Cass R. Sunstein

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As long as people smoke, it’s difficult to argue that free markets are chastened by free wills. It’s an addiction almost always begun in adolescence, yes, but plenty of smokers aren’t even trying to quit despite the horrifying health risks. So we tax cigarettes dearly and run countless scary PSAs, trying to curtail the appetite for destruction and push aside the market’s invisible hand offering us a light.

The cost, of course, goes beyond the rugged individual, transferred onto all of us whether we’re talking about lung cancer or obesity or financial bubbles. Sooner or later, we all pay.

In a NYRB piece about Phishing for Phools, a new book on the topic by economists George A. Akerlof and Robert J. Shiller, professional noodge Cass R. Sunstein finds merit in the work, though with some reservations. One topic of note touched on briefly: the micro-marketing of politicians aided by the “manipulation of focus.” An excerpt:

Akerlof and Shiller believe that once we understand human psychology, we will be a lot less enthusiastic about free markets and a lot more worried about the harmful effects of competition. In their view, companies exploit human weaknesses not necessarily because they are malicious or venal, but because the market makes them do it. Those who fail to exploit people will lose out to those who do. In making that argument, Akerlof and Shiller object that the existing work of behavioral economists and psychologists offers a mere list of human errors, when what is required is a broader account of how and why markets produce systemic harm.

Akerlof and Shiller use the word “phish” to mean a form of angling, by which phishermen (such as banks, drug companies, real estate agents, and cigarette companies) get phools (such as investors, sick people, homeowners, and smokers) to do something that is in the phisherman’s interest, but not in the phools’. There are two kinds of phools: informational and psychological. Informational phools are victimized by factual claims that are intentionally designed to deceive them (“it’s an old house, sure, but it just needs a few easy repairs”). More interesting are psychological phools, led astray either by their emotions (“this investment could make me rich within three months!”) or by cognitive biases (“real estate prices have gone up for the last twenty years, so they’re bound to go up for the next twenty as well”).

Akerlof and Shiller are aware that skeptics will find their depiction of human beings as “phools” to be inaccurate and impossibly condescending. Their response is that people are making a lot of bad decisions, producing outcomes that no one could possibly want. In their view, phishing for phools “is the leading cause of the financial crises that lead to the deepest recessions.” A lot of people run serious health risks from overeating, tobacco, and alcohol, leading to hundreds of thousands of premature deaths annually in the United States alone. Akerlof and Shiller think that it is preposterous to believe that these deaths are a product of rational decisions.•

 

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I think the main problem with Mayor Bloomberg’s ban on gigantic sodas in NYC is that it won’t work. If obesity was mainly caused by this one product, perhaps you could make a case. If it led directly to saving lives like, say, mandatory seat belts, sure, that would make sense. But Bloomberg’s ban lacks such precision. 

Other people think that the main problem with Bloomberg’s plan is that he’s trying to create a nanny state, that’s he’s using state-sanctioned moral suasion. But is that always wrong: From Cass R. Sunstein’s New York Review of Books piece about Sarah Conly’s book Against Autonomy: Justifying Coercive Paternalism:

Many Americans abhor paternalism. They think that people should be able to go their own way, even if they end up in a ditch. When they run risks, even foolish ones, it isn’t anybody’s business that they do. In this respect, a significant strand in American culture appears to endorse the central argument of John Stuart Mill’s On Liberty. In his great essay, Mill insisted that as a general rule, government cannot legitimately coerce people if its only goal is to protect people from themselves. Mill contended that

the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others. His own good, either physical or mental, is not a sufficient warrant. He cannot rightfully be compelled to do or forbear because it will be better for him to do so, because it will make him happier, because, in the opinion of others, to do so would be wise, or even right.

A lot of Americans agree. In recent decades, intense controversies have erupted over apparently sensible (and lifesaving) laws requiring people to buckle their seatbelts. When states require motorcyclists to wear helmets, numerous people object. The United States is facing a series of serious disputes about the boundaries of paternalism. The most obvious example is the ‘individual mandate’ in the Affordable Care Act, upheld by the Supreme Court by a 5–4 vote, but still opposed by many critics, who seek to portray it as a form of unacceptable paternalism. There are related controversies over anti-smoking initiatives and the ‘food police,’ allegedly responsible for recent efforts to reduce the risks associated with obesity and unhealthy eating, including nutrition guidelines for school lunches.

Mill offered a number of independent justifications for his famous harm principle, but one of his most important claims is that individuals are in the best position to know what is good for them. In Mill’s view, the problem with outsiders, including government officials, is that they lack the necessary information. Mill insists that the individual ‘is the person most interested in his own well-being,’ and the ‘ordinary man or woman has means of knowledge immeasurably surpassing those that can be possessed by any one else.’

When society seeks to overrule the individual’s judgment, Mill wrote, it does so on the basis of ‘general presumptions,’ and these ‘may be altogether wrong, and even if right, are as likely as not to be misapplied to individual cases.’ If the goal is to ensure that people’s lives go well, Mill contends that the best solution is for public officials to allow people to find their own path. Here, then, is an enduring argument, instrumental in character, on behalf of free markets and free choice in countless situations, including those in which human beings choose to run risks that may not turn out so well.

Mill’s claim has a great deal of intuitive appeal. But is it right?”

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