| Long Post on Sunstein & Thaler's new book, "Nudge: Improving Decisions About Health, Wealth, and Hap[I'm still copy-editing this, so there may be some changes yet.]
I got an email asking my thoughts on the following, linked article and Sunstein and Thaler's new book:
"We are not for bigger government, just for better governance."
http://chronicle.com/temp/reprint.php?id=pwq4w52rk7wg916xkfflm6r43x0h2d5s
I have a lot of respect for both Sunstein and Thaler, even if I diverge on many significant points from them. I think Sunstein's Laws of Fear should be mandatory reading for the Legal Process class (or frankly anywhere in the 1L curriculum so that law students are equipped to analyze law and policy in a less-knee-jerk manner).
I find it interesting that Cass and myself, despite coming from different perspectives, often times end up at the same destination (or if not the same destination, at least proximate to each other and reaching for the same goals). I will admit that I'm a bit leery of 'libertarian paternalism'. I am forced to wonder when does a "nudge" become a "shove" and a "shove" become a "gun".
I totally agree with them that neoclassical economics' premise that all actors act rationally at all times is a huge problem underlying their premises. Behavioral economics is a very intriguing field and is much more in line with my Austrian view than with the Keynesian thinking, which while dominating the academy is muddled and wrong-headed in my view. The flaw with certain aspects of Sunstein and Thaler's normative view of behavioral economics is that it presume to be able to know objectively the "highest value, best use" choice for a given group of observed individuals. The error in that thinking is the same error neoclassicists make (for which behaviorists criticize them), namely that individual valuations that go into making any choice are subjective and individual specific. How can it correctly be argued that individuals are acting 'irrationally' or out of keeping with their self-interest when they make a choice that doesn't comport to the observer's subjective valuation based upon his or her limited knowledge of the individual's optimization.
This comports with my theory that there is no such thing as altruism. No human is psychologically capable of committing a truly self-less act (with the obvious but generally philosophically irrelevant exception of autonomic responses). This isn't the time or venue to robustly unpack my ontological views on altruism, but suffice it to say that every perceived 'selfless' act is actually an act that provides the actor with more subjective value than not acting would have, e.g., assuages guilt, satisfies personal cravings for justice, required by ethics or an individual's morals, etc... If I ever have the time or mental acuity in order to do it, I would love to develop my views on altruism into a robust defense of it, and I delight in titling the book based on some updating of/hommage to F.A. Hayek's title "The Fatal Conceit".
Back on task..
I find it pretty disingenuous, however, to claim that their not for bigger government, but better governance. Unless they're willing to posit what aspects of government can be reduced to make up for the resources that government directed 'nudging' would require, the policies they advocate ultimate would require a larger bureaucracy and expand the technocratic-scientific-politico-policy class.
I think they do a great disservice to the libertarian and non-Keynesian economic viewpoint by couching the discussion as argumentation between anarchists (laissez-faire types) and communist/fascists (command-and-control types).
I think it's most practical in applications such as those described, where paternalism is either appropriate (minor children) or relatively non-interventionist (sufficient opt-out safeguards).
I frankly don't understand how Cass and Thaler square the libertarian prong of their Mary-Shelley-philosophy with their support for Obama, given the platform and vision for programs in its current form. I am forced to wonder if it doesn't belie the true end-goal for their thought processes, namely technocratic authoritarianism. At the end of the day, someone still has to decide the nature and the magnitude of the "nudge". Human temptation for power and control is seemingly indefatigable. The natural risk of promoting planned (or "smart" in their words) 'nudging' is that the person doing the nudging won't know where (or won't know how once they get going) to draw the line.
A long hypothetical tries to illustrate the point:
If you basically view the American population--in generality as a whole--as Jerry-Springer-Loving-Trans-Fat-Eating rubes that need to be nudged into right-thinking... how do you stop nudging?
You nudge them a little bit (by creating impediments to choice; i.e., the 'cost' of opt-ing out of the governmentally preferred choice is raised a little bit to encourage you to chose what the government has decided is best for you). And a few people decide that the cost to opt-out of the government authorities preferred choice is too high to justify the benefit they would derive from their first-order preference. (This is regardless of whether or not their first order choice was the 'highest, best use' or 'most rational choice'; Frankly, I believe that's an irrelevant question because of the impossibility of one or a small group of people being able to determine rational best-use for a multitude of individuals).
Sunstein and Thaler use an example of placing fruit at eye-level in a cafeteria in order to increase its attractiveness, and presumably thereby encourage people to eat fruit rather than selecting chocolate cake. Fruit is the government preferred choice here presumably because it represents a more 'healthy' choice than chocolate cake. (Although it's easy enough to imagine government preferred choices being for all sorts of less noble reasons. Remember, the only entity capable of enforcing or sustaining a monopoly is the government).
