Paternalism - Immigration Edition

A lot of policies involve group A trying to pass laws that they perceive to improve group B's well-being.  But, how often do we ask group B what they really want?

This new paper by Grace Melo, Gregory Colson and Octavio Ramirez shows how such paternalism can might lead to policies that group B doesn't actually prefer.

“This study presents evidence from a survey and choice experiment on the preferences of Hispanic immigrants who entered the United States illegally for different immigration reform proposal attributes. Key components of the current competing US Senate and House immigration reform bills are considered including pathways to legal permanent residence, temporary work visas, family visitation rights, and access to medical care. The results quantify the value Hispanic immigrants place on different policy attributes and suggest that longer-term work visas are highly valued. Ability to legally work in the United States and a pathway to citizenship are substantially more valued than social services such as medical care and social security benefits.”

Smaller plate size = lower consumption?

Having read a couple papers that looked at the amount of food people ate when using smaller vs. larger plates, I presumed it was something of a stylized fact that people ate less when using smaller plates.  However, this review study just released in Obesity Reviews, suggests that 

“Evidence to date does not show that dishware size has a consistent effect on food intake, so recommendations surrounding the use of smaller plates/dishware to improve public health may be premature.”

Guess I need to update my beliefs on this one.  Here's the whole abstract:

“It has been suggested that providing consumers with smaller dishware may prove an effective way of helping people eat less and preventing weight gain, but experimental evidence supporting this has been mixed. The objective of the present work was to examine the current evidence base for whether experimentally manipulated differences in dishware size influence food consumption. We systematically reviewed studies that experimentally manipulated the dishware size participants served themselves at a meal with and measured subsequent food intake. We used inverse variance meta-analysis, calculating the standardized mean difference (SMD) in food intake between smaller and larger dishware size conditions. Nine experiments from eight publications were eligible for inclusion. The majority of experiments found no significance difference in food intake when participants ate from smaller vs. larger dishware. With all available data included, analysis indicated a marginal effect of dishware size on food intake, with larger dishware size associated with greater intake. However, this effect was small and there was a large amount of heterogeneity across studies (SMD: −0.18, 95% confidence interval: −0.35, 0.00, I2 = 77%). Evidence to date does not show that dishware size has a consistent effect on food intake, so recommendations surrounding the use of smaller plates/dishware to improve public health may be premature.”

The problem with nudging

Jeremy Waldron in the New York Times Review of Books has one of the best critiques of the "Nudge" approach advocated by Sunstein and other behavioral economists (HT: Tyler Cowen).

After discussing the problem with the elitism inherent in "we" (i.e., the experts) making decisions "them" (i.e., the laypeople), he gets to the issue of dignity:

“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.

I still use the same defective strategies but now things have been arranged to make that work out better. Nudging takes advantage of my deficiencies in the way one indulges a child. The people doing this (up in Government House) are not exactly using me as a mere means in violation of some Kantian imperative. They are supposed to be doing it for my own good. Still, my choosing is being made a mere means to my ends by somebody else—and I think this is what the concern about dignity is all about”

and

“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.”

Sounds somewhat similar to how I ended my chapter on behavioral economics in the Food Police

“The economist Robert Sugden says the paternalists are wrong: “There is a viable alternative to paternalism. It is what it always has been – the market.” I don’t know about you, but when I walk into a cafeteria, I want the managers to tempt me – to offer me what looks good at a price I’m willing to pay. Yes, this kind of world might require more will-power and self control, but the alternative world of the paternalistic food police would deprive us of the noble act of making a wise choice when we had the freedom to do otherwise. ”

One thing nudging defenders often say is something like: "but companies nudge us all the time . . ."  That is true, but one must recognize that we can opt-out of a company nudge.  Companies are in competition with each other, and if we don't like the results of the company-nudge, another entrepreneur will come along.  Not only that, if the company nudges aren't really in our best interest, why doesn't another company come along, tell us that and sway us to buy their product?  In short, the difference between a company nudge and a government nudge is the the abundance of competition and op-out ability for the one and the lack of competition and monopoly in the other.  

My most recent piece on the topic came out recently in the European Review of Agricultural Economics.

What's the good of advertisers?

