Archive for the 'Slippery Slope' Category

New Paternalism: Odds & Ends

May 5, 2010

by Glen Whitman

The Cato Unbound discussion on new paternalism has come to a close, but I want to address a few loose ends that came up during the exchange.

The Demand for Evidence

Richard Thaler has demanded empirical evidence that the new paternalism has led to slippery slopes. Given that the new paternalism is a relatively new phenomenon, I certainly don’t claim that the slope has already occurred.

I do claim that slippery slopes are real, that slopes are most likely when certain features are present, and the new paternalism has many of those dangerous features.

Historically, there can be little doubt as to the existence of slippery slopes. Examples that came up during the Cato Unbound forum included the run-up to Prohibition, the escalation of the drug war, and the gradual encroachment of smoking restrictions. I believe an honest examination of other, non-paternalist domains yields similar conclusions. For instance, after passage of the 16th Amendment, the vast majority of people paid no income tax at all, and the top marginal tax rate was only 7%. We all know how that turned out. A much more complex story could be told about early interventions in healthcare that laid the groundwork for more extensive intervention later. Read the rest of this entry »

Cafeteria Marvels

April 17, 2010

 by Mario Rizzo  

The market is a “marvel.” What does that mean? According to Marcus Tullius Cicero, the Roman orator and senator, a marvel is something contrary to or surpassing common understanding.  

In that sense, the market is a true marvel – so much so that it even surpasses the understanding of many economists.  

Richard Thaler (a University of Chicago Business School professor) and Cass Sunstein (a Harvard law professor and Obamian regulatory czar) have illustrated the benign qualities of paternalism with a curious example of cafeteria food placement. (An interesting and important exchange between Glen Whitman and Richard Thaler – among others – is now taking place at Cato Unbound.) Read the rest of this entry »

The Most Important Thing You Can Read

April 6, 2010

by Mario Rizzo

My frequent coauthor, Glen Whitman, has the lead essay on new paternalism at Cato Unbound this month. There will be responses by Richard Thaler (Chicago), Jonathan Klick (U of Penn), Shane Frederick (Yale).

This is the most important thing you can read this month — better than anything anywhere else in the blogosphere, world wide web, and all traditional media publications. Except posts at Think Markets, of course.

Hayek’s Knowledge Problem, as Applied to New Paternalism

March 25, 2010

by Glen Whitman

Mario Rizzo and I have recently published another article on the new paternalism, titled “The Knowledge Problem of New Paternalism,” in the BYU Law Review. (Mario briefly blogged about it here.)  The article lacks an abstract, but here’s a lightly edited portion of the introduction:

The “new paternalism” spawned by behavioral economics faces a severe knowledge problem akin to the knowledge problem that Friedrich Hayek argued afflicts centrally-planned economies. If well-meaning policymakers possess all the relevant information about individuals’ true preferences, their cognitive biases, and the choice contexts in which they manifest themselves, then policymakers could potentially implement paternalist policies that improve the welfare of individuals by their own standards. But lacking such information, we cannot conclude that actual paternalism will make their decisions better; under a wide range of circumstances, it will even make them worse. New paternalists have not taken the knowledge problems that are evident from the underlying behavioral and economic research seriously enough. Read the rest of this entry »

New Paternalism on the Slippery Slopes, Part 11: Avoiding Paternalist Slopes

March 2, 2010

by Glen Whitman

This will be the final installment in my series of excerpts from Mario’s and my article on the slippery-slope potential of new paternalism. The comments on the posts have been minimal, so I’m uncertain how helpful this series has been. Since I’m considering doing the same with a closely related article Mario and I have just published, please let us know what you think.

In the final section of the paper, we offer a few suggestions about how to resist the slippery-slope tendencies of new paternalism (p. 737-739):

How, then, might we protect ourselves against paternalist slopes? We have three recommendations, addressed both to the new paternalists themselves and to those who might be persuaded by them. These recommendations are intended to lower the probability of adopting new paternalist policies to begin with, but also to help resist more intrusive policies after initial policies have been adopted.

1. Have Reasonable Expectations of Decisionmakers

One lesson of behavioral economics is that we cannot reasonably expect decisionmakers to carefully consider the full ramifications of their choices in light of the best available evidence. Instead, they economize on information by using choice heuristics, and they sometimes myopically focus on present and concrete problems while ignoring more distant and abstract ones. This is no less true of public decisionmakers (including voters, politicians, judges, bureaucrats, experts, and rent-seekers) than it is of private citizens. Indeed, the problem is likely worse for public decisionmakers, because they lack the incentives to discover and control their own cognitive limitations. Private decisionmakers at least face the costs and benefits of their own mistakes, and thus have an incentive to correct them.

It is therefore insufficient to ask policymakers to carefully weigh the costs and benefits of each new paternalist proposal. The “careful, cautious, and disciplined approach” advocated by Camerer and coauthors is rather unlikely to guide real-world policy. We should not expect policymakers to weigh all the economic, scientific, and psychological evidence objectively, to stand on nuanced distinctions, and to adopt policies that carefully target just those people who need help most. We should expect policies to be blunt instruments. Read the rest of this entry »

Regulators Ban Mom’s Banana Bread

March 2, 2010

by Chidem Kurdas

Last week, New York City’s  Panel for Educational Policy approved a new rule for school bake sales. Home-made treats are no-no, but pre-approved packaged products, the ones that are also in school vending machines, are fine.

