Who Knows What Is Best for You?

For those who believe that government bureaucrats should control our lives behavioral economics has been a boon.

One of its eminences, Harvard Law Professor Cass Sunstein even worked in the Obama White House. There, he was trying to modernize the principles of government regulation. One must mention that the Obama administration has issued a veritable of business-crushing regulations. It has proven to be a champion at the game.

Along with economist Richard Thaler, Sunstein developed the concept of the nudge. Government would not force people to what was in their best interest. It would nudge them in the right direction. No more compulsion; just a little paternalistic push toward the good.

Of course, this assumes that other people know better than you what is good for you.

As many people noted at the time—among them Thomas Sowell—nothing about the theory obviates the fact that regulators might have a less-than-perfect understanding of what is best for all citizens. They, like the rest of us, are human beings, subject to error.

Great thinkers like Sunstein believe that bureaucrats can make more objective judgments because they are not corrupted by the profit motive. They possess more virtue because their intentions are less venal.

One would be correct to see creeping socialism in this bit of sophistry. Were we to respond to it, we would say that, lacking a profit motive, government officials need not heed the judgment of the marketplace and have no real interest in whether their nudging works.

Who is going to regulate the regulators?

You might respond that our elected representatives should be charged with the task, but we all know that government employees belong to unions and that the unions are in the business of buying politicians.

In any event, the objections against nudging are not only coming from libertarian and conservative circles. Recently, the New York Review of Books published a review of two books by Sunstein. The author, NYU and Oxford Professor Jeremy Waldron critiques the concept from a more classically liberal perspective.

Waldron’s review is excellent and well worth your attention. By the time he is finished there is very little about Sunstein’s nudgery that is still standing.

Waldron begins by noting that Sunstein has divided people into two classes: ordinary people who don’t know and those who do know. Plato would have called the latter group a guardian class, people who have privileged access to the world of big ideas and who therefore have the right to make decisions for the first group.

In Waldron’s words:

Let’s think about the dramatis personae of Sunstein’s account. There are, first of all, people, ordinary individuals with their heuristics, their intuitions, and their rules of thumb, with their laziness, their impulses, and their myopia. They have choices to make for themselves and their loved ones, and they make some of them well and many of them badly.

Then there are those whom Sunstein refers to as “we.” We know this, we know that, and we know better about the way ordinary people make their choices. We are the law professors and the behavioral economists who (a) understand human choosing and its foibles much better than members of the first group and (b) are in a position to design and manipulate the architecture of the choices that face ordinary folk. In other words, the members of this second group are endowed with a happy combination of power and expertise.

Of course regulators are people too. And like the rest of us, they are fallible. In the original Nudge, Sunstein engagingly confessed to many of the decisional foibles that Thaler exposed. Worse, though, is the fact that regulators are apt to make mistakes in their regulatory behavior: “For every bias identified for individuals, there is an accompanying bias in the public sphere.”

Continuing, Waldron raises the important issue of trust. If everyone is trying to nudge us in one way or another, why would we not become a nation of cynics? Are we being trained in the habit of mistrust?

In his words:

I am afraid there is very little awareness in these books about the problem of trust. Every day we are bombarded with offers whose choice architecture is manipulated, not necessarily in our favor. The latest deal from the phone company is designed to bamboozle us, and we may well want such blandishments regulated. But it is not clear whether the regulators themselves are trustworthy. Governments don’t just make mistakes; they sometimes set out deliberately to mislead us. The mendacity of elected officials is legendary and claims on our trust and credulity have often been squandered. It is against this background that we have to consider how nudging might be abused.

And then there are the questions of dignity and free will. It is certainly important that those who want to use behavioral economics to nudge us in one direction or other have no real use for free will.

What happens when we are no longer accorded the option of making a mistake, even of learning from a mistake?

Waldron writes:

Deeper even than this is a prickly concern about dignity. What becomes of the self-respect we invest in our own willed actions, flawed and misguided though they often are, when so many of our choices are manipulated to promote what someone else sees (perhaps rightly) as our best interest? Sunstein is well aware that many will see the rigging of choice through nudges as an affront to human dignity: I mean dignity in the sense of self-respect, an individual’s awareness of her own worth as a chooser. The term “dignity” did not appear in the book he wrote with Thaler, but in Why Nudge? Sunstein concedes that this objection is “intensely felt.” Practically everything he says about it, however, is an attempt to brush dignity aside.

He also suggests that nudging does not provide a moral education. It does not teach us how to make better decisions or how to correct our bad decisions:

Consider the earlier point about heuristics—the rules for behavior that we habitually follow. Nudging doesn’t teach me not to use inappropriate heuristics or to abandon irrational intuitions or outdated rules of thumb. It does not try to educate my choosing, for maybe I am unteachable. Instead it builds on my foibles. It manipulates my sense of the situation so that some heuristic—for example, a lazy feeling that I don’t need to think about saving for retirement—which is in principle inappropriate for the choice that I face, will still, thanks to a nudge, yield the answer that rational reflection would yield. Instead of teaching me to think actively about retirement, it takes advantage of my inertia. Instead of teaching me not to automatically choose the first item on the menu, it moves the objectively desirable items up to first place.

In the end, what Waldron calls a “nudge-world” deprives us of free will and human dignity… and it presumably does so for our own good. It is all about manipulating other people. How long can we expect that that will last?

He explains:

Still, it is another matter whether we should be so happy with what I have called “nudge-world.” In that world almost every decision is manipulated in this way. Choice architects nudge almost everything I choose and do, and this is complemented by the independent activity of marketers and salesmen, who nudge away furiously for their own benefit. I’m not sure I want to live in nudge-world, though—as a notoriously poor chooser—I appreciate the good-hearted and intelligent efforts of choice architects such as Sunstein to make my autonomous life a little bit better. I wish, though, that I could be made a better chooser rather than having someone on high take advantage (even for my own benefit) of my current thoughtlessness and my shabby intuitions.