economics has always been more modest. Assuming the rationality of man was a device that made the discipline possible. The alternative—irrational people behaving in irrational ways—would complicate the world beyond the possibility of understanding. But the modesty wasn’t just epistemological. It was also a democratic impulse, a sign of neighborly deference. A regulator who always assumed that man was other than rational was inviting himself into a position where he could exert a control over his fellow citizens that wasn’t proper for a true democrat. Self-government demands this deference. It won’t work otherwise.
“Ultimately,” the economist Brian Mannix wrote not long ago, “we insist that our regulators start from a presumption of rationality for the same reason that we insist that our criminal courts start from a presumption of innocence: not because the assumption is necessarily true, but because a government that proceeds from the opposite assumption is inevitably tyrannical.”
Long before reading Cass Sunstein as a risk-expert, I read him as a jurisprudential philosophe. I mean, going back to his writing on “deliberative democracy,” going way back. It seems to me that the move from traditional economics here to behavioral economics is precisely the same move in moral philosophy that he, and others of the same tendency, made in the deliberative democracy literature. What was it, after all, that characterized “deliberative democracy” as an intellectual move, in the hands of Amy Gutmann, Sunstein, and others? A theory of meta-deliberation, a theory of how people would ideally discuss all the deeply divisive issues of the day – abortion, affirmative action, on and on.
And yet somehow, some way, the conclusion was always that the right process of thinking must ineluctably lead one to think they way Gutmann, Sunstein, all good and honorable liberal thinkers thought about these hot button issues. Not just good people – but rational people -would all think affirmative action a good thing, abortion okay, etc., etc. The most stunning intellectual move was not merely the claim that these were the right moral conclusions, but that to reach some other conclusion meant that you hadn’t deliberated enough, or deliberated in the right way.
It is the same move that Ferguson’s article describes because it presumes to know what you don’t – viz., the set of rational outcomes. As an exercise in paternalism, it reminds me of conversations as a child with my mother – viz., it wasn’t a conversation in which we had come to reason together to conclusions that we each might reach, even to agree to disagree. No, the conversation wasn’t over until I had come to agree with her. That’s deliberative democracy in a nutshell – and Ferguson describes the same move recapitulated as social science, in the form of behavioral economics.
Co-conspirator Ken Anderson draws my attention to Alan Wolfe’s statement that “Americans are most certainly misinformed. Dumb they are not.” This of course is exactly what I have been saying for years: political ignorance is widespread, but isn’t necessarily a sign of stupidity. To the contrary, being ignorant about politics is, for most voters, actually rational behavior, as is doing a poor job of evaluating the political information they do possess. I also find myself in agreement with Alan Wolfe in his skepticism about Derek Bok’s paternalistic policy proposals (though for different reasons). If voters tend to be ignorant and often illogical in their evaluation of the information they know, transferring more power to government in order to adopt paternalistic policies will only increase the impact of the types of cognitive errors paternalists seek to correct.
I hereby respectfully draw Co-Conspirator Ilya’s attention to Alan Wolfe’s witty and insightful book review in today’s New York Times of Derek Bok’s The Politics of Happiness. In particular to the following two sentences; should we call this rational political ignorance or not?
Americans are most certainly misinformed. Dumb they are not.
Advocates of “libertarian paternalism” cite experimental evidence showing that people often make irrational decisions, and argue that we need government regulation to guard against such problems. Economist Richard McKenzie challenges part of this rationale by citing experimental evidence showing that markets actually give people incentives to act more rationally than they would otherwise, thus undercutting claims of irrational behavior based primarily on surveys or experiments that don’t mimic the incentives and other conditions of real-world markets:
People, including economists, are imperfect decision makers because of their mental limitations. But this fact does not mean that markets fail. Indeed, markets do far more than induce improved allocation of resources, given wants and resources. Markets induce market participants to be more rational than they otherwise would be because they must pay a price for being irrational. Thus, markets allow—no, require—economists to assume that people are more rational than they are likely to be found to be in laboratory settings, absent meaningful information and incentives and absent market pressures.
