Jayson L. Lusk, “Are You Smart Enough to Know What to Eat? A Critique of Behavioural Economics as Justification for Regulation.” European Review of Agricultural Economics 3: 355-373, 2014.
• People make some 200 food-related decisions per day!
• Food policy activists presume that people should be eating differently than they do.
• Lusk argues that behavioral economics-inspired policies are best when they are applied to rules that are aimed at externalities, not internalities.
• Behavioral economics is sort of an intellectual fad, boosted by the interest of journals in novelty. At the same time that behavioral economics articles started appearing claiming that humans are not rational, other journals were publishing articles claiming that non-human animals are rational.
• Some behavioral economists jump quite quickly from small-scale experiments on undergraduates to major claims about appropriate policy. Laboratory conditions are not the real world, and lab experiments reveal how people operate in the lab.
• People need practice to make good decisions, so the government should not remove opportunities for people to choose. People self-regulate, self-commit, and even employ stickk.com.
• Behavioral economics incentivizes the abdication of personal responsibility and normalizes abnormality. Markets, alternatively, anticipate our changing preferences.
• If we abandon traditional “welfare” analysis based on consumer surplus, all we have to go on are the prejudices of researchers.
• Is there really any evidence that those people who are subject to all of these behavioral biases actually do worse in life than others not similarly afflicted?
Wednesday, August 19, 2015
Adam Oliver on “Nudging, Shoving, and Budging”
Adam Oliver, “Nudging, Shoving, and Budging: Behavioural Economic-Informed Policy.” Public Administration, 2015; doi: 10.1111/padm.12165.
• There is no accepted definition of libertarian paternalism or nudges. As a result, many policies are described to be behavioral despite having little claim to that moniker. You should worry about being pro-nudge, because the nudgers might go way beyond what you think you are signing up for.
• Oliver claims nudges should present “no” burden on the rationals while attempting to correct an internality.
• Loss aversion is not something you choose, but something you are, like a White Sox fan [Okay, the White Sox are not actually mentioned in the article.]
• Libertarian paternalism concerns internalities, respects liberty, and employs behavioral means. The British Behavioural Insights Team goes beyond nudging: sometimes it addresses externalities, as with organ donation. Having teenagers mentor toddlers to reduce teen pregnancy is not an obvious behavioural policy, nor is the provision of information about the drinking habits of one’s peers.
• Straight out paternalism, without the libertarian adjective, is a “shove”; smoking bans are shoves.
• A “budge” is a behaviorally informed regulatory intervention, designed to counter the misleading nonsense thrown up by profit-seeking corporations, like the payments made by candy makers to grocery stores for check-out line product placement.
• Maybe it is the opportunity to choose, and not the utility derived from the choices, that is the real measure of welfare.
• There is no accepted definition of libertarian paternalism or nudges. As a result, many policies are described to be behavioral despite having little claim to that moniker. You should worry about being pro-nudge, because the nudgers might go way beyond what you think you are signing up for.
• Oliver claims nudges should present “no” burden on the rationals while attempting to correct an internality.
• Loss aversion is not something you choose, but something you are, like a White Sox fan [Okay, the White Sox are not actually mentioned in the article.]
• Libertarian paternalism concerns internalities, respects liberty, and employs behavioral means. The British Behavioural Insights Team goes beyond nudging: sometimes it addresses externalities, as with organ donation. Having teenagers mentor toddlers to reduce teen pregnancy is not an obvious behavioural policy, nor is the provision of information about the drinking habits of one’s peers.
• Straight out paternalism, without the libertarian adjective, is a “shove”; smoking bans are shoves.
• A “budge” is a behaviorally informed regulatory intervention, designed to counter the misleading nonsense thrown up by profit-seeking corporations, like the payments made by candy makers to grocery stores for check-out line product placement.
• Maybe it is the opportunity to choose, and not the utility derived from the choices, that is the real measure of welfare.
Sunday, July 26, 2015
Alemanno (2015) on “Nudging Healthier Lifestyles”
Alberto Alemanno, “Nudging Healthier Lifestyles: Informing the Non-communicable Diseases Agenda with Behavioural Insights.” Chapter 14 in A. Alemanno and A. Garde, eds., Regulating Lifestyle Risks: The EU, Alcohol, Tobacco and Unhealthy Diets, Cambridge University Press, 2015.
• The European section of the World Health Organization has begun an initiative to combat “lifestyle” non-communicable diseases: those associated with tobacco, alcohol, and goods high in salt, sugar, and fat.
• Regulations that commonly are applied to lifestyle goods include mandatory information disclosure; marketing limitations; taxes and other devices to reduce availability.
• Behavioral economics-style nudges fit well with lifestyle issues. They tend to be low cost and preserve individual choice. Lifestyle nudges might include disclosure rules; default settings; and, simplification. For instance, the extremely graphic photos required on cigarette packs, and nutrition fact panels, are nudges of a sort.
