Who Shall Judge My Happiness?

The question addressed in this article, an old question with a new twist, is if individuals are the best judge of their own utility. Should the state force or coerce you to do things, e.g. wear a seat belt or motorcycle helmet, be forced to take medical or retirement insurance, that might be in your best interest but for some reason you will not do yourself (assume laws are passed to ensure that others do not pay the costs of your choice, e.g. through higher insurance)? My view is that individuals, not the government, are the best judge of what makes them happy.

For example, I am a proponent of social insurance, but not from a paternalistic point of view. I believe there are important market failures that justify government intervention. Thus, there is a role for government that is not dependent upon the state believing it knows better than the individual what is in their best interest. Instead, the government is fixing a broken market. I differ from many Democrats on this point as I believe government intervention, whether it's direct intervention or through the creation of incentives, must be justified by economic analysis. I don't want the state to tell me what is best for me, make choices for me, or even to push me in a particular direction it thinks I ought to be nudged. I have less problem with the government providing information, and perhaps framing the choices as it does so, so long as it does not create financial or other incentives that cause individuals to pursue particular courses of action (the article accompanying this editorial is free, as is the editorial). Thus, I agree with the spirit of this editorial:

The state is looking after you, Editorial, The Economist: Liberals sometimes dream of a night-watchman state, securing property and person, but no more. They fret that societies have instead submitted to the nanny state, a protective but intrusive matriarch, coddling citizens for their own good. Economists, with their strong faith in rationality and liberty, have tended to agree. As many decisions as possible should be left in the individual's lap, because no one knows your interests better than you do. Most of us have gained from this freedom.

But a new breed of policy wonk is having second thoughts. On some of the biggest decisions in their lives, people succumb to inertia, ignorance or irresolution. Their private failings—obesity, smoking, boozing, profligacy—are now big political questions. And the wonks think they have an ingenious new answer—a guiding but not illiberal state.

What they propose is “soft paternalism” (see article). Thanks to years of patient observation of people's behaviour, they have come to understand your weaknesses and blindspots better than you might know them yourself. Now they hope to turn them to your advantage. They are paternalists, because they want to help you make the choices you would make for yourself—if only you had the strength of will and the sharpness of mind. But unlike “hard” paternalists, who ban some things and mandate others, the softer kind aim only to skew your decisions, without infringing greatly on your freedom of choice...

Most people would accept that a healthy diet is hard to achieve, financial matters are confusing and cigarettes kill too many. The state is tempted to step in, not only because of the harm that smokers, lushes, spendthrifts and gluttons may do to others, but because of the harm they are doing to themselves. ... This is hard paternalism. The softer sort is about nudging people to do things that are in their best interests. ... In most cases, though, soft paternalism means the government giving people a choice, but skewing the choice towards the one their better selves would like to make.

For instance, in many countries plenty of workers fail to enroll in pension schemes and suffer as a result. The reason is not that they have decided against joining, but that they haven't decided at all—and enrolling is cumbersome. So why not make enrolling in the scheme the default option, still leaving them the choice to opt out? Studies have shown this can nearly double the enrolment rate. ... (see article).

Soft paternalists also want to give people more room to rethink “hot and hasty” decisions. They favour cooling-off periods before big decisions, such as marriage, divorce or even buying cigarettes. Some of them toy with elaborate “sin licences”, which would entitle the holder to buy cigarettes, alcohol or even perhaps fatty foods, but only at times and in amounts the licenceholder himself signed up to in advance.

If people want this kind of customised paternalism, why can't the market, in the shape of rehab clinics and personal trainers, provide it? Soft paternalists argue that, without the power of the state behind such schemes, they will often break down: ... Long before the government took it upon itself to ban opium from general sale, Samuel Taylor Coleridge, a Romantic poet and drug addict, used to hire porters to bar his entry to apothecaries. But he would later threaten to have them arrested if they did not let him pass.

Soft paternalism has much in its favour. First, it is certainly better than hard paternalism. Second, a government has to provide information to citizens in order for them to make rational decisions on everything from smoking to breastfeeding to organ donation. Even a government reluctant to second-guess its citizens ends up advising them in one way or another. What people decide they want is often a product of the way a choice is framed for them... Even a truly liberal government would find itself shaping the wishes and choices to which it earnestly wants to defer. It's surely better to lure people into pension schemes than out of them.

Yet from the point of view of liberty, there is a serious danger of overreach, and therefore grounds for caution. Politicians, after all, are hardly strangers to the art of framing the public's choices and rigging its decisions for partisan ends. And what is to stop lobbyists, axe-grinders and busybodies of all kinds hijacking the whole effort? There is, admittedly, a safety valve. People remain free to reject the choices soft paternalism tries to guide them into—that is what is distinctive about it. But though people will still have this freedom, most won't bother to use it—that is what makes soft paternalism work. ... this is a tool that transfers power from the individual to the state, which only sometimes knows best.

Its champions will say that soft paternalism should only be used for ends that are unarguably good: on the side of sobriety, prudence and restraint. But private virtues such as these are as likely to wither as to flourish when public bodies take charge of them. And life would be duller if every reckless spirit could outsource self-discipline to the state. Had the government deprived Coleridge of opium, he might have been happier. Then again, there might have been no “Kubla Khan”.

Comments

[algernon]

Good article. And I applaud your approach, Prof. Thoma.