One underappreciated fact about the experimental and survey evidence relied on by advocates of the new paternalism is that it models voter decision-making far more closely than market decisions. Unlike market participants, voters have little or no incentive to either acquire information about the issues they decide, or to analyze the information they do have in an unbiased fashion. The same is true, to a lesser extent, of libertarian paternalist policies established by expert regulators insulated from democratic control (the “rule of experts” is often proposed as a means by which paternalist regulation can be enacted without being influenced by voter ignorance and irrationality). Such regulators may be more knowledgeable than voters. But unlike consumers, they do not have their own money at stake, and therefore don’t suffer any penalty if they make mistakes, and don’t have much incentive to combat any irrational biases they may have.
By advocating increased government intervention in order to combat irrationality, the paternalists are arguing for a transfer of power to decision-making processes where irrationality is likely to be greater than it is in markets. The proposed cure actually exacerbates the disease.
As with some other aspects of the current debate over paternalism, the relationship between markets and rationality was well-described by F.A. Hayek. In Volume 3 of Law, Legislation, and Liberty, published over 30 years ago, he wrote:
Competition . . . is the method by which we have all been led to acquire much of the knowledge and skills we do possess. This is not understood by those who maintain that the argument for competition rests on the assumption of rational behavior of those who take part in it…. [R]ational behavior is not a premise of economic theory, though it is often presented as such. The basic contention of theory is rather that competition will make it necessary for people to act rationally in order to maintain themselves. It is based not on the assumption that most or all the participants in the market process are rational, but, on the contrary, on the assumption that it will in general be through competition that a few relatively more rational individuals will make it necessary for the rest to emulate them in order to prevail. In a society in which rational behavior confers an advantage on the individual, rational methods will progressively be developed and be spread by imitation. It is no use being more rational than the rest if one is not allowed to derive benefits from being so.
Hayek’s point is particularly relevant to the comparison between voters and regulators on the one hand and market participants on the other. There is little benefit to being a well-informed, rational voter, since the chance of any one such voter affecting electoral outcomes is remote; if a government with better policies does somehow get elected, irrational voters who voted for the other side will benefit just as much as their better-informed compatriots. Voters are therefore almost a paradigmatic example of Hayek’s category of people for whom “[i]t is no use being more rational than the rest.” Government regulators – especially those insulated from political pressure – have some incentive to become well-informed, but very little reason to combat their cognitive biases.
Ultimately, there is little doubt that market participants are sometimes irrational. The problem is that government decision-makers are likely to be more so.
(Update: Thank you Instapundit)
David Brooks has a piece up today in the Times attracting much comment. I am no populist, except perhaps by David Frum’s unexacting standards, but let’s just say I think that Brooks somewhere along the way lost the marvelous tuning that made him the true heir of Veblen. I think it was the need at the Times to do politics rather than Bobo culture and “comic sociology.” As for me, well, how much of an elitist am I? An editor of the TLS once told me, “Ken, you have almost exquisite taste. It would be flawless, too, except for your fondness for the novels of AA Gill.”
Here is my response to David Brooks, en passant, taken with some editing from the conclusion of an essay of mine in the Columbia Law Review in 1996, reviewing books on lawyers, elites, and the therapeutic New Class.
A New Class of Lawyers: The Therapeutic as Rights Talk (96 Columbia Law Review 1092 (May 1996).) (SSRN link)
The old elites wanted to be the top of the communities in which they had grown up; whether to lead or dominate, to serve communities or exploit them, at least they understood themselves as having a place in them. The new elites, by contrast, want no connection; they understand that power is elsewhere, money is elsewhere, and mobility is everything; if indeed they have to live somewhere, it will be if at all possible in a wholly private, gated community. Yet simultaneously they want to dominate.
The New Class pushes its mobility to absolute limits, launching itself into what it imagines is a global society conducted in the jet stream, made weightless by the complete mobility of capital, but with devastating consequences for those left behind on the ground. For those who cannot fly, there is first, the administration of life by these same elites and their hirelings, the authoritarian, bureaucratic formations which, to be sure, express themselves alternately in soothingly therapeutic psycho-babble or communitarian slogans of the common good or assertions of new and endless rights and, second, economic insecurity in the midst of being urged to greater self-esteem …
In this unforgiving light, the unhappiness of lawyers looks rather less like professionals experiencing the loss of fulfillment that accompanies losing “ownership” of the social ends of the legal profession and rather more like the unhappiness of experts who, having established to their own satisfaction the certainty of ends not open for argument by non-experts, wonder why they are not also loved.
