Paternalism and Perfectionism

1
Paternalism and Perfectionism

• F.H. Buckley
• Sciences Po
• fbuckley_at_gmu.edu

2
The assignment from last dayWhy compulsory
attendance?

• An externality problem? Does each persons
  attendance confer external benefits on other
  students? (e.g., better questions).
• A self-binding strategy that responds to akrasia?
• On the other hand, does compulsory attendance
  weaken the signal of diligence? Or would that
  amount to excessive signaling?

3
The hubris of economists

• All learning aspires to the condition of
  economicsbut for the data problem
• Ostensible critiques of economics are best
  understood from an economic perspective

4
Rational Choice Five assumptions

• Four we saw already
• Full Information
• Non-satiation
• Completeness or comparability
• No third party effects (externalities)
• Now--Perfect Rationality

5
Relaxing the Rationality Assumption
Transitivity A Technical Definition

• If A is preferred to B and B is preferred to C,
  then A is preferred to C
• AgtB, BgtC ?AgtC
• A?B, B?C ? A?C

6
Transitivity AgtB, BgtC ?AgtC
Time 1














A













B


C





















































Time 2






0








7
Transitivity Indifference curves cant touch

If a c and c b, then a b. But b gt a



Time 1

































A violation of transitivity










b








a













c











Time 2






0









8
Relaxing the rationality assumptionPaternalism

• Suppose we knew we would harm ourselves in our
  choices in certain cases
• Might we not then wish to delegate to the
  paternalist to choose for us?

9
Relaxing the rationality assumptionByron, The
Prisoner of Chillon
At last Men came to set me free I asked not
why, and recked not where-- It was at length the
same to me, Fettered or fetterless to be-- I
learned to love despair My very chains and I
made friends, So much a long Communion tends To
make us what we are, even I Regained my freedom
with a sigh
10
Paternalisms questionable historySo you want
to help victims? How about

• Restrictions on women
• Slavery
• The benevolent have a tendency to colonize,
  whether geographically or legally. Arthur Leff

11
The New Paternalism

• Unlike the old Paternalism, the new Paternalism
  does not discriminate
• It is also based on better science

12
The New PaternalismWhen might our desires
misfire?

• When might we agree to let the Paternalist
  second-guess our decisions?
• Judgment Biases Because we miscalculate what is
  good for us
• Akrasia Because we lack the strength of will to
  pursue what we know is good for us

13
Paternalism Judgment Biases

• Rationality as a scarce resource the need to
  rely on heuristics and hunches
• Even if these are satisfactory in average cases,
  they seem to mislead in anomalous cases.
• The rise of cognitive paternalism

14
Judgment Biases Some readings

• Vern Smith, Nobel Address 2002
• Kahneman, Slovic and Tversky, Judgment Under
  Uncertainty (1982)
• Gigerenzer, Adaptive Thinking (2000)
• Sunstein, Behavioral Law and Economics (2000)

15
Judgment Biases Emotional and Moral Heuristics

• Our emotions are coded with knowledge
• Deep preferences as a solution to PD games
• Of disgust and hatred
• Moral Heuristics
• Gigerenzer
• Romola

16
PaternalismSome Judgment Biases

• The Availability Bias
• Pauline Kael on the 1972 election
• How likely is a divorce?

17
Some Judgment Biases

• The Anchoring Bias
• Suppose I tell you that there are 18 Canadian
  Nobel laureates.
• How many Chinese laureates do you think there
  are?
• How many Italian ones do you think there are?
• How many Russian (Soviet) ones?

18
Some Judgment Biases

• The Anchoring Bias
• Suppose I tell you that there are 18 Canadian
  Nobel laureates.
• How many Chinese laureates do you think there
  are? 6
• How many Italian ones do you think there are?
• How many Russian (Soviet) ones?

19
Some Judgment Biases

• The Anchoring Bias
• Suppose I tell you that there are 18 Canadian
  Nobel laureates.
• How many Chinese laureates do you think there
  are? 6
• How many Italian ones do you think there are? 19
• How many Russian (Soviet) ones?

20
Some Judgment Biases

• The Anchoring Bias
• Suppose I tell you that there are 18 Canadian
  Nobel laureates.
• How many Chinese laureates do you think there
  are? 6
• How many Italian ones do you think there are? 19
• How many Russian (Soviet) ones? 21

21
Some Judgment Biases

• The Anchoring Bias
• Suppose I had started by telling you that there
  were 261 U.S. Nobel laureates. Had that been the
  anchor, would your estimates of the number of
  Russian laureates been different?

