Billy Foster, PhD

Billy Foster

Clinical Assistant Professor of Economics at

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Ask a physicist how long it would take a bowling ball to land if you dropped it from the roof of your house. He will happily assume that your house is located in a vacuum, and then proceed to calculate the right answer. Ask an engineer to predict the path of a billiard ball after it is struck at a certain angle. He will assume that there is no such thing as friction, and the accuracy of his prediction will give him no cause for regret. Ask an economist to predict the effects of a rise in the gasoline tax. He will assume that all people are rational and give you a pretty accurate response. — Steven E. Landsburg, The Armchair Economist (1993)

Posts Tagged ‘preferences’

The role of government has been debated since the days of Plato. The debate may never be settled. There may something many can agree on, however. The ideals of soft paternalism suggest that the state can often point you in the right direction without removing freedom of choice from the situation. By changing the default setting, behavior can be changed.

To many economists, this doesn’t make sense. For example, imagine two boxes. One has a cupcake and the other a donut. I allow you to pick a box, I take the other, and we open both. Once you’ve seen both items, I give you the choice of the two. Economic theory states that you always select the item you prefer more. This is not what always occurs. People tend towards the status quo–choosing the one they received first. For more on this see this article by Jack L. Knetsch.

An article from The Economist states that 49% of people who start a new job will sign up for a pension plan if paperwork is required to join, where 86% will remain in the pension if paperwork is required to opt out. If we believe more people should be saving for retirement, changing this default value can make society better off, while still preserving individual choice. Recently, organ donor programs have been pushing for a similar change in the status quo. See the USA Today article on opt-out donor programs.

Earlier this year an article by Dr. Kirsten Bibbins-Domingo et al. in the New England Journal of Medicine suggested that moderately lowering salt in diets should be a public health target. While some view this as the long arm of government reaching too far into our kitchens, I see it as another form of soft paternalism. As any chef will attest, you can’t cook salt out of a dish. Now those who prefer lower salt meals can have them and those who want to add salt can do so freely. The spectrum of choice is greater and the change in the status quo might end up promoting public health.