The bake sale ban is supposed to reduce childhood obesity. An education bureaucrat explained that homemade goods can’t be allowed because it’s impossible to know their portion size and content.  You may add raisins to your banana bread and slice it thin, while I add walnuts and cut it thick.

Hence banana bread, cupcakes and anything else baked at home have been banished; but kids are free to gorge on Kellogg’s Frosted Brown Sugar Cinnamon Pop-Tarts, which come in portion-controlled packages and have known ingredients—in fact a long list of ingredients from high fructose corn syrup to yellow dye #6.

This is a vivid little example of how regulation in general functions and the impact it has in many areas of social life. Read the rest of this entry »

New Paternalism on the Slippery Slopes, Part 10: Rejoinder to Objections

February 28, 2010

by Glen Whitman

Some new paternalists have recognized the slippery-slope objections to their approach, and they have made some effort to respond. But we find the responses insufficient (p. 735-737):

In their book Nudge, Sunstein and Thaler recognize the slippery-slope objections to their policies, and offer three responses. We reply to their responses here.Sunstein and Thaler’s first response is that the slippery-slope argument “ducks the question of whether our proposals have merit in and of themselves.” They say if the initial interventions are worthwhile, then we should “make progress on those, and do whatever it takes to pour sand on the slope.”

Our claim is not that slippery slopes are the only objection to the new paternalism. Various other objections have also been made (and referenced in the introduction to this Article). The slippery slope is an additional argument against the new paternalism.

The idea that we should “make progress” on the initial interventions, and then do what we can to “pour sand” on the slope, is a variant of the usual (and, we think, hackneyed) response to all slippery-slope arguments: that we can simply “do the right thing now, and resist doing the wrong thing later.” But if the slope argument is correct, there is a causal (albeit probabilistic) connection between initial interventions and later ones. Saying we should move forward on those initial interventions is akin to saying we should do something because it promises present benefits, while ignoring the potential costs in the future. Ironically, it is just this sort of error in private decision-making that most new paternalists think cries out for correction. The slope risk must be counted among the costs of the initial intervention.

Read the rest of this entry »

New Paternalism on the Slippery Slopes, Part 9: Framing in Public Policy

February 27, 2010

by Glen Whitman

And after another long interruption, I’m finally going to finish my series of excerpts from Mario Rizzo’s and my article, “Little Brother Is Watching You: New Paternalism on the Slippery Slopes.” There are three more posts, including this one.

As discussed in an earlier post, the new paternalists use the notion of framing — that is, the idea that people’s choices respond to seemingly irrelevant differences in how the choice situation is presented — to justify a variety of policy interventions. But what happens when we apply the notion of framing to the choices of the policymakers themselves? There is a natural human tendency to frame decisions narrowly “because immediate and concrete effects are more psychologically accessible than remote and abstract ones” (p. 726), and this tendency has worrisome implications for public policy. Specifically, paternalist policy-makers will tend to ignore the indirect and longer-term and implications of their policy choices (p. 726-727):

Narrow framing leads decisionmakers to consider choice-options simply as they arise, framed by present circumstances, the crisis of the moment, and perhaps the activities of rent-seekers. Their actions will often be ad hoc solutions to particular problems, and the narrow framing produces a tendency not to see important interrelationships. In Kahneman’s words again, “[t]he decision of whether or not to accept a gamble is normally considered as a response to a single opportunity, not as an occasion to apply a general policy.” For example, the interaction of biases may be ignored. This means the problem is not simply one of discounting long-term effects, but also of discounting effects that occur through longer and more complex chains of causality.

Read the rest of this entry »

The Price of the Mega-State

January 23, 2010

by Mario Rizzo  

The recent Supreme Court decision that “ruled that the government may not ban political spending by corporations in candidate elections” is a true victory for freedom of speech.   

What many people do not realize, however, is that both sides in this dispute had important and valid points. The terrible truth of the matter is that a large complex government is incompatible with political and personal freedom. It is not just the economic freedom in various sectors that is threatened by a large welfare and regulatory state. (Most classical liberal-oriented economists well understand the effect on economic liberty.) However, those other freedoms that modern-day social democrats (aka “liberals”) value are also threatened.   Read the rest of this entry »

New Paternalism on the Slippery Slopes, Part 8: Hyperbolic Discounting in Public Policy

January 15, 2010

by Glen Whitman

As discussed in a previous post in this series, the new paternalists often use the concept of hyperbolic discounting (roughly, excessive impatience) to show that people make systematic errors that could, in principle, be corrected by government intervention. But what if policymakers, too, are prone to hyperbolic discounting? That is the question raised in the next section of the paper (p. 724-725):

Policymakers can have short time horizons for various reasons. They might no longer hold office when future costs and benefits of their policies occur. Insofar as voters have imperfect memories, they might fail to fault policymakers for the ill effects (or credit them with the good effects) of policies they supported. Both of these effects give fully rational policymakers an incentive to discount future consequences.If policymakers are hyperbolic discounters, there is yet another reason they will tend to discount the future: because they apply especially high rates of discount when some costs or benefits are in the present (or near future). Read the rest of this entry »

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