• The European Union (oddly) is requiring that cigarette packs not disclose tar, nicotine, and carbon monoxide content. The rationale is that such information might lead smokers to think that some cigarettes are less harmful than others. (There is some evidence that consumers smoke low tar and nicotine cigarettes more intensely, undoing any relative health benefits.)
• Thaler and Sunstein’s “publicity principle” (borrowed from John Rawls, building on Kant) is that governmental nudges must be supportable if everyone is informed about them. If people will be upset if they were misled, even if the misleading resulted in better choices for them, then the misleading is wrong.
• Much of the evidence for nudges comes from the laboratory, and might not work in the real world. Or, a nudge might work at first, but then become less effective over time. Notice that marketing experts think that nudges work, however.
• The European section of the World Health Organization has begun an initiative to combat “lifestyle” non-communicable diseases: those associated with tobacco, alcohol, and goods high in salt, sugar, and fat.
• Regulations that commonly are applied to lifestyle goods include mandatory information disclosure; marketing limitations; taxes and other devices to reduce availability.
• Behavioral economics-style nudges fit well with lifestyle issues. They tend to be low cost and preserve individual choice. Lifestyle nudges might include disclosure rules; default settings; and, simplification. For instance, the extremely graphic photos required on cigarette packs, and nutrition fact panels, are nudges of a sort.
• The European Union (oddly) is requiring that cigarette packs not disclose tar, nicotine, and carbon monoxide content. The rationale is that such information might lead smokers to think that some cigarettes are less harmful than others. (There is some evidence that consumers smoke low tar and nicotine cigarettes more intensely, undoing any relative health benefits.)
• Thaler and Sunstein’s “publicity principle” (borrowed from John Rawls, building on Kant) is that governmental nudges must be supportable if everyone is informed about them. If people will be upset if they were misled, even if the misleading resulted in better choices for them, then the misleading is wrong.
• Much of the evidence for nudges comes from the laboratory, and might not work in the real world. Or, a nudge might work at first, but then become less effective over time. Notice that marketing experts think that nudges work, however.
Saturday, July 25, 2015
Sunstein on Choosing Not to Choose
Cass R. Sunstein, “Choosing Not to Choose.” Duke Law Journal 64(1):
1-52, October, 2014.
• This article essentially responds to a critique of one common behavioral economics-style policy intervention, the strategic use of default settings. The critique is that using default settings to nudge people is an affront to their autonomy, even if it is easy to choose something other than the default.
• Sunstein’s response is to suggest that a failure to provide a default could just as easily be an affront to autonomy: often, people do not want to choose, they want a well-chosen default in place so that they can avoid choosing.
• Therefore, mandating an active choice (as opposed to setting up a default) can itself be paternalistic, and maybe not even in a libertarian fashion. Sunstein calls it “choice-requiring paternalism” (page 7).
• A compromise between using a default and requiring an active choice would be to ask people if they want to choose, knowing that if they do not, they can “opt out” of choosing and receive a default choice (which they could alter) instead; this approach is called “simplified active choosing” (page 8).
• Of course, the question of whether you want to choose might itself be an unwelcome query.
• If you can’t trust the default, there is much to be said for active choosing. But if the situation is unfamiliar, then why choose, if the default setters can be trusted?
• Active choice might make more sense in situations where you can learn about choices over time, or develop your preferences.
• The rise of big data means that sellers might know better than consumers what the consumers want.
• One reason not to want to choose is to deflect responsibility. Also, people have plenty of decisions to make (200 a day for food, we are told) and might prefer to focus their autonomy on an important but manageable subset of decisions.
• Sometimes active choice is to protect third parties, or to provide credible proof that a choice was made in a deliberate fashion. This might be the case with organ donation, for instance.
• Is GPS undermining our ability to navigate? Does Pandora hinder learning about different types of music? Jane Jacobs noted that cities bring about unwelcome but nevertheless consciousness-expanding encounters, by providing an architecture of serendipity.
• People seem to value more highly options they have chosen than options they have been assigned, that is, they have a bias in favor of choice.
• Would you be willing to have your book purchases chosen by big data? How would you feel about being defaulted into a regime where big data chose your books and charged your bank account? (You could return the books for a refund.) Would you feel differently if we were talking not about books but about household goods like paper towels or detergent?
• In summary, choice can sometime be a curse, undermining your autonomy and your welfare.
• This article later spawned a book with the same title.
• This article essentially responds to a critique of one common behavioral economics-style policy intervention, the strategic use of default settings. The critique is that using default settings to nudge people is an affront to their autonomy, even if it is easy to choose something other than the default.
• Sunstein’s response is to suggest that a failure to provide a default could just as easily be an affront to autonomy: often, people do not want to choose, they want a well-chosen default in place so that they can avoid choosing.
