Over the last couple of years, I think I have decided that I am a fan of libertarian paternalism. (That link goes to an old post from almost exactly two years ago, which is kind of funny, typos and all. Oh, passage of time…) I do think that part of the appeal is the oxymoronic nature of the term (it’s the “jumbo shrimp” of policy, really), but I mainly like that the goal of libertarian paternalism is to get you to make “good” choices (those you would make if you were patient, unbiased, rational, etc.) without actually forcing your hand or limiting your choice set. I think it’s because, while I REALLY don’t like being told what to do, I realize that I could use some help in the decision-making department sometimes. And I’ll go to the gym tomorrow, I swear.
Libertarian paternalism is exactly what Richard Thaler and Cass Sunstein talk about in their book Nudge: Improving Decisions About Health, Wealth, and Happiness. They review findings in behavioral economics and elsewhere to show that “choice architecture” actually matters in terms of how people think about the decisions that they face. I am very happy to see that the book is a best-seller, both because I think the subject matter is important and also because it’s generally uplifting to see big nerds succeed with a mainstream audience. (To the authors’ credit, the book is written in a very non-technical yet not oversimplified way.) My main hope is that the book becomes popular among those who are actually in charge of designing the choice architectures that the authors refer to, since there is more relevance to their thesis than merely providing more pop economics for public consumption.
If you’re curious, there is a pretty interesting Q&A with the authors on the Amazon page linked to above.
I swear I have a point here, aside from plugging the work of two fellow economists of course. The other day, I came across a post on the New York Times City Room blog entitled “Please Give the Disabled Your Seat. Or Else.” Apparently the signs requesting passengers to give up their seats for elderly and/or disabled passengers have been updated:
Basically, they’ve turned what used to be a subtle nudge into a more forceful one with a side of threatening. (Maybe I just think that because I am vaguely terrified of the large green stick figure man. If I ever run into him on the subway, I am getting off immediately…and calling my mommy.) Is this helpful? Apparently the MTA (Metropolitan Transit Authority) thinks so, but I would caution that perhaps they should be more careful with their nudges, since nudges sometimes have a pesky tendency to backfire. Consider the following example, from another really old blog post:
“Gneezy and Rustichini (2000, JLS) performed a field experiment with 10 day care centers in Haifa, Israel. These day care centers were having problems with parents picking up their children late, which (to me at least) is not surprising since there was no specific penalty for doing so. In order to combat this problem, the day care centers instituted a fine of 10 Shekels per child if a parent arrived more than 10 minutes late. Economic theory would obviously suggest that, since the price of picking up a child late has increased, there would be less of that activity. However, what the researchers saw was that more, rather than fewer, parents started picking up their children late. It is also important to note that this higher level of tardiness persisted even after the fine was taken away (at least for the period that the researchers observed.) The authors of the study make the claim that this evidence is consistent with the crowding-out of the original moral incentive.”
You can generally take “moral incentive” as “underlying preference for doing the right thing.” In the subway example, giving up your seat for the old lady with the cane is pretty clearly the right thing, unless of course she then yells at you for thinking she is too old to stand and hits you with said cane. (I’ve seen it happen, it’s kind of amazing. But no, that is not a good excuse for not offering.) Furthermore, even if it is the law to give up a seat in that situation, it’s not really one that is enforceable, though it would make for great societal pressure if train conductors could stop the train to give an uncooperative passenger a ticket. (“Behave or I swear I will turn this train around…”) As a result, it’s mainly the moral incentive, coupled with a sprinkling of desire to not look like a jackass, that makes people follow the law. If you remind people that it is in fact the law and not just the right thing to do, it’s quite possible that you are crowding out their moral incentive to do the right thing, which is, for the most part, the only thing driving behavior in this situation.
P.S. The comments on that article are pretty hysterical.