Marginal Revolution: Scream this from the rooftops

July
S	M	T	W	Th	F	St
			1	2	3	4
5	6	7	8	9	10	11
12	13	14	15	16	17	18
19	20	21	22	23	24	25
26	27	28	29	30	31

« Practice questions for my macro class | Main | Democide »

Scream this from the rooftops

Does bounded rationality make paternalism more attractive? This Essay argues that errors will be larger when suppliers have stronger incentives or lower costs of persuasion and when consumers have weaker incentives to learn the truth. These comparative statics suggest that bounded rationality will often increase the costs of government decisionmaking relative to private decisionmaking, because consumers have better incentives to overcome errors than government decisionmakers, consumers have stronger incentives to choose well when they are purchasing than when they are voting and it is more costly to change the beliefs of millions of consumers than a handful of bureaucrats. As such, recognizing the limits of human cognition may strengthen the case for limited government.

Yes, some NBER Working Paper Abstracts should be screamed from the rooftops. Here is the paper itself. Glaeser also offers some arguments against "soft paternalism":

1. Soft paternalism is an emotional tax on behavior which yields no government revenues.

2. Soft paternalism can cause bad decisions just as easily as hard paternalism.

3. Public monitoring of soft paternalism is much more difficult than public monitoring of hard paternalism.

4. While hard paternalism will be limited by public opposition, soft paternalism is particularly attractive because it builds public support.

5. Soft paternalism can build dislike or even hatred of subgroups of the population.

6. Soft paternalism leads to hard paternalism.

7. Soft paternalism complements other government persuasion.

Get this:

Soft paternalism requires a government bureaucracy that is skilled in manipulating beliefs. A persuasive government bureaucracy is inherently dangerous because that apparatus can be used in contexts far away from the initial paternalistic domain. Political leaders have a number of goals, only some of which relate to improving individual well-being. Investing in the tools of persuasion enables the government to change perceptions of many things, not only the behavior in question. There is great potential for abuse.

Thanks to Daniel Klein for the pointer.

Posted by Tyler Cowen on November 28, 2005 at 07:14 AM in Economics | Permalink

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c66b253ef00e55097958e8834

Listed below are links to weblogs that reference Scream this from the rooftops:

» Glaeser on Paternalism from Will Wilkinson / The Fly Bottle
Tyler instructs all good men to shout Ed Glaeser's new NBER working paper on "Paternalism and Psychology" from the rooftops. I am more than happy to oblige. At a glance, it is clear that this is an important paper. Glaeser... [Read More]

Tracked on Nov 28, 2005 11:25:44 AM

» Green: The Color of Money -- and Jealousy (Part Two) from A Stitch in Haste
Via Fark comes word of a individual who likes to rage against the machine literally:After we collect $430 in donation... [Read More]

Tracked on Nov 28, 2005 11:49:22 AM

» Bank Regulation and Public Choice Theory from EconLog
There are several gems in the latest Milken Institute Review. On the topic of bank regulation, James Barth, Gerard Caprio... [Read More]

Tracked on Nov 28, 2005 6:51:44 PM

» Statism Comes Back to Bite Technocrats from Coyote Blog
Over the past fifty years, a powerful driving force for statism in this country has come from technocrats, mainly on the left, who felt that the country would be better off if a few smart people (ie them) made the [Read More]

Tracked on Nov 29, 2005 11:21:20 AM

» I Have a Ph.D. and so You Should Trust Me to Make Good Decisions on Your Behalf from An Econoclectic Perspective
To be quite honest, after I received my B.A., I thought I knew everything. I thought that I, and lots of people like me, could make the world a better place if only people would let us make more of the decisions. This was waayyyy back in t... [Read More]

Tracked on Nov 29, 2005 9:54:37 PM

» Advanced MP3 Catalog Download from MP3 Catalog
Download advanced mp3 catalog pro Advanced MP3 Catalog is designed for anyone ... Generate and print reports and CD covers, export your catalog, search for ... [Read More]

Tracked on Mar 27, 2006 1:35:17 PM

Comments

While I agree thoroughly with the sentiment expressed in the last Glaeser quote, there must be some sort of "people's crime prevention cooperative" (in Lycophron's words), which should deal not only with large crimes against a small number of people (e.g. murder) but also with small crimes against a large number of people (e.g. exterminating a fishery). Balancing this cooperative's power with the powers of individuals is the tricky part, which requires inventive solutions.

Posted by: A Tykhyy at Nov 28, 2005 8:51:16 AM

While I appreciate the alert to a paper that sounds interesting, I feel a little compelled to point out that we do currently have an administration that's fairly well skilled at managing beliefs. At least more skilled than any beauracracy I can imagine.

Posted by: George Williams at Nov 28, 2005 10:33:47 AM

While I agree to some extent with Mr. Williams above about the manipulative nature of many actions of the current administration, I think that point Mr. Glaeser is making is more about large government as a whole trying to micromanage the decisions of individuals under their administration, and as such, the US government has progressively since the turn of the century in particular (with Prohibition, the illegalization of marijuana, monitoring of private communications during undeclared wartime/the Cold War, regulation of the internet, tight controls over television broadcasting content, etc) become more and more paternalistic (culminating in the nanny state of the last two decades which has tried to legislate and enforce mores about everything from religious free expression to social norms at the state and local levels.)