So based on a goal of 'nudging' people; helping them make 'better' 'choices' for themselves (at least according to the value-judgement/estimation of the government acting through a planner-bureaucrat who's is dictating the policy), the government requires that the fruit be placed eye-level and the chocolate cake be placed on a shelf immediately above the fruit: still visible and easily accessible, but not the first thing that naturally jumps to the eye. Based on this strategy, fruit is viewed more attractively, and consequently some who would have chosen cake had it been the first thing they saw instead choose fruit. At this stage in the game, all seems gentle, harmless, and without much reproach.
The problem is that government _never_ stops at this stage. It's counter to human nature; the nature of bureaucracies, governments, and power; and to our own historical experience.
The planner-bureaucrat still sees a lot of people not choosing what he has decided is the 'right' choice. Consequently, he feels justified in 'nudging' a little harder (since it's not enough to put the fruit at eye level, we move the chocolate cake to the next shelf up, so it's a little harder to reach and more people can't get a good look at it from that angle).
Now that the cost to opt-out has been raised (not as accessible compared to the fruit), a few more people are 'priced out' of the market due to government interventionism (they like chocolate cake, and would prefer that as to the fruit, all things being equal, but they don't subjectively value the excess benefit of their first-order choice versus their second-order choice more than the effort required to obtain the first-choice over the second-choice).
Notice also, that this new nudging policy has a disparate impact on short people (apply this to whatever your preferred disenfranchised, minority, or otherwise oppressed identity group). Short people will face a disproportionately higher 'cost' to obtain cake under this policy as they might have to ask for assistance to get it, and they can't see the cake from their view, therefor adding uncertainty into the market (decision), e.g., is it dried out, is there frosting, how big are the slices, etc.
Now the bureaucrat is happier... he's seeing more results of people choosing the 'right' (i.e., his) choice due to his policies. (The more accurate way to characterize his actions is that he has, though government interventionism, eliminated the choice of cake from certain percentage of the subject population.)
However, there's still too many people out there making 'bad' (i.e., not his) choices. And when he stops to think about it, if he were to stop 'nudging' people, what would be his purpose? His job and his nudging skills would be marginalized and irrelevant. In order to justify his continue suckling at the taxpayers' collective teat, he has to continue to 'nudge' people into the 'right' way. What started out with subjectively good intent now starts to take on greater importance to his individual well-being. And after all, he did get in this in the first place to help people! And look at all the good he's done already ... he can't stop now ...
And thus the spiral of regulation continues: Putting the cake on the higher shelf didn't work, so next we'll put it behind a glass door that's a bit awkward to open when your in line and carrying a tray. Other cafeteria patrons are annoyed: if you'd only chose fruit, you wouldn't hold up the line as you try to extricate the cake from the case... People can still opt-out of fruit and chose cake, but it's another step. Yet too many people are still choosing the 'bad' cake!
So we now move the cake to the storage refrigerator. If people want cake, they have to ask a government employee for it and then wait for them to retrieve it. The cafeteria workers are busy, so asking for cake makes them grouchy, but still some people put up with the added costs of having to ask for cake and reducing their lunchtime in order to wait for it to be retrieved.
For some, the cost of cake is now too high to obtain it through the cafeteria, so they start to bring in cake they bought from other sources or baked at home. This can't be allowed, because there's no way then to monitor cake vs. fruit consumption. It's not that the bureaucrat has anything against outside cake per se, but "you have to understand," he pleads, "that we have to ban outside food in the cafeteria for health and safety reasons. It's for your own safety and that of the other patrons of the cafeteria." "Have no fear," he continues "I know some of you thought that we removed cake from the cafeteria, but you were laboring under a misapprehension. Cake is still available, even if you really should be having fruit, just ask any of the staff, and they will provide you with one."
Now that the bane of unmonitored activity is dealt with, the bureaucrat can get back to helping people help themselves. He is now reviewing the progress made to date and is pleased at all the progress he's made. On the basis of his progress to date, he secures more taxpayer funds to study the effects of cake. Maybe if people just understood the danger of cake (over fruit), they'd understand why they're making bad choices. Based on his study, he then insists that cake feature a prominent warning label, describing all the bad effects that can happen from eating cake ("This product is a known health hazard. Consumption of cake can lead to (or exacerbate existing conditions of) diabetes, heart disease, obesity ...."). This label puts some people off from eating cake: either through fear or social pressure from fruit eaters. Additionally, the bureaucrat institutes a public service announcement campaign to educate the public on the dangers of cake. After some finagling, the bureaucrat scores a real coup, and Oprah dedicates a weekday episode of her show to the hidden dangers of cake. Again the 'costs' continue to rise, and the result is more people are 'priced' out of the market for cake.