Much of what I read and hear in debates about obesity, nutrition, and public health seems to assume that all corporate food marketing is "bad".  Food marketers are nudging us away from healthful choices toward the more profitable (for them) unhealthful ones (never mind that some companies sell healthy products).  Many people argue that the government needs to make its own commercials to counter-nudge us back toward health eating.

With that backdrop, I was interested to read the back-and-forth letters between Rory Sutherland and George Loewenstein at the beginning of this paper, The Behavioral Economics Guide 2014. (HT: Andreas Drichoutis)

Here's an interesting point by Sutherland:

“Interestingly the late, mostly great, Gary Becker (in a paper with Kevin Murphy) seems to agree with me on this. Their model of advertising seems to suggest that advertising should be viewed not as persuasion (something which distorts preferences, as you suggest) but as a complementary good, the consumption of which, alongside the main product, increases the value of that main advertised product and which therefore allows sellers to capture more of the consumer surplus. He sees advertising as potentially a value-add, not as manipulation.

Nonetheless, I agree that we are right to be suspicious of manipulation. After all, the most successful advertisers over the past 150 years have been totalitarian regimes. ”

Sutherland also responds to Loewenstein's story about a recent joy-ride to the country ending in a meal of burgers and beer which was ruined when Loewenstein learned he was simply playing out a scene he'd seen in a credit card commercial.  Sutherland writes: 

“But what is strange is that we are already affected by frames, without being remotely aware of them. When you described your cycling experience, it was clear that you saw the cycle ride as virtuous and the food and beer as sinful. Yet people have been enjoying the consumption of beef products and fermented beverages since the time of the pharaohs.

Indeed, perhaps 900m people in China would have read your story and said, “The beer and the burger I understand. What I don’t understand at all is why a presumably wealthy Yankee professor would get to the restaurant by bicycle, when I have been dreaming of owning a car for the last ten years. Travelling by bicycle is the lowest form of drudgery.” You have clearly been manipulated here. But it’s not the credit card company I blame, it’s Nike.”

Loewenstien responds with some interesting observations of his own.  Do read the whole exchange. 

Does behavioral economics justify paternalism?

That is the question I attempt to answer in a paper forthcoming in the European Journal of Agricultural Economics.  The paper is a summary the plenary address I will give in a couple months at the European Association of Agricultural Economics congress.

The issue at play:

“The traditional economic approach justifies government regulation when there are market failures. Thus, economists have traditionally confined their advocacy for government regulation to well-defined classes of market failures that exist when there are issues like externalities, public goods, market power or information asymmetries. Although these traditional motivations are often mentioned when advocating food policies, the new and particularly influential weapon that has been added to the arsenal is the argument that there are cognitive failures. The identification of the cognitive failures, and their policy implications, is the subject of behavioural economics.”

The article goes on critique the idea that behavioral economic findings necessarily justify paternalistic regulations.  For example:

“If we really suffer from time inconsistent preferences, then resources like stickk.com allow us constrain (or impose costs) on our future-selves. The fact that many people are unwilling to create commitment contracts only serves to emphasise that although we often say we want to behave differently in the future, we are unwilling to actually constrain ourselves. So, there is no real inconsistency in our preferences; only an inconsistency in what we actually do and the stories we tell ourselves about what we wished we were doing in a world with no difficult choices or consequences. But, in cases where time inconsistent preferences actually exist, we do not need paternalists to constrain our future choices; we face ample incentive (and opportunity) to make that determination ourselves.”

or

“If we no longer use individual’s own choices to define what is or is not ‘good’, then whose do we use? The paternalist seeks to replace each individual’s judgment of the ‘good’ with their own. But, if we forgo the traditional economic notion of consumer welfare analysis, we lose any logical basis for claiming that one policy is superior to another from the consumers’ standpoint.”

The article concludes with some suggestions for future research, such as this one:

“Fourth, it might be constructive to use behavioural insights to, rather than devise new policies, learn how to better determine what consumers want, and perhaps even to help consumers better learn and ascertain their own preferences. In Norwood and Lusk (2011), we propose one such value elicitation approach, but there are other ways these concepts can be applied and implemented. Rather than seeking to discover ever new behavioural biases, perhaps we should learn how people make choices when they are warned of their biases and are offered opportunities to state their preferences in environments that minimise them. If using willingness-to-pay values in cost–benefit analysis is only credible if the values arise from well-defined preferences, it makes sense to think about designing approaches to help consumers learn and reveal those preferences.”