Tuesday, June 5, 2012

Paternalism - for children, and for the lower orders

Will Wilkinson's excellent post at The Economist highlights the less-than-hidden classist underpinnings of New York's soda ban.
GIGANTIC sugared soft drinks are disgusting. Let's just get that out of the way. Can we also agree that the high-calorie drinks rich people like to consume—red wine, artisanal beer, caramel frappuccinos, mango smoothies with wheatgrass and a protein boost—aren't at all disgusting? At any rate, we yuppie pinot-drinkers know how to look after ourselves. In contrast, the wretched classless hordes, many of them being of dubious heritage, lack the refinement of taste necessary to make autonomy unobjectionable. Those who abuse their liberty, filling the sidewalks of our great cities with repulsive shuffling blimps, can't expect to keep it, can they? 
But should we really be surprised that paternalistic regulation would be so-targeted? When I work backwards from the set of paternalistic regulations to the most plausible underlying motives, I still wind up with the conclusion I'd reached a year ago:
The behaviours of the lower orders disgust me [the regulator]. They give in to base animalistic sensory pleasures. We need to fix them. Tax and regulate them until they stop being noticeably annoying. We'll say it's for their own good, but we'll really stick to the kinds of things that annoy us. So things like making sure everyone in low decile schools takes a course in basic personal finance so they understand how hire-purchase works and avoid making mistakes with loans, we'll not worry about that. But we'll tax fatty foods because obese people are unpleasant to look at and we'll tax the kinds of booze that the lower orders drink because few things are more unpleasant than poor drunk idiots.
It's not implausible that poorer cohorts are more in need of paternalistic regulation than higher income cohorts, if only because of differences in intelligence across cohorts. Do flip back to the linked post and consider the stylized facts there presented:
  • The kinds of alcohol that poor people like get taxed far more heavily relative to overall price than do the kinds of alcohol that rich people like. That isn't unreasonable where the external costs of alcohol use are proportionate to the pure alcohol consumed, but when we start going for minimum price regulation and specific taxes on RTDs, it looks an awful lot more targeted.
  • Official government agencies ignore the evidence on the J-curve and instead promote an abstinence only line. The only sense I can make of this is the noble lie: dumb people who'd otherwise be tempted to drink too much if they drink at all shouldn't drink; smart people can see through the official line.
  • The war on drugs is more heavily enforced against poor people than against rich people.
  • "Fat taxes" would disproportionately hit the poor. The tax will be a greater portion of the purchase price of hamburger meat compared to scotch fillet, even if the fat proportions are identical. And, the higher the proportion of ingredient cost in total price (as opposed to say the input of a high quality chef), the greater will be the the proportionate burden of an ingredient tax. Any bets on whether the price of a McDonald's burger goes up by more, percentage-wise, than a Ruth's Chris steak if we put in a fat tax?
  • If the point of an "internality" tax like a fat tax is to force the individual to weigh the health costs to himself when purchasing, we'd need to scale those taxes by income if we think that rich people respond less to a small per unit increase in food prices than do poor people but suffer from similar behavioural anomalies; if we think that smart rich people are already weighing up those costs and compensating with increased exercise, then it doesn't matter that the per unit charge has less effect on the that group.
  • There's all kinds of talk of mandating that fast food restaurants prominently display nutritional information and calorie counts. But folks tend to overestimate calorie counts at fast food places and underestimate them at the fancier restaurants where rich people eat. Because everybody expects fast food to have lots of calories.
  • Finally, high IQ folks may be better able to route around whatever regulations are put in place.
It still looks to me as though paternalistic regulation is generally targeted at annoying behaviours exhibited by poor people, with sufficient route-arounds to keep the regulations from being too annoying for higher income cohorts. Bloomberg's soda restrictions were just a bit more blatant than most. Again, pulling from last year's post:
One of the better critiques of policy prescriptions based on behavioural economics is that it requires the modeller to step out of the system and to assume that he and the regulator who implements his policies are less subject to the problems ascribed to the regulation's subjects. Public choice folks worry that the paternalistic regulators suffer from the same behavioural foibles as everyone else but have worse incentives than do individuals who have to suffer the consequences of their own decisions. But if the implicit model is that all of this behavioural stuff really only applies to those people over there - poor dumb people, then there's good reason to keep the modeller out of the system.
Recall that Berggren found very few articles in behavioural economics advancing policy prescriptions consider the possibility that regulators might also be subject to behavioural anomalies; I think it's because of a general assumption that they do in fact sit above those they're regulating.

11 comments:

  1. I think it's true, which is precisely it's the *last* think the left will accept it. Enamored by image of Plato's cave (them being outside of cave and us poor schmucks of course sitting in it), they can't afford the view that it's not like while they individually may have some shortcomings, statistically and generally they are so enlightened and us all bigots, traditionalists, skeptics and selfish capitalist bastards are in need of enligtenment.

