I must say that I find Professor Whitman’s debating style reminds me quite a bit of arguing with John Cleese in the famous Monty Python argument clinic sketch. Whitman employs two strategies. 1. Mis-stating the arguments and goals of the other side. 2. Repeating unsubstantiated claims. This is tiresome and unconvincing. Let me recapitulate.
First, Whitman says that I do not take the slippery slope arguments seriously. That is correct, and for good reason. He has never presented a shred of empirical evidence to suggest that this risk is real. Firms have been using Save More Tomorrow and automatic enrollment for over a decade. Some countries have adopted similar provisions in state-sponsored savings plans. Where is the evidence that this has led to requirements that everyone become marathon runners or vegans? In the absence of such empirical evidence, the claim is just fear mongering, and, as I stressed in my earlier essay, no different from the unsubstantiated claim that privatizing some sector of the economy will inevitably lead to some catastrophic outcome. Why is the paternalistic part of libertarian paternalism so much riskier than the libertarian part? Put another way, what is the evidence that small change tolerance is asymmetric? If the frog example were true, would frogs be less likely to jump if we were gradually cooling the water instead of warming it?
As anyone who has read Nudge knows, the book is very much pro–freedom of choice and pro-market. We are eagerly looking for ways of using nudges instead of bans and mandates, a point stressed in libertarian David Henderson’s review of the book in the Cato magazine Regulation. Many libertarians and conservatives, including the Tories in the UK, have embraced the ideas precisely because they make the world more libertarian, not less.
I am also gratified that the discussion thread over at the Volokh Conspiracy is quite smart and balanced even though Ilya Somin gets the discussion off to a unhelpful start by claiming (a) that we consider regulators to be perfectly rational, when again we repeatedly say in the book that regulators are human just like everyone else and (b) that “regulators have no reliable way of estimating the benefits and costs that consumers derive from potentially risky products.” If he means “perfectly reliable” then fine, but that is not a sensible standard. Suppose that a crib is found to strangle babies that sleep in it, as happened to the child of friends of mine. I think it is pretty easy to guess that parents would not want to buy a crib that has strangled a dozen kids. Don’t you? And saying that companies that make cribs that kill babies will eventually be driven out of business is cold comfort to the parents of the kids that died. Yet we do not want to ban cribs. And if we do have regulators, don’t we want them to use some kind of cost benefit analysis? (My proposal in this domain, by the way, would be to require, yes mandate, that crib manufacturers attach a permanent identifying label to cribs to make it easier to identify and take out of service cribs that have been discovered to be dangerous. The crib that killed my friends son had been recalled but no one knew that at the day care center where it was being used.)
Second, nowhere do Cass Sunstein and I (or any other behavioral economists that I know of) ever state that the choice architect should choose default options or any other bit of choice architecture based on what we prefer. In fact, as I noted, we say just the opposite, in italics, on page 6 of Nudge, and then repeat it often throughout the book. I don’t know how we could possibly have been any clearer on that. Whitman replies that he is happy to hear that this is my view and then suggests Sunstein thinks otherwise by quoting an admittedly tortuous passage from an article we had written several years before the book. The fact that the passage was hard to parse has something to do with the fact that it did not make it into the book, and the fact that some libertarians had been confused on this point was one of the reasons we went out of our way to be so explicit and repetitive about it in Nudge. So, for the last time, we believe that choice architects, in either the public or private sector should choose defaults to make people better off as judged by themselves. If Whitman can find a single passage in Nudge where we say anything else please let me know so I can correct it in future printings. If not, please stop suggesting otherwise. The claim is simply false and misleading.
Third, since the word paternalism is what seems to give Whitman fits, let’s re-label our policy “Best Guess”. “Best Guess” is the policy of choosing the choice architecture that is your best guess of what the participants would choose for themselves if they had the time and expertise to make an informed choice. This is very similar to what a doctor would do for patients. In his original essay Whitman suggests instead that the default be set according to “customary expectations.” Why is this obviously reactionary policy either better or easier to implement? In Shane Frederick’s excellent swimming example, suppose there has never been a sign by the river, does that mean that there should never be one? Is that true regardless of the swimming fatality rate or the introduction of some hazardous waste upstream? If the old sign says “ye olde swimming hole” should we stick with that? Best Guess says the choice architect should select a sign that, on balance, maximizes the utility of the visitors to that river. Of course, implementing Best Guess can be hard in some cases, but as I also keep repeating and Whitman keeps ignoring, you must choose something, including not having a sign. This is what we mean by inevitability. You cannot avoid choice architecture, so why not try to use good choice architecture? And, since as Whitman acknowledges, the wording of the sign matters, any effort to “just stick to the facts” leaves an infinite number possibilities remaining. Whitman does not seem to appreciate that 0.000017% and pictures of corpses are both “accurate descriptions.”