I wish upon you & your colleagues diffidence in correcting "market failures" with gov't solutions. "Gov't failures" are at least as frequent as mkt failures, & some market failures are largely a consequence of numerous previous gov't interventions...the US health care, for instance.

[cm]

We are conflating more than one meaning/connotation of "happiness" here.

"Happiness" has little to do with "reasonable", "globally optimal", or "considerate" behavior.

"Market failure" can be recast as "substantial difference between global and (apparent) local cost functions", or more precisely e.g. locally ignoring externalities that are very much observable globally.

Cf. also "prisoner's dilemma", "tragedy of the commons", etc.

One can even go as far as making the case that the very purpose of government and other forms of social organization/hierarchy is to make big-picture, and "group" judgements overriding individual judgement.

While often and perhaps always abused, originally there was more to it than just alpha males grabbing control.

[reason]

I'm missing a more than token acknowledgement of externalities here. The whole issue of "freedom" needs a grown up conversation. My freedom will necessarily impinge on your freedom, so long as we share a world. And concentration on a single individual's utility will necessarily shut out consideration of the effect of that individual's choices on others (not least because of a common environment). Until this is acknowledged many individually rational actions, will be in total counter-productive. (One clear example is traffic congestion.)

Not to mention the problems with addiction, mental illness and short-sightedness that are beginning to be well understood problems with utility theory. I agree - by all means avoid paternalism and give people choices, but social and community security need to be protected above all, and we should build healthy democracy to make the decisions about directions and policy to protect the public infrastructure. Without a healthy public infrastructure no freedom is possible.

And I think "market failure" is more than just a difference between local costs and global costs. It has to do with inappropriate ownership rules and ignorance about positive externalities as well. And with market structure - oligopoly and oligopsony are penicious. If necessary we need active policies to promote freedom of entry and active competition. Not to mention pernicious incentives that develop from the problem of capturing the value that is provided in money. We have unemployment, there is no shortage of useful things to do - what gives. The answer is easy, those with the needs are often not those with the money. And some valuable things (public space for instance, or the legal system) do not directly capture their value. Their very worth is inherently their lack of cost (otherwise they cease to be public and universally accessable). Read some Jane Jacobs.

Think of science and knowledge economics. The way we handle intellectual property is intellectually troublesome. Patent Systems are regularly abused and tend to make innovation not necessarily more rewarding but more costly. Science progresses on a broad interrelated front and trying to pretend that we can parcel it up into small private packages is problematic, even dangerous. (Especially in a democracy where knowledgable exchange by a large informed population is essential). The "knowledge economy" shouldn't be the secretive economy, but we are potentially headed that way.

[reason]

Perhaps more to the subject than my last post (rant), I can say that in Australia there have been very effective public information campaigns (advertising on television mostly) combatting drink-driving, smoking and littering. Non-coercive but very effective (using children embarassing littering adults was particularly effective), and definitely worthwhile. Humans are complex animals - economists please explain why are there propagandist advertising compaigns at all if the world is full of homo economicus,

[slink]

mark ..sir

what if the market itself is skewing choice

i do not mean a co ordination failure

or a third party negative externality

or even an addiction type internality

merely a dynamic process

with scale effects sufficient
to barrierize the result
from easy spontaneous exit
to a higher preferable state

a path dependent sink hole

like krug's nice gimmick
on londons restaurants
at long last
an exit is found
from
a largely happenstantial
can food/bad food miasma

[donna]

Me, I'm a firm believer in giving all 16 year old kids Ninja bikes and an open stretch of road with a big drop-off at the end. That will take care of the risk takers who want to screw around with their health.

[calmo]

donna, a firm believer in the view that all that vitality is just wasted on youth, targets the 16 year olds.
Seeing them drop off the end of the road makes her happy.
But not really.

Who Shall Judge My Happiness?

So I judge donna's happiness, that's who. And that's what --no matter the machinations that cm goes through wondering what this stuff 'happiness' is. [We don't want to know. And yes, we are happy, damn happy not to go there.]

Ok, I relent. This is as far as we go: Satisfaction. [Yes, you boomers, like the Rolling Stones.] Who shall judge my satisfaction? Unless we are showing clear signs of dimentia (and this could arise from exposure to 16 yr olds, just sayin), we give ourselves priority re judging. [Just don't get in denial about this ok?]
We do not go as far as Real Happiness. No, we let the purple sheets have that and anyone else that can get into a full lotus and stay there for hours chanting away pretending mightily against considerable agony that this is Bliss. [Only some believe.]
They are of no interest to economists since they are lousy shoppers.
So we judge our own happiness and make judgements, sometimes better ones, about those we know well.

Will this make somewhat anonymous people happy? Not especially, I predict/judge in advance.

[anne]

'Had the government deprived Coleridge of opium, he might have been happier. Then again, there might have been no “Kubla Khan”.'

Among the more ignorant and destructive passages imaginable. Mental illness is wellness, but only for artists. Ah, we should be thankful for Van Gogh's depression....

[anne]

There are times when I ask the best and the brightest whether depression should be clinically, medically, treated and wait a brief while for the artist argument, but there will always come a response from someone who knows really knows of depression and the argument is stilled even if not completely convincingly.

The British, interestingly enough however beyond Economist types, almost always understand from the beginning.