Thursday, October 12, 2017

"moved, steered, and in some cases manipulated"

At Mercatus, Nudge Theory in Action. It's a one-paragraph blurb for a new book on one aspect of behavioral econ, plus the Table of Contents, plus a link to the foreword by Tyler Cowen (PDF).

It's an advertisement. It's a nudge.

I went to the PDF.

"The issues surrounding 'Nudge' are some of the most important in all of economics" Cowen writes. "The simplest models of economics take preferences as given, but nudge ideas suggest that we can be moved, steered, and in some cases manipulated."

Oh that's new.

When I took macro in 1977, I was taught that there are two major types of economies: command economies, and those guided by economic incentives. "Incentives" was the good one and (not coincidentally) the one we have. The commies had command economies.

More recently I've seen people complain about the ineffectiveness of our approach. Oh, sure, command economies can be much better at getting you to do what they want you to do. If you like that kind of effectiveness. But I prefer incentives: Give me a tax break for doing what you want me to do. I'll get there eventually.

Incentives are compatible with the market economy, if that matters to you; command is not.

When it comes to policy, I prefer incentives. But when it comes to what brand I smoke and what I eat and what I wear and where I live, I prefer to be left alone.

But that's just me.

"The simplest models of economics take preferences as given," Cowen writes, "but nudge ideas suggest that we can be moved, steered, and in some cases manipulated."

Should we be more suspicious of private sector nudge or public sector nudge?

I am myself never quite sure how to answer the above question. On one hand, I fear the greater competency of private sector nudge. I know that a talented team of marketers is working overtime to try to get me to buy the product, take out a loan, or participate in a charitable cause ...

"A lot of this nudging is good for me," he adds. Fuck that.

Private sector nudge is highly problematic, and I would say it is often worst in those areas we tend to feel best about: health care, education, and charity. In those cases, our guard is most likely to be let down, even if we are highly educated. Or should I say because we are educated?

What about public sector nudge? Well, the good news is that a lot of what government does is simply send money around through transfer programs. In this regard, its potential for manipulating us is fairly limited.

That last part I don't buy at all. The potential for manipulating people is limited because they use transfer programs? If I'm a poor starving waif surviving on government handouts, I have no incentive to kiss government ass? I have more incentive, more likely.

Furthermore, government is extremely bureaucratic and usually it does not have top tier marketing talent. Most of the time I just don’t find my government very persuasive. Is there really anything the DMV can talk me into that I wouldn’t otherwise want to do?

But can I then relax? Can I stop worrying about public sector nudge? I am not so sure...

War, he says. Government nudges us into war.

Government also has nudged us into believing that more government regulation is the answer to many of our problems.

Cowen is not doing a neutral evaluation here. He's got preferences, and his evaluation is based on them. But I think Cowen's preferences show that he has more to fear of manipulation from anti-government forces than from government.

"Finally," Cowen writes,
I worry about how private sector and public sector nudge interact... The problem, in broadest terms, is that the public sector often piggybacks upon the marketing efforts of the private sector. The private sector marketing, taken alone, probably would be far less harmful, but it can be combined with the coercive powers of the public sector.

With anti-government attitudes so common these days, I suggest that private sector nudges are far more effective than public sector nudges.

And what is this crap about "the coercive powers of the public sector"? I thought we were talking about nudging. Incentives, remember? Not the command economy. Did you lose focus, Cowen?

Or are you trying to nudge me.

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