The issue of the New Class and its lawyers is authoritarianism. In an age when the therapeutic has appropriated rights talk, and with it lawyers, turning it and them into agents of New Class authoritarianism and social control, the real question that needs to be answered is why there exists the continued “hegemony within the public culture of an essentially indeterminate and at the same time absolutist discourse of rights.” It predominates because, far from being merely a language of individual liberty or even unbridled individual license (as, for example, the communitarians would have us believe) it is today a language of state authority, a language of therapeutic paternalism; those who actually dream of being “liberals” will not reclaim rights talk any time soon. Its appropriation is at the core of the process by which the state today controls, as the late Christopher Lasch wrote, “not merely [the individual's] . . . outer but his inner life as well; not merely the public realm but the darkest corners of private life, formerly inaccessible to political domination.”
Lawyers are deeply complicit in this colonization of the language of rights by the culture of therapy. They participate because it serves the agenda of a class that, unfamiliar with democracy except as an impediment to its social engineering, is incapable of any form of discourse that is not directed from the top to the bottom. Expertise, particularly in the social sciences, is a language of hierarchy and social control, and lawyers today, as a professional formation within the New Class, deploy the language of rights to the end of making the therapeutic coercive in the public sphere.
It is not a glorious profession because it is not a glorious class, and lawyers are right to be unhappy.
Advocates of the “new paternalism” (sometimes also called “libertarian paternalism”) argue that carefully calibrated government interventions can help consumers avoid mistakes caused by their own cognitive biases. In this interesting new article, economist Mario Rizzo and legal scholar Glen Whitman argue that new paternalist policies are vulnerable to slippery slopes that will extend them far beyond the areas where they might be genuinely need to correct consumer errors. Here is the abstract:
The “new paternalism” claims that careful policy interventions can help people make better decisions in terms of their own welfare, with only mild or nonexistent infringement of personal autonomy and choice. This claim to moderation is not sustainable. Applying the insights of the modern literature on slippery slopes to new paternalist policies suggests that such policies are particularly vulnerable to expansion. This is true even if policymakers are fully rational. More importantly, the slippery-slope potential is especially great if policymakers are not fully rational, but instead share the behavioral and cognitive biases attributed to the people their policies are supposed to help. Accepting the new paternalist approach creates a risk of accepting, in the long run, greater restrictions on individual autonomy than have been heretofore acknowledged.
I have myself previously criticized the new paternalism here, here, here, and here. Rizzo and Whitman argue that the danger of slippery slope effects is greater if policymakers themselves suffer from cognitive biases. In this post, I pointed out that the voters who elect the policymakers also suffer from ignorance and cognitive bias, often to a greater extent than the consumers whose biases new paternalist policies are intended to correct. Giving more power to cognitively biased government officials elected by rationally ignorant and cognitively biased voters is likely to exacerbate the effects of cognitive error more than correct it.
Finally, I can’t write a post about slippery slope effects without mentioning Senior Conspirator Eugene Volokh’s excellent “Mechanisms of the Slippery Slope,” which is extensively cited by Rizzo and Whitman. This is my personal favorite among Eugene’s many articles.
A few weeks ago, I warned that one of the problems with the Administration’s proposed Consumer Financial Protection Agency is that it could easily be captured by interest groups who would use its powers to exploit the general public for their own benefit:
[Voter] political ignorance opens the door to interest group “capture” of the CFPA or other agencies that will implement paternalistic regulations. Such regulations will necessarily be complex and difficult to understand. Rationally ignorant voters are unlikely to follow them closely enough to be able to tell the difference between effective regulations and harmful ones. As a result, it will be easy for interest groups and government officials to enact regulations that benefit politically influential businesses as the expense of the public under the guise of consumer protection. We have seen this pattern time and again with other regulatory agencies, such as those engaged in railroad, airline, public utility, and trucking regulation.There is no reason to believe that the new paternalistic regulatory agencies will be any different. Indeed, agencies implement paternalistic financial regulations are likely to be even more vulnerable to capture because of the complexity of the financial system (which makes political monitoring by ignorant voters even more difficult), and the presence of numerous powerful interest groups who have an incentive to do the capturing. Banks, credit card companies, real estate developers, and many others will no doubt lobby hard to capture the CFPA once it gets established.