• Therefore, mandating an active choice (as opposed to setting up a default) can itself be paternalistic, and maybe not even in a libertarian fashion. Sunstein calls it “choice-requiring paternalism” (page 7).
• A compromise between using a default and requiring an active choice would be to ask people if they want to choose, knowing that if they do not, they can “opt out” of choosing and receive a default choice (which they could alter) instead; this approach is called “simplified active choosing” (page 8).
• Of course, the question of whether you want to choose might itself be an unwelcome query.
• If you can’t trust the default, there is much to be said for active choosing. But if the situation is unfamiliar, then why choose, if the default setters can be trusted?
• Active choice might make more sense in situations where you can learn about choices over time, or develop your preferences.
• The rise of big data means that sellers might know better than consumers what the consumers want.
• One reason not to want to choose is to deflect responsibility. Also, people have plenty of decisions to make (200 a day for food, we are told) and might prefer to focus their autonomy on an important but manageable subset of decisions.
• Sometimes active choice is to protect third parties, or to provide credible proof that a choice was made in a deliberate fashion. This might be the case with organ donation, for instance.
• Is GPS undermining our ability to navigate? Does Pandora hinder learning about different types of music? Jane Jacobs noted that cities bring about unwelcome but nevertheless consciousness-expanding encounters, by providing an architecture of serendipity.
• People seem to value more highly options they have chosen than options they have been assigned, that is, they have a bias in favor of choice.
• Would you be willing to have your book purchases chosen by big data? How would you feel about being defaulted into a regime where big data chose your books and charged your bank account? (You could return the books for a refund.) Would you feel differently if we were talking not about books but about household goods like paper towels or detergent?
• In summary, choice can sometime be a curse, undermining your autonomy and your welfare.
• This article later spawned a book with the same title.
Loewenstein, Bryce, Hagmann, and Rajpal, “Warning: You are About to Be Nudged”
George Loewenstein, Cindy Bryce, David Hagmann, and Sachin Rajpal, “Warning: You are About to Be Nudged,” March 28, 2014
• Does informing people about the use of a behavioral nudge – here, default choices – alter their behavior relative to using the nudge without informing them?
• The experiment involves a hypothetical directive concerning end-of-life care. Subjects could choose the “Prolong” option, in which medical authorities do whatever is necessary to keep someone alive, despite the potential for more suffering, or subjects could choose the “Comfort” option, in which doctors would try to be make the patients comfortable, at some cost in terms of longevity. Subjects also could choose to deputize their relatives and doctors to make the choice for them at the appropriate time.
• Each subject was provided with a default option, either “Prolong” or “Comfort,” though it was easy to override the default. Most people preferred the “Comfort” alternative, and the default setting did not influence these preferences in the aggregate. Telling people in advance about the extraordinary staying power of defaults had no effect relative to telling them after their initial choice.
• Along with the general Prolong/Comfort option, there were questions concerning five specific medical interventions. Choices on whether to pursue these options showed a significant influence from the default settings, even when subjects were pre-informed that they were being “defaulted.” Some of the influence remained for the respondents who were post-informed that they had been defaulted, and were asked to choose again without a specified default.
• Pre-informing people of the default had little impact on diminishing the power of the default nudge; likewise, post-informing them of the default, and giving them the opportunity to choose again, did not diminish the power of the default. Nonetheless, these findings take place in an experimental context in which default pressures themselves are not large.
• Does informing people about the use of a behavioral nudge – here, default choices – alter their behavior relative to using the nudge without informing them?
• The experiment involves a hypothetical directive concerning end-of-life care. Subjects could choose the “Prolong” option, in which medical authorities do whatever is necessary to keep someone alive, despite the potential for more suffering, or subjects could choose the “Comfort” option, in which doctors would try to be make the patients comfortable, at some cost in terms of longevity. Subjects also could choose to deputize their relatives and doctors to make the choice for them at the appropriate time.
• Each subject was provided with a default option, either “Prolong” or “Comfort,” though it was easy to override the default. Most people preferred the “Comfort” alternative, and the default setting did not influence these preferences in the aggregate. Telling people in advance about the extraordinary staying power of defaults had no effect relative to telling them after their initial choice.
• Along with the general Prolong/Comfort option, there were questions concerning five specific medical interventions. Choices on whether to pursue these options showed a significant influence from the default settings, even when subjects were pre-informed that they were being “defaulted.” Some of the influence remained for the respondents who were post-informed that they had been defaulted, and were asked to choose again without a specified default.
• Pre-informing people of the default had little impact on diminishing the power of the default nudge; likewise, post-informing them of the default, and giving them the opportunity to choose again, did not diminish the power of the default. Nonetheless, these findings take place in an experimental context in which default pressures themselves are not large.
