STONE the crows what idiots we all are.
According to research by the Australia Institute most of us are dills when it comes to dosh. Rather than the rational calculators of classical economics, our behaviour is based on our genetic programming. This means, “we cannot just assume that consumers are willing and able to make good financial decisions even when all the necessary information is freely available in some form.” [i]
In fact the Institute estimates 80 per cent of us do not make consistently sensible decisions about money, which means most of us must lift our games, “or call someone who enjoys the challenge”.[ii]
Or failing that somebody who will do it for the money.
Fair enough, with tax laws as complex as they are incomprehensible and warnings that however much super you are saving it will not be enough to avoid an impoverished old age most of us need assistance to decide what to do with our dough.
But the idea that our biological heritage and behaviour ensures we are ill equipped to sensibly manage our own affairs is easily extended. In the pre Obama era, American political scientist Drew Westen explained how US voters declined to elect Democrats because their brains, acting on the orders of millennia old genetic codes, were not up to the task. Instead of arguing about the issues, candidates, he claimed, should keep it simple:
You can slog it out for those few millimeters of cerebral turf that process facts, figures and policy statements. Or you can take your campaign to the broader neural electorate, collecting delegates throughout the brain and targeting different emotional states with messages designed to maximise their appeal.[iii]
And while every salesperson knows too much choice confuses customers, there is something more than a little patronising in the way people use behavioural economics to decide what we need to know. Thus CSIRO researchers suggest:
Public policy should also recognise that more choice is not always better for people, particularly those who struggle with complex decision-making. It will often be better for all concerned if people are initially presented with a limited number of options, perhaps with more available for those are motivated to seek them out. Similarly for information, more is not necessarily better.[iv]
The idea we do not know what is good for us gets social engineers into the policy game, without having to answer allegations that they are spruiking for the nanny state. The argument is as simple as it is self-serving for advocates of increased government involvement in our lives. To stop us making dubious decision, or no decisions at all, government should nudge us towards what is good for us.
Richard Thaler and Cass Sunstein explain how in an immensely influential book, Nudge, which shows how behavioural economics can get us to do what the state knows is best. [v]
Their book is full of safe and sensible examples. They suggest incentives to nudge elderly Americans into picking appropriate prescription plans and ways to encourage drivers to sign up for organ donation – the sort of things people would do if they were smart enough to do their financial homework on healthcare costs and sensible enough to ignore their primeval fear of dismemberment after death. And just like arguments that because we are too dumb to organise our own money we need somebody to do it for us, it is hard to argue against the all-knowing state pushing us to act in our own interests.
Unless of course you doubt governments know best, as Thaler and Sunstein acknowledge, “we are keenly aware that governments are populated by humans”. Or suspect the interests of the state and individuals are always congruent. Or doubt that our genetic goofiness justifies public servants bossing us about.
When President Obama appointed Sunstein head of the agency that writes government regulations, Tea Party types went berserk, pointing to nanny state plots. Sunstein, said Glenn Beck,
… looks at Americans as a bunch of lab rats. And he knows all the tricks and all the levers to make them behave the way he wants them to. Just a little nudge here and little nudge there.[vi]
He has a point, if an overblown one. There is a difference between the state enacting laws that require us to give up smoking or buy medical insurance and introducing incentives that nudge us into doing what we what do ourselves if we were better organised.
If there is a problem with using behavioral economics to recast public policy it has more to do with the way it is used to undermine the idea that a market economy empowers us to act in our own best interests.
For advocates of command economies, it is easy to add the idea that our behavior is shaped in part by out biology to the belief that markets exist to con the credulous. As Andrew Ferguson puts it, behavioral economics “assumes the free market itself is a kind of unending con game with the smart guys exploiting the saps.”
And once that idea is accepted government regulation is less repression than smart servants of the state protecting the rest of us:
As an advocate for the market’s helpless victims, the government has the responsibility to undo the con, a task that will require the smartest administrator’s operating according to only the latest scientific research and making the most exquisite moral judgements.[vii]
Or to tell us how much and where we should save or to push us into doing what we would recognise is best for us if only we smarter and more sensible.
At which point the Crows self-preservation instincts kick in. The Crows can barely count but while they do not know anything about economics, both their biology and higher order reasoning agree that anybody who thinks they know what is best for everybody else generally doesn’t.
[i] The Australia Institute, Evidence versus emotion: how do we really make financial decisions, @ https://www.tai.org.au/ recovered on December 5
[ii] op cit 29
[iii] Drew Westen, The political brain (Public Affairs, 2007)
[iv] Andrew Reeson and Simon Dunstall, Behavioural economics and complex decision-making (CSIRO, 2009) 16
[v] Richard Thaler and Cass Sunstein, Nudge: improving decisions about health, welfare and happiness (Penguin, 2009)
[vii] Andrew Ferguson, “Behavioural economics – the governing theory of Obama’s nanny state”, The Weekly Standard, 15, 29 April 19 2010 @ www.weeklystandard .com recovered on December 5