Recently, Democratic Representative Maxine Waters added an amendment to the bill establishing the CFPA that would add five seats to its powerful Oversight Board for “experts in the fields of consumer protection, fair lending and civil rights, representatives of depository institutions that primarily serve underserved communities, or representatives of communities that have been significantly impacted by higher-priced mortgage loans.” All sorts of interest group representatives could easily get on the board under this amendment. For example, pretty much any bank or credit card company official could claim to have expertise in the “fields” of “consumer protection” or “fair lending.” Similarly, many banks can easily claim to “primarily serve underserved communities.” Finally, interest group representatives could pose as “representatives of communities that have been significantly impacted by higher-priced mortgage loans.” For example, lenders and real estate developers located in such areas would surely qualify; after all, they live in the community too. The majority of the board will still be made up of various federal government officials. But these officials are far from immune from interest group pressure themselves, and of course such lobbying will be facilitated by the fact that several interest group representatives will likely be sitting on the board itself.
Conservative columnist Byron York, author of the linked article, focuses mostly on the fact that Waters’ amendment cleverly forestalled a Republican effort to keep ACORN from getting representatives on the board. ACORN, however, is just one of many groups that could potentially get seats on the Oversight Board. Indeed, ACORN’s notoriety makes it less dangerous than many of the other groups that could potentially capture the CFPA. Any effort to put ACORN representatives on the board would likely result in lots of negative publicity; for that reason, I doubt that the administration would let it happen. On the other hand, rationally ignorant voters are likely to overlook the presence of representatives from other, equally pernicious but less well-known groups.
Thanks to Eugene’s generosity, I will have access to this space all week to expound what I see as a great moral and practical imperative: to put our new knowledge of what controls crime into use, with the goal of achieving “half and half”: half as much crime and half as many people behind bars in a decade as we have today. (Here’s the a book-length version of the argument.)
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Engineers have a sardonic saying: “When brute force fails, you’re not using enough.” For three decades, in the face of the great crime wave that started in the early 1960s, we have been trying to solve our crime problem with brute force: building more and more prisons and jails. We now keep 2.4 million of our fellow human beings under lock and key at any one time, and that number has continued to grow despite the spectacular drop in crime between 1994 and 2004, which took crime rates to 50% of their peak levels.
Imprisonment at five times the historical level in the United States, and at five times the level of any of the countries with which we would like to compare ourselves, has not been sufficient to fully reverse the growth in crime; current crime rates are still at 2.5 times the level of the late 1950s and early 1960s. Even that discouraging number understates how much worse things are now than they were half a century ago; today’s high crime rates persist in the face not only of ferocious punishment but also of greatly enhanced – and very costly – adaptations by potential victims to avoid being victimized. Those adaptations range from buying alarm systems to moving to the suburbs. Most of all, they involve avoiding risky situations. The need to take such precautions leaves all of us less free than Americans were half a century ago.
The burdens of crime, and of punishment, are not evenly spread across the social landscape. Homicide is the leading cause of death among black men between 18 and 30 who did not finish high school, and a black male dropout also has a better than even chance of serving prison time before turning 30. William Stuntz has calculated that the incarceration rate among African-Americans today is higher than the incarceration rate in the Soviet Union the day Stalin died.
Is there an alternative to brute force? There is reason to think so, and pieces of that alternative approach can be seen working in scattered places throughout the world of crime control. But the first step in getting away from brute force is to want to get away from brute force: to care more about reducing crime than about punishing criminals, and to be willing to choose safety over vengeance when the two are in tension.
If for a moment we thought about “crime” as something bad that happens to people, like auto accidents or air pollution or disease, rather than as something horrible that people do to each other—if we thought about it, that is, as an ordinary domestic-policy problem—then we could start to ask how to limit the damage crime does at as little cost as possible in money spent and suffering inflicted.
The answer to that question will not be the only factor that influences, or should influence, crime-control policy. Justice both requires and limits punishment. Laws, customs, and institutional arrangements—including the Constitution and ideas such as “innocent until proven guilty”—limit, and ought to limit, the range of options. Still, thinking about the advantages and disadvantages—what economists quaintly call “benefits” and “costs” —of different approaches to crime control is one place to start the inquiry.
Crime causes damage: directly to victims, and indirectly as people incur costs, and impose costs on others, to avoid victimization. The value of the total damage is hard to reckon, but serious estimates (even excluding “white collar” crime) run as high as $1.4 trillion per year: more than 10 percent of GDP. Furthermore, this damage falls most heavily on the poor and socially marginal people least able to bear it; crime not only concentrates around social disadvantage but also sustains it, increasing costs for consumers and employers alike and thereby driving away resources and opportunities.
