November 14, 2005
From the desk of Winterspeak:Personal interactions with Schwartz
Barry Schwartz has become something of an anti-choice posterchild after his book, "Paradox of Choice", hit the circuit. I've actually met and spoke with him a couple of times and remain unimpressed -- as does Mindles H Dreck.
Schwartz's position is out and out socialist/communitarian/technocratic/elitist or whatever you choose to call the notion that people cannot be trusted to make good decisions for themselves. He honestly believes that it is the correct role of an authority to make the decision for them, both for their own good and for the good of society. He pays lip service to the idea that choice and competition have produced some good, but argues that things are so out of hand now that that has to end.
Nevertheless, I am sympathetic to the idea that figuring out this stuff is complicated and I acknowledge the empirical reality that multiple choices turn people off and impose a real search cost on them.
Schwartz's response to this is to eliminate choices entirely, but Thaler/Sunstein's "LIbertarian Paternalism" is about better defaults and better editting. Instead of getting rid of an option, make the default options better. This is a critical distinction since "one-size-fits-all" is a poor approach to public policy but people also make bad decisions when left to their own devices. Since you cannot get away from having some default option, why not try to make it a good one instead of a random one? In areas like healthcare and retirement, bad individual decisions have negative externalities since soceity at large will be taxed to make up the difference. Since good defaults result in better decisions (which they do), this is a good way to improve 401(k) participation rates and the quality of that participation without reducing individual choice.
(I don't know of any good way to handle healthcare.)
Posted by Winterspeak at November 14, 2005 9:36 AM | TrackBack | Technorati inbound linksVirgina Postrel has written on this subject many times. If memory serves, she suggests that as choices become more complicated, we rely more on choice-making intermediaries - and all without any artificial limitation of choices. Makes sense to me.
If governments couldn't convince people they could make better choices for them than they could make themselves, how would they justify their power?
It's already legal to make 401(k)s opt-out rather than opt-in. I suspect that forcing all plans to go opt-out would reduce match rates as participation climbed (to keep costs down). But that's only a supposition.
On Timothy's supposition, I, too, think fewer companies would match (or would reduce match rates) employee contributions if all 401(k)s were opt-out plans. A primary reason for the employer match is to create an incentive for employees to participate in the 401(k). If the employees participate without the match (because of the opt-out structure), there is little reason for the employer to offer a match. (This does not mean that employers would simply pocket the savings from forgoing the match. Many of them would make a contribution to each employee's account. The only difference is that the amount of the contribution to an employee's account would not depend on the amount of the employee's contribution.)
Look at how difficult it is to choose a spouse. And that is a lot more important than choosing an automobile or a brand of soap! So many choices! And given the divorce rate these days, we don't seem to be choosing very well. Obviously the State should step in and select our mates for us, using scientific principles.
I for one welcome our new overlords.
We have too many books! There are so many published that no person can keep up with even the leading items. We need to prevent more books from publishing! Academics and writers should be subject to a gov't review board that would give only a select few permission to publish.
Well, if Barry Schwartz is so convinced that decision making is a terrible, terrible hardship, I've got some great news for him. Because I'm such a damn swell fellow, I'll make the sacrifice of making all of Mr. Schwartz's consumption decisions for him. If he believes what he's saying (as opposed to looking for a justification for his arrogating himself the right to make similar decisions for others), he'll look at me as his personal savior.
And food! For the love of frank, if someone would oversee my meal planning and motivate me with a cattle prod to exercise, I just might shed this last 10 (ok, 15) pounds.
Since I'm obviously a bad decision maker when it comes to diet and exercise (which will affect my health, creating a drain on the medical community and eventually hindering my ability to contribute to society, etc), someone has to dooooo something...
...like pay farmers not to produce...
...like ban junk food from public areas...
...like demonize the restaurant industry...
(snark)
Hang on. If we are so bad at making choices, why pass the buck to politicians we chose?
A solution for health care: allow the 401(k) account to be drawn from, tax-free, for health purposes (much like a Flexible Spending Account, HSA, and MSA can be used now) if and only if the account is associated with an acceptable medical insurance program (at least catastrophic) on the person for whom the expense is drawn.
Also have the same rule apply for Roth 401(k)s. (Never heard of a Roth 401(k)? You'd better Google it!
-Billy
"If we are so bad at making choices, why pass the buck to politicians we chose?"
They will deal with that in the next round.
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