Archive for the ‘Blog’ Category

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.

In the spring of 2011, Ray Lewis made the prediction that crime would increase if the NFL lockout prevents the football season from occurring. For some people, like the kids mentioned in his statement, football is a substitute for causing trouble. Ray Lewis (and subsequently LaVar Arrington) left out half the story. A group exists that causes crime because of football. Examples include football drunks and overly aggressive fans (e.g. the baseball incident in May 2011). Without football, the first group will cause more crime while the second group will commit less crime. Due to the uncertainty of the relative sizes of these two groups, predicting the end result is not so easy. I would’ve suggested that crime would decrease, but I am no better of a predictor as we are all victims of the same type of bias.

Mr. Lewis and Mr. Arrington believe the number of aspiring players is larger than unruly fans. I suggest the opposite. Why? Tversky and Kahneman’s availability heuristic suggests that we tend to think there are more of the types of people or things that can easily be brought to mind. The aforementioned NFL players believe that in the average community there are more aspiring athletes than fans. They grew up in such communities. I grew up in a place with relatively more fans, so I fall for the same type of selection bias by asserting the contrary. None of us has experienced the random sample necessary to make a reliable estimate. One of us is likely right, but based on poor methods of estimation.