Notwithstanding all the impediments the government has now put into place in order to obtain cake, some still chose (inconceivably to the bureaucrat who's worked so hard to make people make the 'right' choice) the chocolate cake. This is unacceptable. If the bureaucrat can't justify his continued progress at addressing the cake dilemma, he might have his funding cut or even eliminated. He then strikes upon a brilliant plan: why not require people to just pre-register for cake. It will be a simple review process, but then if they forget to register or if at lunchtime they actually would prefer cake, they're out of luck. A nice, gentle nudge, no?
He creates a cake application form for patrons to request cake. The form is small, and simply requires the name of the requester, the date requested, and the requester's expected lunch time. A patron who wants cake simply has to fill out the form by 9 am, submit it to the cafeteria, pre-pay for their cake, receive a receipt, and then present the receipt to the cake control window in order to obtain their cake. This seemingly innocuous step has a great effect of reducing cake consumption. People who would have bought cake before now are unable to opt-out of the government preferred choice of fruit for a whole host of reasons: they were unable to step away from their jobs in order to take the time to fill out the form, go to the cafeteria, and prepay for the cake; they were late getting in; they didn't have exact change to pay for the cake in the morning; they lost the receipt during the day; they missed their expected lunch time; ad infinitum.
As the cake registration system continues, the bureaucrat starts to think about ways to 'improve' his system and better document his results. The form expands to include the applicant's cake history, contact information in case of emergency, demographic data, etc. The process now requires the applicant to sign a waiver, acknowledging the health risks and to receive nutritional counseling brochure. In addition to the receipt, the would-be cake-eater now has to show valid government-issued ID as well as signing a control log in order to receive the applicant's cake.
The expense of all these procedures is high, and naturally, the 'right' choice making, fruit eating patrons can't be expected to subsidize the systems there to protect the opt-outing-cake-eater, who is increasingly becoming socially stigmatized for his cake-preference. Consequently, the bureaucrat lobbies congress and gets a special cake excise tax passed, raising the price of the cake higher.
A patron of the cafeteria, who was a cake eater and also overweight, has a heart attack and dies. While it is medically impossible to know for sure, the bureaucrat advances the idea that he wouldn't have died if he'd just made the 'right' choice and had fruit instead of cake. This demonstrates, in the bureaucrat's mind, the need for ways to prevent people from making bad decisions and the danger that cake presents. Now the application process is modified: a health screening is required and must be updated annually in order to be licensed to consume cake. Standards are enacted to determine those fit enough to handle the dangers of cake... The bureaucrat still views this as consistent with his starting goal: 'nudging' people into choosing fruit over cake. He's had a lot of success; cake is rarely consumed now, and only by those capable (in his estimation) of being able to handle cake. To him, the system is still 'nudging'. It says to would-be cake eaters, "You can opt-out still! We think cake is the better option, but we aren't going to stop you. You simply have to comply with these requirements in order to obtain it. -- You don't mean the BMI, cholesterol, etc health requirements... well just work hard, lose some weight, etc... and soon you'll be within the guidelines for it. After all, we're doing this for your own good."
While a few cake fans comply, the cost of compliance now is simply too high for the benefit cake provides. The number of license applicants dwindles as the on-going compliance requirements just aren't worth the effort to obtain cake. It reaches a point where the bureaucrat wonders if nudging is even necessary anymore. Almost no one eats cake these days. While if he had tried to outlaw cake at the beginning, there would have been an uproar as the percentage of cake eaters were high, but now there's too few people to make any meaningful resistance. The bureaucrat might leave the system as it is: a de facto outlawing of cake through a specious opt-out process. In the alternative, the bureaucrat can just outlaw cake entirely. After all, it's not as if anyone needs cake to survive, right?
End the end analysis, the 'nudger' couldn't help himself from taking things beyond a simple 'nudge' all the way to an invasive batter and the theft of choice.
So hopefully that long, drawn out hypo illustrates my concerns with Cass's theory. Ultimately, the libertarian prong completely drops out, and one is just left with paternalism.
Nonetheless, even if you credit libertarian paternalism as a plausible theory or a 'good' idea, there are still meta-ethical questions: what is the basis, authority, and justification for the nudge in the first instance?
These are questions that are hard for Sunstein and Thaler to answer satisfactorily. Ultimately, they're forced to abandon any liberty or personal autonomy analysis as the root-source of their theory. Instead the lodestar upon which it is predicated is an ontological necessity of technocratic authoritarianism.
I will admit, Cass's writing is always a good read, and he's a very smart man. If I ever were doing a doctoral thesis in philosophy, I would love to have him critique it and do a mock defense with me. After that, I'd be pretty certain I could handle anything else that a defense committee could throw at me. Libertarian paternalism in the form of a 'nudge' theory, however, is somewhat intellectually dishonest. It is ultimately an attempt to wrap authoritarian, or in the words of Sunstein "command-and-control", planning in a libertarian sounding, candy coating.
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