One way to frame the general problem of crime-control policy is, “What set of actions would result in the least total harm and cost, from crime and crime-control efforts combined?” Neither across-the-board lenity nor maximum severity offers the right answer to that question. In order to squeeze the maximum crime prevention benefit from every prisoner-day of incarceration, we need to learn to deliver the minimum effective dose of punishment and to make as much use as possible of convincing and clearly communicated threats rather than actual punishments.
The principles of effective deterrence are straightforward, though making actual institutions implement those principles is complex. Punishment should be swift and certain rather than severe; those subject to it should know precisely what actions will lead to punishment; efforts should be concentrated, rather than dispersed, to enjoy the benefit of the positive-feedback process in which reduced offending leads to increased deterrence.
Since punishment is always a cost and not a benefit, we should also be alive to the many possibilities to reduce offending without punishment: everything from a later school day (to shorten the burglary-friendly time period when adolescents are out of school but grown-ups have not returned from work) to removing highly criminogenic environmental lead to sending nurses to visit first-time mothers in need of coaching.
Our current crime rates and our current incarceration levels are national disgraces. We know how to fix both halves of that problem, and there is no good excuse for not doing so.
If the boys don’t stand to benefit from the vaccine, then are we making boys into The Island? Well, that’s an awfully inflammatory way to start out, I grant you. Here’s another inflammatory way to start out … would forcing boys to be vaccinated against their will but without any medical benefit to them, with the benefits accruing instead to girls, violate Roe v Wade? Our boy-bodies, ourboyselves? For that matter, should pre-teen girls be forced to be Nudgily inoculated because their parents systematically underestimate the extent to which they will engage in sexual activity and have a tendency to acquire the disease? Something here to offend almost everyone in this debate, if one takes it very far down to fundamentals.
Update: Thanks, Glenn, for the Instalanche! While I am thinking of this, please note that I am not the Dr. Kenneth Anderson, MD, Harvard Medical School, who is a real expert on vaccines and viruses and appears to have done some interviews and other media stuff on Gardasil. I gather from a couple of comments that I have either tried some readers’ patience or else exceeded their attention spans. There is not a lot of careful organization of this post, because I inserted paragraphs in between editing something unrelated; this is not my day job. However, to the extent there is a structure, it is this:
- (a) Opening that you might find clever or not, but is designed to raise at least three multiple, indeed really different, ways in which mandatory vaccinations of either all girls, or all boys, or all girls and boys, with Gardasil could raise liberty and rights issues.
- (b) A short mention of what Gardasil is and why it was controversial back in 2006 when it was introduced, for those who haven’t closely followed it.
- (c) An introduction to the current issue, which is the introduction of Gardasil as safe for boys for genital warts which, according to the WSJ news article, are rare and not a big deal (I gather from comments that readers dispute this factual claim), whereas the true reason for vaccinating boys is for the benefit of girls.
- (d) A discussion of the general issue of mandatory vaccination and why it is ethically justified for everyone who would benefit from what amounts to social insurance, and the wickedness of free riding, both as its own ethically bad thing as well as for the extra social social harms it causes by undermining the “herd immunity.”
- (e) A discussion of the special case of religious claims for exemption from mandatory vaccination which are also free-riding, and my undefended (because arising from another kind of argument) claim that we should no longer allow religious claims of exemption.
- (f) A shift in discussion from the general justification, even on libertarian grounds, for mandatory vaccination that benefits everyone to the special case of Gardasil, if one accepts the factual premise that it only benefits the girls, and not the boys.
- (g) An argument that requiring the boys to be vaccinated in that case violates their rights, and uses them merely as means to other social ends of social utility.
- (h) Consideration of a possible real-world counterexample in the form of other cases where we use a non-benefiting pool to benefit another group – rubella vaccinations; my suggestion is that it is not a good analogy.
- (i) A final (undefended) claim that we would not be discussing this at all if the situation were flipped, and we were talking about mandatory vaccination of girls to prevent testicular cancers.
- (j) Then some side remarks, including a comment that one need not look at this from either a strong utilitarian or strong rights-based view; one might, for example, adopt views from Catholic social thought on the doctrine of love in the commonweal.