However, I personally don't see a means of rectifying the growth of government barring some sort of mass uprising. The reason I would say something so drastic is because the clever part of the United States' paternalism has been its very trappings of democracy. Each time the controls have been placed on individuals rights and decisions, it has been through a vote from whatever group happens to be most politically active, and this has tended away from the majority of Americans in actual expressed sentiments (e.g., older people wishing to restrict the so-called "moral degeneration" of the younger people, which often drives them even more into social rebellion.) Essentially, then, there has to be, I should think, a method by which the government could be drastically reduced, a kind of political chemotherapy, that does not required armed uprising or mass mobilization, because the very nature of the source of paternalism is a sense of "don't rock the boat" and a built-in social control against "disrespecting the authority of the government" that developed in large part out of the nationalism of the 20th Century necessitated oftentimes by the great world conflicts the US found itself in.

Posted by: Neal at Nov 28, 2005 11:12:09 AM

Neal, good analysis but one can go even deeper. First, one could make a case for a link between "paternalism" and the structure of contemporary technology, industry and by extension general business practice, which requires a disciplined "workforce" to function properly. J.T.Gatto's discussion of schools seems relevant here. Another important source is a short essay by C.S.Lewis called "The Abolition of Man". Second, the general _respect_ towards the authority of any government is the only thing which keeps it afloat, but the general submission to this authority, which is presumably what we don't like, goes back at least to Plato's ill-named "Republic" ("the State" is a better translation). Indeed, Plato could also claim to be the founder of school and higher education as we know it.

Posted by: A Tykhyy at Nov 28, 2005 11:52:11 AM

Glaeser's analysis is interesting, but appears to offer no practical solution other than laissez-faire. Are there some classes of consumer behavior that Glaeser fails and in which soft paternalism creates both public and private good?

For example:
How does Glaeser's analysis of paternalism relate to government's efforts to encourage cigarette smokers to quit and discourage prospective smokers from taking up the habit?

What about mandatory motorcycle helmet laws?

Posted by: Scott Chelette at Nov 28, 2005 4:24:16 PM

The article makes some terrific points. However, has he made a compelling case against 'sin taxes' on addictive substances? He says that the first best solution to self control problems is to supply people with technologies that increase their self control. I'm all for it. Unfortunately -- and I am writing as a psychologist and substance abuse researcher -- addiction treatments are expensive, not overwhelmingly effective, and severely limited in supply. Until we can make enhanced self-control an option, taxes on alcohol and tobacco (would that we could tax marijuana or cocaine) help prevent the formation of addictions.

Posted by: Bill Gardner at Nov 28, 2005 5:22:17 PM

Let's talk concrete examples: Many employers match 401(k) contributions dollar for dollar or 50 cents on the dollar. A great deal, right? But one people irrationally don't take advantage of. It's like leaving money on the pavement.

Now, it has been shown that simply by changing the default option from non-contributing (so that people have to opt in to the program) to contributing (so that people have to opt out of the program) you are going to change behavior enormously -- most people who never bother to opt in never bother to opt out either. The option to opt out is still there for those who have thought enough about it and decided they want the money now. But they have to think about it first.

If you're going to argue that individuals always make better decisions for themselves than the government, then surely you can't simultaneously argue that people pay so little attention to their affairs that they will be influenced by something as insignificant as which option is the default.

Posted by: Battlepanda at Nov 28, 2005 5:50:03 PM

Mandatory motorcycle helmet laws only try to prevent persons from damaging themselves, and are thus less important than e.g. the laws limiting the use of toxic substances in consumer products.

Posted by: A Tykhyy at Nov 29, 2005 5:21:26 AM

"It's like leaving money on the pavement." Yes it is. What is wrong with leaving money on the pavement if the alternative is throwing your own money on the pavement, too?

My company has an absolutely crappy 401K from my point of view. They got the cheapest thing they could buy from Fidelity. On the basis of what it costs them it probably looks great. A bit of conflict there, eh?

Posted by: Tia at Nov 30, 2005 2:50:20 AM

emotioneel lesbisch ^^^ emotioneel schoolmeisje ^^^ coy fighetta ^^^ adatto infermiera ^^^ plus chaude extravagant quarante six ^^^ fitness fetiche ^^^ sodomiser vingt ^^^ lapin vingt cinq ^^^ attraente giovane figa fotti ^^^ selvaggio giovane prostituta ^^^ kall snut fitta samlag ^^^ vaghalsig skolflicka full ^^^ sentimentale giovane ubriache ^^^ nonsensical allievo strip ^^^ varp pupper ^^^ finfin ben ^^^ varp g streng ^^^ spinkel hoydepunkt ^^^ adynamos neos avnanismos ^^^ kryo koritsia katourima ^^^ siege arriere trente six ^^^ mere elle se deshabille ^^^