    Taste reigns supreme: people who play chess and sip white whine are going to be disdainful of those who do not have such tastes and deep down there will feel justified and empowered to make others follow their vision of nurturing others until they have the "right" behavior.

    The funny part is that this instinct is present in hoi polloi too, just in slightly different forms and re different values. It's everybody being peasant pretending to be aristocrat of some sort and trying to remake others that he perceives to be peasant according to his peculiar view of "unacceptably tasteless" behavior of peasant-style behavior and trying to resocialize others to be aristocrat according his peculiar vision of "good life" (good worker, avoiding "idle rich parasite" lifestyle regardless of material standard, etc). Noblesse oblige is in everyone while everyone pretends it's not, leading to farce.

    I remember the poem of sort of "guru" of anti-commie opposition, workers and intellectuals alike, from Soviet times:

    True, we have had a bit of necessary courage
    But all things considered, it was a matter of taste

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  2. There is an alternative reasoning that can explain why biases of the regulator are not usually modelled.
    Suppose the bias only occurs (for everyone, including the regulator) at the time of the consumption decision. Then the regulator, who is not making a consumption decision at the time of writing the laws, is not affected by the bias when writing the laws.

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    1. Except in that case, people in the cold state can buy commitment devices to check them when hot. Then we are back to assuming that dumb people are too dumb to buy commitment devices, ignoring that the poor pay for things like Christmas savings clubs.

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    2. Yes, but only if markets for commitment devices are complete.

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    3. This one already was! You could buy a smaller cup at the theatre if you wanted to bind yourself against drinking too much Coke. Or is the point of irrationality the point of sale, before even had a sip?

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    4. Yes, in this case. But my point was to question your (or perhaps Berggren's?)suggestion regarding the reasoning behind the usual assumptions of the behavioural economics literature.

      For the record, I don't support the proposed NY soft drink law, because I'm not sure that a reduction in the choice set is a good thing here. What I would support is a law that required labelling of drink sizes by amount rather than names (i.e. "one litre" instead of "mega"). I think that such a law would improve my utility (as I would know exactly what I was purchasing) and not just the utility of the "lower orders".

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    5. Evan, I wasn't questioning that you can find behavioural anomalies in the lab. I am questioning the extent to which they apply in the real world and whether, by opening up a vast new domain to government regulation, the behaviouralists haven't done great harm. Why worry about behavioural in application to politics? Think of the list of anomalies the behaviouralists find:
      - sunk cost fallacy: surely this applies as well in bureaus drafting policies that are better abandoned.
      - endowment effects: status quo bias in policy
      - loss aversion: governments flailing around to bail stuff out
      - hyperbolic discounting: Depends how close the next election is, don't it?
      Need I go on?

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    6. I think that it is key to note that the fallacies that might befall a bureaucrat are (often) independent of the fallacies that might befall a consumer, so that we can study the two problems separately. In this light, the current behavioural literature is normative in nature, but there is certainly room for a political economy/behaviouralist melding of the minds to work on answering positive questions.

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  3. Eric, you definitely need to flood the inboxes of all of those self-righteous buggers at the Center for Science in the Public Interest with this particular blog post.

    Not that I think it would do much good, but at least they'd be on notice that there are people out there who understand their true motivations. ;-)

    Garth Wood

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  4. "Official government agencies ignore the evidence on the J-curve and instead promote an abstinence only line. The only sense I can make of this is the noble lie: dumb people who'd otherwise be tempted to drink too much if they drink at all shouldn't drink; smart people can see through the official line."

    I can think of another option, more insidious, which I suspect is correct: the aim is to cause a societal shift down the J-curve. The only way (in their view) to move the people at the high end is to move everybody else as well. Take speeding as an example (or drink driving, or eating high-calorie, nutrient-poor foods). Even though the marginal increase in risk at travelling 5km/h over the speed limit is small, to change the culture of people who drive far in excess of the speed limit , the tolerance is reduced to 5km/h. I suspect that the plan is that those drive at 5km/h over the speed limit now reduce it down to 100km/h. Then a bigger portion of society "frowns on" exceeding the speed limit, affecting those who greatly exceed the limit. So peer pressure eventually changes the attitude of those at the top of the J.

    Except of course that I doubt that this will work. Those at the top of the J couldn't give a rats ass about what those at the bottom of the J say, and subsequent reductions in the tolerance level will only result in alienating those people that aren't much marginally riskier.

    Imagine a tolerance of 1km/h - unless technology provides a means to stop speeding, driver inattention to the speedo will inevitably result in periodic minor lapses, and a police car which is positioned just over the top of the hill will inevitably catch those drivers whose eyes weren't paying attention to the speed (for example, they were actually watching the road).

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    1. You still then need the harm reduction among heavy drinkers to outweigh the harm increase as some moderate drinkers flip to abstinence.

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