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Why Nudge?
The Politics of Libertarian Paternalism
By Cass R. Sunstein Yale UNIVERSITY PRESS
Copyright © 2014 Cass R. Sunstein
All rights reserved.
ISBN: 978-0-300-19786-0
CHAPTER 1
Occasions for Paternalism
In recent decades, there has been an outpouring of empirical work on how human beings think and behave—and about the risk of serious error, especially in unusual or unfamiliar situations. As I have noted, this work has been noticed by policymakers, and its influence is likely to grow. My goal in this chapter is to provide a brief summary, acknowledging that a great deal remains to be learned. My emphasis is on those findings that have special importance for the Harm Principle and the uses of paternalism.
Two Systems in the Mind: Of Humans and Econs
Within recent social science, authoritatively discussed by Daniel Kahneman in his masterful Thinking, Fast and Slow, it has become standard to suggest that the human mind contains not one but two "cognitive systems." In the social science literature, the two systems are unimaginatively described as System 1 and System 2. System 1 is the automatic system, while System 2 is deliberative and reflective. System 1 can be understood to reflect the behavior of Humans, whereas Econs think and act in accordance with System 2.
System 1 works fast. It is often on automatic pilot. Driven by habits, it can be emotional and intuitive. When it hears a loud noise, it is inclined to run. When it is offended, it wants to hit back. It certainly eats a delicious brownie. It can procrastinate; it can be impulsive. It wants what it wants when it wants it. It can be excessively fearful and too complacent. It is a doer, not a planner. System 1 is a bit like Homer Simpson, James Dean from Rebel Without a Cause, and Pippi Longstocking.
System 2 is more like a computer or Mr. Spock from the old Star Trek show (or the android Data from the somewhat less old Star Trek show). It is deliberative. It calculates. When it hears a loud noise, it assesses whether the noise is a cause for concern. It thinks about probability, carefully though sometimes slowly. It does not really get offended. If it sees reasons for offense, it makes a careful assessment of what, all things considered, ought to be done. It sees a delicious brownie and makes a judgment about whether, all things considered, it should eat it. It insists on the importance of self-control. It is a planner as well as a doer; it does what it has planned.
These points raise some natural questions. What, exactly, are these systems? Are Humans and Econs agents? Do they operate as homunculi in the brain? Are they little people? Are they actually separate? In the case of conflict, who adjudicates?
The best answer is that the idea of two systems is a heuristic device, a simplification that is designed to distinguish between automatic, effortless processing and more complex, effortful processing. When people are asked to add one plus one, or to walk from their bedroom to their bathroom in the dark, or to read the emotion on the face of their best friend, the mental operation is easy and rapid. When people are asked to multiply 179 times 283, navigate a new neighborhood by car, or decide which retirement or health insurance plan best fits their needs, the mental operation is difficult and slow.
Identifiable regions of the brain are active in different tasks, and hence it may well be right to suggest that the idea of "systems" has physical referents. An influential discussion contends that "automatic and controlled processes can be roughly distinguished by where they occur in the brain." The prefrontal cortex, the most advanced part of the brain (in evolutionary terms) and the part that most separates human beings from other species, is associated with deliberation and hence with System 2. The amygdala has been associated with a number of automatic processes, including fear, and it can thus be associated with System 1.
Consider the question of whether people pay sufficient attention to their own futures. This is an especially important topic for assessing paternalism, because public officials are often concerned that people enjoy short-term benefits (from smoking, spending, or overeating) at the expense of long-term harm. Econs give due consideration to the long term, but Humans may well ignore it, and when they do, perhaps we have an occasion for paternalism.
Neuroscientists have actually located a part of the brain—the ventromedial pFC (vMPFC)—that is most active when people are thinking about themselves. (If you want to have a narcissistic moment and focus on yourself right now, your vMPFC will be active.) By itself, perhaps, that is not so interesting. But neuroscientists have also found that when impatient people are thinking about their future selves, the vMPFC is not active. In patient people, by contrast, that region of the brain is active when they are thinking of their future selves. Here, then, is a neurological basis for distinguishing between Humans and Econs. Impatient people think of their future selves in the same way that they think of strangers—raising the possibility that they may not be sufficiently concerned about their own future well-being.
On the other hand, different parts of the brain interact, and it would be hazardous to locate System 1 and System 2 in particular regions. Fortunately, there is no need to make technical or controversial claims about neuroscience in order to distinguish between effortless and effortful processing. The idea of System 1 and System 2 is designed to capture that distinction in a way that works for purposes of exposition (and that can be grasped fairly immediately by System 1).
