Category: Nudge – Sunstein and Thaler

Paternalistic Choice Architects

Paternalistic Choice Architects

Posted on by jabittan
The idea of paternalism in the United States is full of contradictions, challenges, and conflicting opinions. Many people in the country don’t want to be told what to do by anyone, and don’t want to appear as though they are accepting paternalistic messages or nudges. Some people fully buy into the idea of paternalism, looking for prescribed rules and ways of living. And most of us have a mixture of people we view as leaders and role models, from whom we expect paternalistic messages.

 

In the book Nudge, Richard Thaler and Cass Sunstein write, “In our understanding, a policy is paternalistic if it tries to influence choices in a way that will make choosers better off, as judged by themselves” [emphasis in original]. This is the definition I am working with for paternalism. The idea is that someone else can know what is best for us, even if we don’t see it ourselves.

 

I believe that a lot of conflict in the United States today stems from the people and authority figures we are willing to accept paternalistic messages from. Some people in the United States, I include myself in this group, will accept paternalistic messages from university professors, while others will reject their messages. Leaders who we will accept messages from can be religious leaders, community elders, parents, successful business people, or even celebrities. For all of us, there is a set of people that we look to for guidance and advice. A set of people that we believe knows what might be best for us. The fact that our set of leaders can be very different and in some instances be completely discredited by others can lead to a lot of friction across our populace.

 

Nevertheless, what all these figures have in common is that they all can be in a position to be a choice architect. As Thaler and Sunstein write, “A choice architect has the responsibility for organizing the context in which people make decisions.” Business leaders shape the decision context for people’s healthcare, retirement savings, and many other daily choices. Religious leaders can shape the way people think about charitable giving and volunteering. Community leaders can influence the same choices and university professors can influence the way people think about certain situations. In all of these contexts, the way that choices are framed, the choices that are presented as viable options, and how people understand their agency can be influenced by a choice architect.

 

By nature then, choice architects are paternalistic. They are in charge of the form you use to sign up for healthcare, the range of volunteer and charitable activities that are available to you for consideration, and the responses that are considered appropriate for you when thinking about politics, society, and individual behaviors. Someone else presents you with options and decisions they believe are best for you.

 

Choice architects are very important because the way they frame a choice or decision can greatly influence the behaviors of many people. Presumably, choice architects want to maximize the good outcomes that arise from the choices they shape. This means that how they structure decisions, what they consider viable alternatives, and how they build decision frameworks can have huge consequences for what people actually do. A good health benefits sign-up form can influence whether people select a healthcare plan that actually fits their needs. A good sense of where volunteering can do the most good can drive a pastor or community leader to engage their followers in a meaningful way, and a university professor who can frame thoughts and decisions in a meaningful direction can help people think about problems in new and ways. Of course, in each setting, the choice architect could be wrong, and could mislead people, could make an error that hurts people financially, leads to wasted time, or frustrates people. It may be paternalistic to think that a choice architect knows what is best and can guide people toward what is best for them, but the alternative, having the choice architect pull back and not accept this paternalistic responsibility, can have even more serious consequences.
Should We Assume Rationality?

Should We Assume Rationality?

Posted on by jabittan
The world is a complex place and people have to make a lot of decisions within that complexity. Whether we are deliberate about it or not, we create and manage systems and structures for navigating the complexity and framing the decisions we make. However, each of us operate from different perspectives. We make decisions that seem reasonable and rational from our individual point of view, but from the outside may seem irrational. The question is, should we assume rationality in ourselves and others? Should we think that we and other people are behaving irrationally when our choices seem to go against our own interests or should we assume that people have a good reason to do what they do?

 

This is a current debate and challenge in the world of economics and has been a long standing and historical debate in the world of politics. In his book Thinking Fast and Slow, Daniel Kahneman seems to take the stance that people are acting rationally, at least from their own point of view. He writes, “when we observe people acting in ways that seem odd, we should first examine the possibility that they have a good reason to do what they do.”

 

Rational decision-making involves understanding a lot of risk. It involves processing lots of data points, having full knowledge of our choices and the potential outcomes we might face, as well as thinking through the short and long-term consequences of our actions. Kahneman might argue, it would seem after reading his book, that truly rational thinking is beyond what our brains are ordinarily capable of managing. But to him, this doesn’t mean that people cannot still make rational choices and do what is in their best interests. When we see behaviors that seem odd, it is possible that the choices other people have made are still rational, but just require a different perspective.

 

The way people get to rationality, Thinking Fast and Slow suggests, is through heuristics that create shortcuts to decision-making and eliminate data that is more or less just noise. Markets can be thought of as heuristics in this way, allowing people to aggregate decisions and make choices with an invisible hand directing them toward rationality. So when we see people who seem to be acting obviously irrationally or opposed to their self-interest, we should ask whether they are making choices within an entirely different marketplace. What seems like odd behavior from the outside might be savvy signaling to a group we are not part of, might be a short term indulgence that will stand out to the remembering self in the long run, and might make sense if we can change the perspective through which we judge another person.

 

Kahneman shows that we can predict biases and patterns of thought in ourselves and others, but still, we don’t know exactly what heuristics and thinking structures are involved in other people’s decision-making. A charitable way to look at people is to assume their decisions are rational from where they stand and in line with the goals they hold, even if the choices they make do not appear to be rational to us from the outside.

 

Personally, I am on the side that doubts human rationality. While it is useful, empathetic, and humanizing to assume rationality, I think it can be a mistake, especially if we go too far in accepting the perspective of others as justification for their acts. I think that there are simply too many variables and too much information for us to truly make rational decisions or to fully understand the choices of others. My thinking is influenced by Kevin Simler and Robin Hanson who argue in The Elephant in the Brain, that we act on pure self-interest to a greater extent than we would ever admit, and we hide our self-interested behaviors and decisions from everyone, including ourselves.

 

At the same time, I do believe that we can set up systems, structures, and institutions that can help us make more rational decisions. Sunstein and Thaler, in Nudge, clearly show that markets can work and that people can be rational, but often need proper incentives and easy choice structures that encourage to encourage better choices. Gigerenzer in Risk Savvy ends up at a similar place, showing that we can get ahead of the brain’s heuristics and biases to produce rational thought. Creating the right frames, offering the right visual aids, and helping the brain focus on the relevant information can lead to rational thought, but nevertheless, as Kahneman shows, our thinking can still be hijacked and derailed, leading to choices that feel rational from the inside, but appear to violate what would be in our best interest when our decisions are stacked and combined over time. Ultimately, the greatest power in assuming rationality in others is that it helps us understand multiple perspectives, and might help us understand what nudges might help people change their behaviors and decisions to be more rational.