It might well be that the facts are different from what the WSJ news story quoted below suggests; in that case read this as a hypothetical around the question of whether it is permissible to require mandatory vaccination of one group in order to benefit another. Several commenters have stated that men, gay men particularly, are at much greater cancer risk than the article says, for example. I make no claim to being a doctor or public health specialist or expert in the facts of these medical issues. So:
Gardasil is a vaccine against the sexually transmitted HPV virus that is a leading cause of cervical cancer in women. It was approved by the FDA for use in women in 2006.
Approval was not without some controversy in 2006 – arguments over whether the manufacturer had overstated the extent and variety of protection, and whether the manufacturer’s massive spending on promoting the vaccine to health officials had shifted public officials’ objective judgment about safety and effectiveness. There were independently arguments over the high monetary cost of the vaccine and its administration in relation to benefits. This discussion skips over the monetary cost issues, the ethics of Merck’s campaign, and similar “money” issues. However, this WSJ article describes that 2006 controversy this way:
After the FDA approved Gardasil’s use for girls and young women in 2006, the vaccine’s maker, Merck & Co., was criticized for lobbying aggressively to get states to make inoculation a requirement for pre-teenage girls. Its high price — $390 for the three-dose regimen — also came under attack … The FDA ruling on Gardasil came the same day that the agency approved a rival vaccine designed to protect against cervical cancer in women. GlaxoSmithKline PLC’s Cervarix vaccine was approved for use in girls and women ages 10 to 25 … While Cervarix, like Gardasil, protects against two HPV strains that are linked to about 70% of cervical-cancer cases in the U.S., the Cervarix vaccine doesn’t offer protection against the HPV strains that can cause genital warts.
I mention the 2006 controversy this despite having had a daughter get the vaccine; my wife and I thought it pretty clear that if you were a girl, the benefits outweighed the risks heavily even if it didn’t prevent against every form. (And I mention this personal item because I don’t want anyone to think that I’m actually simply covertly opposed to vaccination, or to brand-new vaccines, etc. I’m not, and whatever your views on that, I’m coming here from a standpoint of being perfectly comfortable with vaccination and, as discussed below, very willing to make vaccinations mandatory – and think it consistent with a generally libertarian outlook.) At least as the pediatrician explained it, for it to make a substantial difference, it needed to be given early on in adolescence, which, put more directly, before a girl became sexually active and might acquire the virus. (Experts out there – and I am not one and only followed this via our pediatrician – can correct any of this.)
What’s new? The vaccine has just now been approved for use in boys as well. As the same Wall Street Journal story notes, there is controversy over whether boys ought to be vaccinated, whether there should be mandatory public health vaccination of boys, and whether there is a medical ethics question involved. The controversy comes down to whether the vaccine benefits boys in any way except very minimally (fewer than 1% get the non-threatening genital warts, and of course none get cervical cancer).
In my most recent post on paternalism, I criticized claims that paternalistic policies can be justified on the grounds that government-appointed experts have greater knowledge than consumers and are less likely to be influenced to cognitive error. Among other points, I emphasized that government experts have no way of determining how much benefit consumers get from potentially risky products and therefore no good way of deciding which products should be banned or restricted on the grounds that their costs outweigh their benefits. In a recent e-mail, NYU economist Mario Rizzo (himself a leading academic critic of paternalism) points out that F.A. Hayek made a similar point in his classic 1945 article, “The Use of Knowledge in Society”:
It may be admitted that, as far as scientific knowledge is concerned, a body of suitably chosen experts may be in the best position to command all the best knowledge available—though this is of course merely shifting the difficulty to the problem of selecting the experts. What I wish to point out is that, even assuming that this problem can be readily solved, it is only a small part of the wider problem.
Today it is almost heresy to suggest that scientific knowledge is not the sum of all knowledge. But a little reflection will show that there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place. It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active cooperation.
Hayek’s point was directed at arguments for socialist central planning (common in Hayek’s time). But it applies with almost equal force to modern expertise-based arguments for paternalism. Last year, I discussed the broader relevance of Hayek’s thought to our own times in this post. In a follow-up post, I argued for the modern relevance of Hayek’s critique of conservatism.