Here is a striking demonstration of the relationship between the two systems. Behavioral economists have shown that people are affected by how a problem is "framed." Suppose that you are deciding whether to have an operation. You are far more likely to have that operation if you are told that of a hundred people who have the operation, ninety are alive after five years than if you are told that after five years, ten are dead. The purely semantic reframing has a major effect on people's judgments. Similarly, people are "loss averse," in the sense that they dislike losses more than they like corresponding gains. If people face a five-cent tax for using a plastic bag (a loss), they are much more likely to be affected than if they are given a five-cent bonus (a gain) for bringing their own bag. In response to questions, people persistently show both framing effects and loss aversion. (There is a nice lesson here for policymakers. If you want to have an impact, choose effective frames and enlist loss aversion. Is it paternalistic for policymakers to heed that lesson? Before you answer "yes," note that some kind of framing is inevitable.)
Now assume that people are answering those same questions in a foreign language—that is, a language that they speak, but in which they are not entirely comfortable. Here is the key finding: It turns out that they do not show either framing effects or loss aversion. Asked to resolve problems in a language that is not their own, people are less likely to depart from standard accounts of rationality. In an unfamiliar language, they are more likely to get the right answer. How can this be?
The answer is straightforward. When people are using their own language, they think quickly and effortlessly, so System 1 has the upper hand. But when people are using another tongue, System 1 gets a bit overwhelmed and may even be rendered inoperative, while System 2 is given a serious boost. Our rapid, intuitive reactions are slowed down when we are using a language with which we are not entirely familiar. We are more likely to do some calculating and to think deliberatively—and at least on some questions, to give the right answers. In a foreign language, people have some distance from their intuitions and their emotions, and that distance can stand them in good stead. In a foreign language, Humans recede in favor of Econs.
As the authors of the relevant study write, "Perhaps the most important mechanism for our effect is the reduction in emotional resonance that is associated with using a foreign language.... An emotional reaction sometimes induces a less systematic decision." Compare the choice of Samuel Beckett, the Irish novelist and playwright, to write some of his greatest works in French rather than English, a decision that was rooted in a judgment that the less familiar language would promote greater clarity and force him to write more economically and to think more fundamentally.
There is a lesson here about the importance of using less intuitive, more technical approaches to law and regulation, including those that emphasize the need to assemble information about costs and benefits and to give careful consideration to that information. Such approaches do not (exactly) use a foreign language, but they do ensure that people have a degree of distance from their initial judgments, thus reducing the mistakes associated with System 1. People do not naturally think about regulation (involving, say, the environment, occupational safety and health, or terrorism) in terms of costs and benefits, but the effort to do so can weaken or eliminate the effect of intuitions, in a way that leads to greatly improved decisions. There is also a point here about the hazards of relying on our intuitions as a foundation for political or moral theory, including our thinking about paternalism—a point to which I will return.
The defining feature of System 1 is that it is automatic, but System 1 can also be emotional, and its emotional character creates both risks and opportunities. People may be immediately fearful of some risk—say, the risk associated with terrorism, or the risk of losses in the stock market—whether or not reality, and the relevant statistics, suggest that there is cause for alarm. (Recall the importance of loss aversion; people can get pretty emotional about losses, even small ones.) A great deal of research finds that people tend to assess products, activities, and other people through "an affect heuristic." When the affect heuristic is at work, people evaluate benefits, costs, and probabilities not by running the numbers but by consulting their feelings. They might hate coal-fired power plants or love nuclear power, and those feelings may influence their judgments about the benefits and costs of coal-fired power plants and nuclear power. System 1 is doing the key work here.
In fact, some goods and activities come with an "affective tax" or an "affective subsidy," in the sense that people like them more, or less, because of the affect that accompanies them. Advertisers and public officials try to create affective taxes and subsidies, which are an important part of choice architecture; consider public educational campaigns designed to reduce smoking or texting while driving. Some political campaigns have the same goal, attempting to impose a kind of affective tax on the opponent and to enlist the affect heuristic in their favor. Many political campaigns appeal directly to System 1. The same is true for some lawyers involved in trials or even appellate litigation. If System 1 can be enlisted, it may run the show, with System 2 operating as a kind of ex post helper. In many cases, System 2 acts as the lawyer, and System 1 is a most demanding client.
The affect heuristic is, of course, merely one of a large number of mental shortcuts that people use to make judgments. These shortcuts generally work well, which is why people use them, but they can also misfire. As I have noted, heuristics tend to have "ecological rationality," in the sense that they make sense in the settings where they are usually applied. Nonetheless, they can create major problems in new or unfamiliar settings.