Bartling, Fehr, and Herz, “The Intrinsic Value of Decision Rights”
Björn Bartling, Ernst Fehr, and Holger Herz, “The Intrinsic Value of Decision Rights.” University of Zurich, Department of Economics Working Paper No. 120, April 19, 2013 [updated version available].
• Consider a principal-agent situation, where the principal would like to have a task accomplished. The principal can control fully the choice of task and effort, or can delegate the choices to an agent with different preferences -- though the delegation, if it takes place, can specify a minimum effort level. The question that the authors explore is whether the principal is willing to sacrifice some expected return just to keep control.
• In their experiment, the answer is… “Yes”: principals give up more than 16% in certainty equivalent terms to control the choices. The higher the stakes, the greater the intrinsic value that principals place on control. Also, and oddly, the closer the alignment between principal and agent preferences, the greater the intrinsic value of control to the principal, even though the agent would make similar choices to what the principal makes, and the principal knows that.
• Note that the intrinsic value of control or ownership is non-transferable; it is subject to a sort of endowment effect. Sometimes proposed corporate mergers become undone because neither group of executives is willing to cede control.
• Entrepreneurs and scientists seem to sacrifice income for control.
• Consider a principal-agent situation, where the principal would like to have a task accomplished. The principal can control fully the choice of task and effort, or can delegate the choices to an agent with different preferences -- though the delegation, if it takes place, can specify a minimum effort level. The question that the authors explore is whether the principal is willing to sacrifice some expected return just to keep control.
• In their experiment, the answer is… “Yes”: principals give up more than 16% in certainty equivalent terms to control the choices. The higher the stakes, the greater the intrinsic value that principals place on control. Also, and oddly, the closer the alignment between principal and agent preferences, the greater the intrinsic value of control to the principal, even though the agent would make similar choices to what the principal makes, and the principal knows that.
• Note that the intrinsic value of control or ownership is non-transferable; it is subject to a sort of endowment effect. Sometimes proposed corporate mergers become undone because neither group of executives is willing to cede control.
• Entrepreneurs and scientists seem to sacrifice income for control.
Saturday, July 18, 2015
M. Ryan Calo (2013), “Code, Nudge, or Notice?”
M. Ryan Calo, “Code, Nudge, or Notice?” University of Washington School
of Law Research Paper, February 7, 2013.
• Code (including physical and virtual architecture), nudges, and information disclosure (notice) can be alternatives to formal law. They can alter behavior, but they might not include the procedural safeguards, nor the transparency, that commonly accompany law. Some nudges, for instance, can be invisible and unknown to the public. Like placebos, they might even lose their effectiveness if they were known.
• Consider driving. Speed bumps are a type of “code; visual illusions like those lines on Lake Shore Drive are a type of nudge; and, “kids at play” signs are a species of notice.
• If code precludes violations, then the potentially beneficent role of civil disobedience is undermined. Code makes some types of legal activity impossible; for instance, some fair uses of copyrighted material are ruled out by Digital Rights Management techniques.
• Calo invokes a rather singular definition of “nudges,” such that they necessarily take advantage of decision-making biases (such as the status quo bias) to push people in a preferred (by whom?) direction. Code rebiases, as opposed to debiases.
• Does frequent nudging lead to infantilization?
• Notice works where informed decision making works (and informing works, too). Some scholars take a very negative view of mandated information disclosure, on the grounds that it is frequently ineffective and even counterproductive.
• Are extremely graphic cigarette warnings a case of information provision (notice), or nudge? The answer might determine the constitutionality of mandates for such warnings.
• Code (including physical and virtual architecture), nudges, and information disclosure (notice) can be alternatives to formal law. They can alter behavior, but they might not include the procedural safeguards, nor the transparency, that commonly accompany law. Some nudges, for instance, can be invisible and unknown to the public. Like placebos, they might even lose their effectiveness if they were known.
• Consider driving. Speed bumps are a type of “code; visual illusions like those lines on Lake Shore Drive are a type of nudge; and, “kids at play” signs are a species of notice.
• If code precludes violations, then the potentially beneficent role of civil disobedience is undermined. Code makes some types of legal activity impossible; for instance, some fair uses of copyrighted material are ruled out by Digital Rights Management techniques.
• Calo invokes a rather singular definition of “nudges,” such that they necessarily take advantage of decision-making biases (such as the status quo bias) to push people in a preferred (by whom?) direction. Code rebiases, as opposed to debiases.
• Does frequent nudging lead to infantilization?
• Notice works where informed decision making works (and informing works, too). Some scholars take a very negative view of mandated information disclosure, on the grounds that it is frequently ineffective and even counterproductive.
• Are extremely graphic cigarette warnings a case of information provision (notice), or nudge? The answer might determine the constitutionality of mandates for such warnings.
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