Tags: Hayek, Paternalism, Rule of Experts
In recent years, advocates of paternalistic policies, such as economist Richard Thaler, argue that government-appointed experts should limit the choices available to consumers in order to prevent them from making poor decisions because of ignorance or cognitive bias. After all, they claim, experts are likely to know better than ordinary consumers which products are too risky for us to use. This kind of “new paternalism” (also known as “libertarian paternalism”) has had a lot of influence in the academic world. It has also caught on in the Obama Administration, which has based major policy initiatives on it such as the proposed Consumer Financial Protection Agency.
In this recent essay, New Zealand economist Eric Crampton points out a serious flaw in the logic underlying the new paternalism. Experts may be better than consumers at figuring out the health risks posed by various products. But they usually have no reliable way to estimate the benefits the consumers get from them. Paternalism can only be justified, if at all, in cases where the risks posed by the product outweigh the benefit purchasers derive from it. Experts who have no way of estimating those benefits are in no position to determine which products should be regulated or banned:
None of us holds health as our only goal. Every time we take a slight risk in traffic, or decide to drive at all, we’re trading the risk of accident against the benefits of getting to where we’d like to go. When we decide to go skiing, we trade off fun against the risks of a broken leg or worse. Even where our children are concerned, we make trade-offs. We could always choose to purchase a little more safety for them than we do. We could spend a little more on the slightly safer car or car seat. We could always expend a little more effort in keeping them from harm. But we don’t make our toddlers wear padded helmets: the child wouldn’t like it and neither would we….
The new paternalists often cite asymmetric information about health risks—in which producers take advantage of consumers’ inadequate knowledge of health consequences or dangers—as justifying taxation or regulation. Often, however, consumers are not ignorant. For example, the best evidence suggests that individuals overestimate the health costs of smoking. If there’s an information market failure, it’s causing folks to smoke too little, not too much….
More recent work by behavioural economists focuses on costs borne internally which individuals have trouble reducing due to self-control problems. A drinker might sincerely wish he could drink only two pints per day, but instead drinks four and he’s not been able to find any way of stopping himself. If taxes were increased to the point where he’d only purchase two pints per day, so the argument goes, he’d be made better off by his own measure of his own wellbeing….
These ‘internalities,’ as they are sometimes called, might matter on the blackboard but it’s difficult to see them as the basis for public policy. Unless a regulatory agency can see into our souls and discern that weakness of will is the problem, we can’t tell that a tax really makes drinkers better off by the drinkers’ judgment.
To put it a different way, a public health expert probably knows more than I do about the risks of drinking or smoking. But only I know how much enjoyment I derive from drinking a beer or smoking a cigarette (in my case the answers are very little and none, but preferences differ). I discuss this point in greater detail in this post.
Paternalism might still be justified if the only options were either going with the experts’ ignorance about benefits or going with consumer ignorance about costs. Fortunately, however, consumers can make use of expert knowledge without government coercion. There is a great deal of expert-produced information on the risks of smoking, drinking, financial products, and so on, that interested consumers can access on the market, or even for free through the internet. True, consumers might make mistakes in choosing which experts to rely on or in deciding to forego expert advice altogether. But those errors must be weighed against the much greater impact of ignorance and cognitive errors in the political process. If consumers sometimes forego expert advice out of ignorance or cognitive errors, similar mistakes are even more likely to plague “rationally ignorant” voters, as I argued here and here.
All of the above assumes that government-appointed experts tasked with formulating paternalistic policies are honestly doing their best to apply their expertise in a disinterested way. In reality, of course, a government agency with the power to ban or restrict important consumer products is likely to be heavily influenced by interest group lobbying. Industry and labor groups are likely to push hard to get the agency to adopt regulations that benefit them at the expense of consumers and competitors. Moreover, government regulators themselves are not always above using their power to pursue their own self-interest or ideological agendas. Crampton gives several examples of such behavior in New Zealand, and American regulators are unlikely to be much better.
CONFLICT OF INTEREST WATCH: Crampton and I are coauthors on another article.
UPDATE: Some commenters claim that Thaler and other “libertarian paternalists” don’t advocate policies that actually restrict choices. This is simply false. They advocate numerous such policies. See here for some examples. The distinctive element of libertarian paternalism is not that it doesn’t restrict consumer choices but that it purports to do so on the basis of what the consumers themselves would prefer if they weren’t influenced by ignorance or cognitive error.
Tags: Paternalism, Rule of Experts