More importantly, we can often improve on customary expectations. I was gratified to read that Whitman says he might offer Save More Tomorrow to his employees if he had a firm. Presumably he would do that not because it is customary (although it is becoming so) but because he thinks that the workers might like it, and it is voluntary. Hint: that is what we mean by libertarian paternalism (now libertarian Best Guess). Perhaps he might also use automatic enrollment with a very low-cost opt out, just as we recommend.
In many domains we can drastically improve on what is customary. Consider organ donations. In most states in the United States, to make your donation available you have to take some action such as sign the back of your driver’s license and get two witnesses to sign it. In some countries such as Spain they have switched to an “opt out” system called presumed consent. In Nudge we endorse a third approach, in this domain called “mandated choice.” It also happens to be used in my home state of Illinois.
Under this plan, when you go in to get your drivers license picture retaken every few years, you are asked whether you want to be a donor or not. You must say yes or no to get a license. About two thirds of drivers are saying yes, and lots of lives will be prolonged as a result. This is a great example of libertarian Best Guess in action. Although a large majority of people say in polls that they would want their organs harvested, many never get around to opting in, and a vocal minority in the United States object strenuously to the idea of presumed consent. So it is worthwhile to find a policy that gets many of the benefits of presumed consent without while honoring the preferences of those who object to having to opt out. Mandated choice has some other advantages in this context, namely that families are less likely to overrule the choices of the donor if that choice has been made actively rather than passively.
One might wonder whether you can always use mandated choice, or what David Laibson and his colleagues call “active decision making,”[1] but as those authors acknowledge, that method is more attractive in simple yes-no situations than in one such as 401(k) pension plan design where many participants have no idea what is a good investment strategy and would prefer to have an expert suggest a sensible default, one that they can reject if they want.
I do not know where Whitman gets the idea that our implementation of “Best Guess” is to favor what is “socially approved.” Again, no one who has read Nudge could be left with that impression. We apply our tools to many domains that are not politically popular. (Start with chapters 13 to 15 for examples.) Nor do we always favor the more puritan alternatives. If we talk more about nudges for things like savings, smoking, and weight loss, that is because the evidence there is strongest that people want such nudges (and pay for them in the market). I have never heard of anyone signing up for a plan to commit himself to smoking more cigarettes next year, or eating more fast food. Have you?
I likewise do not understand the big distinction Whitman makes between government vs. private use of libertarian Best Guess. If he would use Save More Tomorrow in his company, why shouldn’t the government offer it to its employees, or utilize the concept in a partial privatization of Social Security? If one favors school choice, then wouldn’t you want to help parents make better choices for their children, and especially encourage more parents of disadvantaged children to make good use of the choices being offered to them? These are the kinds of policies for government that we propose in Nudge. Whitman’s biggest gripes are with the policies that he only imagines that we favor, ones that involve coercion. What part of the term libertarian doesn’t he get?
One of the examples we discuss in Nudge is an innovation by the city of Chicago on a dangerous curve on Lake Shore Drive. The city painted horizontal lines across the road that get closer and closer together as the driver approaches the apex of the curve. As we recently posted on our blog, this innovation has reduced accidents by 36%. Does Whitman think this is bad because it was implemented by the government? Should only private toll roads be allowed to think creatively? And notice that the “customary” signage in this location, which included a reduction in the speed limit to 20 mph, was less effective than the nudge.
It is true, of course, that others may favor policies that are either more libertarian or more paternalistic. Some behavioral economists have written favorably about sin taxes and cooling off periods. Whatever one thinks about the costs and benefits of such proposals, they are surely less intrusive than bans. And, as Matthew Rabin often points out, all taxes create some distortions. One might prefer a smaller government, but until that objective is achieved, we have to fund the current one, so the debate should be about whether a tax on sugar or alcohol is better than one on wages or interest. And, wouldn’t most libertarians prefer to legalize and tax marijuana as opposed to our current policy?
And lastly, small clarification. In my discussion of smoking regulation, I said that externalities were part of the argument for pushing those policies. I was not as clear as I should have been so let me elaborate a bit. I think that the political justification for the bans on smoking in public places like bars and restaurants has largely been driven by the risks and discomfort caused by third-hand smoke. I did not mean to suggest that such arguments are necessarily compelling. My only point, a minor one at that, is that I don’t sense that the increasingly strong regulations against public smoking can be used to say that there is a growing trend toward paternalism. In fact, over roughly the same time period, marijuana laws appear to be getting less intrusive, both in the U. S. and elsewhere. Indeed, in Amsterdam, it is legal to smoke a joint in a coffee shop, but not a cigarette!
In conclusion, sometimes judging the slope can be as hard as reading a green in golf. In life, as well as in golf, one can take comfort in the fact that on average, the slope is zero. If you live in fear of downhill putts you will leave a lot of putts short. When in doubt, aim for the cup.
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[1] Gabriel D. Carroll, James J. Choi, David Laibson, Brigitte Madrian and Andrew Metrick, 2005. “Optimal Defaults and Active Decisions,” NBER Working Papers 11074.