When people use heuristics, they avoid answering a hard question and answer a simpler one instead. For risks, people may not ask, "What is the statistical likelihood of harm?" (a potentially complex question) but instead, "Have I heard of any cases in which the potential harm actually came to fruition?" For political candidates, people may not ask, "Do I agree with Candidate A or Candidate B on economic policy?" (a potentially complex question) but instead, "Do I like and trust this person" or "Is this person like me?" (much easier questions). Something similar is at work in educational campaigns that attempt to trigger fear (in the context, for example, of smoking, obesity, and texting while driving), and thus engage System 1 rather than offer statistical analyses.
In an interesting and important passage, Mill offered two exceptions to the Harm Principle, both connected with the operations of System 2. The first involves people below the age of adulthood; the second involves primitive peoples, whom Mill describes as living in "those backward states of society in which the race itself may be considered as in its nonage." Mill concluded that "[d]espotism is a legitimate mode of government in dealing with barbarians, provided the end be their improvements, and the means justified by actually effecting that end. Liberty, as a principle, has no application to any state of things anterior to the time when mankind have become capable of being improved by free and equal discussion." Whatever we think of this passage, which raises obvious questions about parochialism and condescension, it is clear that Mill prizes System 2 and the opportunities for reflection, planning, calculation, and self-control that it affords.
Behavioral Market Failures
I now turn to four sets of mistakes that produce significant harms and problems, and that should be counted as behavioral market failures. As we shall see, all of them are firmly rooted in the operations of System 1. With respect to paternalism, the unifying theme is that insofar as people are making the relevant errors, their choices will fail to promote their own ends. It follows that a successful effort to correct these errors would generally substitute an official judgment for that of choosers only with respect to means, not ends.
There are, however, some complexities in this claim. The distinction between means and ends raises a number of difficult puzzles, some of them involving the identification of people's ends over time.
PRESENT BIAS, TIME INCONSISTENCY, AND SELF-CONTROL
According to standard economic theory, people will consider both the short and long term. They will take account of relevant uncertainties, including the potential unpredictability of the future and the possibility of significant changes over time. It may well be far better to have money, or a good event, a week from now than a decade from now. People may, rationally and reasonably, select different balances between the present and the future. With respect to present and future consumption, people who are twenty-five make different tradeoffs from people who are sixty-five, and for excellent reasons.
In practice, however, some people procrastinate or neglect to take steps that impose small, short-term costs but would produce large, long-term gains. At least some of the relevant actions seem hard to justify. While System 2 considers the long term, System 1 is myopic, and in multiple ways, people show present bias. People may, for example, delay enrolling in a retirement plan, starting to exercise, ceasing to smoke, or using some valuable, cost-saving technology. Inertia is often exceedingly powerful, and it helps account for the power of default rules, which establish what happens if people do nothing. Often nothing is exactly what people will do, so the default rule tends to stick, whether it involves saving for retirement, personal privacy, or clean energy.
For example, some of us decline to choose more energy-efficient products, including appliances and cars with good fuel economy, even when that choice would save us a lot of money. Many people make choices that have short-term net benefits but long-term net costs, including a significant risk of causing premature death (as is the case, for many, with smoking cigarettes and poor diet). Procrastination, inertia, hyperbolic discounting, and associated problems of self-control are especially troublesome when the result is a small short-term gain at the expense of large long-term losses. There is a close connection between procrastination and myopia, understood as an excessive focus on the short term.
Time inconsistency arises when people's preferences at Time 1 diverge from their preferences at Time 2. At Time 1, people might prefer to eat a great deal, smoke, spend, become angry, drink, procrastinate, or gamble. The resulting choices might have serious harmful effects at Time 2, making their lives far worse. Recall that an identifiable region of the brain is most actively engaged when people are thinking about themselves, but for impatient people in particular, this region is less active when they are thinking about their future selves. Psychologist Jason Mitchell and his coauthors contend that such "shortsighted decision-making occurs in part because people fail to consider their future interests as belonging to the self." For those shortsighted people, the "vMPFC response was nearly identical when people tried to predict their future enjoyment ... and another person's present enjoyment," suggesting that such people think of their own future selves in the same way that they think of strangers.
(Continues...)
Excerpted from Why Nudge? by Cass R. Sunstein. Copyright © 2014 Cass R. Sunstein. Excerpted by permission of Yale UNIVERSITY PRESS.
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