22
Some Judgment Biases

• The Gamblers Fallacy
• You are at a casino. At the roulette table, the
  numbers are either red or black. Black has come
  up six times in a row. What is the probability
  that it will come up black on the next turn?
  (Assume a fair table.)

23
Some Judgment Biases

• The Gamblers Fallacy
• You are at a casino. At the roulette table, the
  numbers are either red or black. Black has come
  up six times in a row. What is the probability
  that it will come up black on the next turn?
  (Assume a fair table.) 50. (You thought the
  table had a memory?)

24
Some Judgment Biases

• Regret
• You attend a boring lecture in law-and-economics.
  On returning to your flat you discover that you
  missed a visit from a long-lost friend. You feel
  great regret even though, ex ante, attending the
  lecture seemed the best thing to do.

25
Some Judgment Biases

• The Hindsight Bias
• You watch a baseball game. The pitcher (ERA of
  2.11) has given up two walks in the eighth
  inning. The manager leaves him in. The next
  batter up hits a home run. Idiot!, you say. I
  would have taken the pitcher out.

26
Do judgment biases justify Paternalism?

• Do we underestimate small probability events?
• Mandatory seat belt laws
• Mandatory no-fault divorce
• Incentives to put savings into a pension plan

27
Do judgment biases justify Paternalism?

• Are our hunches dumb? Gigerenzers fast and
  frugal heuristics
• Ecological rationality how well do our
  heuristics fit in the world we inhabit.
• Is there an inner logic to availability, regret
  and other heuristics?

28
Do judgment biases justify Paternalism?

• Is there an inner logic to availability, regret
  and other heuristics?
• Anchoring and availability ordinarily are
  efficient
• Regret pierces through egotism
• The Hindsight Bias underlines the lesson we are
  taught.

29
Do judgment biases justify Paternalism?

• Are some biases self-correcting?
• There is a 50-50 chance it will rain tomorrow,
  and a 10 percent chance of a bus strike. What is
  the probability that it will rain and that there
  will be a bus strike? But might the conjunction
  bias be self-correcting if the probabilities are
  not handed to one?
• Optimism and risk aversion

30
Do judgment biases justify Paternalism?

• Are some biases corrected through learning?
• How to hit a curve ball.
• Can market processes help?
• Would inefficient heuristics tend to get excluded
  in markets?

31
Do judgment biases justify Paternalism?

• What about the Paternalists judgment biases?
• Lord Denning and the hindsight bias.
• The business judgment rule.
• The availability bias and inefficient pollution
  regulations.

32
Paternalism Akrasia

• The akratic are not-ruled
• Pictures of akrasia
• Dostoyevskys gambler
• The disciples in the garden The spirit is
  willing but the flesh is weak.
• St. Peter

33
Varieties of Akrasia

• Overwhelming passion Phèdre
• The Divided Self To which self are we allied?
• Reversal of preferences Mary Beth Whitehead
• Self-deception Denial is not a river in Egypt
• Discounting the future criminals

34
Does Akrasia argue for paternalism?

• The akratic might wish for laws that address
  their weakness of will.
• Can you think of examples?

35
The Counter-arguments

• Is addiction per se bad? Might it ever make sense
  ex ante to become an addict?

36
Gary Becker Rational and irrational addiction
Utility
Preferences for commodities over time
Time
0
Gary Becker, Accounting for Tastes (1996)
37
Gary Becker Rational and irrational addiction
Over time the preference for classical music
increases but this is a benign addiction
Utility
classical music
B
A
Time
0
Subject suffers from withdrawal if music taken
away from him
Gary Becker, Accounting for Tastes (1996)
38
Gary Becker Rational and irrational addiction
Utility
classical music
B
A
Time
0
C
coffee
Unlike classical music, there comes a time when
the subject would like to stop drinking coffee.
Though he finds he cannot do so, his ex ante
decision to start drinking coffee is still
rational
39
Gary Becker Rational and irrational addiction
Utility
classical music
B
A
Time
0
C
coffee
D
hard drugs
Ex ante, the decision to start taking hard drugs
is irrational
40
The Counter-arguments

• Can the state distinguish between rational and
  irrational addiction?
• Just how would you categorize the taste for the
  following
• Tobacco
• Ice cream
• Lotteries

41
The Counter-arguments

• If we might be weak-willed, can we address the
  problem without the help of legal barriers?
• Social sanctions
• Self-binding

42
The Counter-arguments Self-binding as a response
to akrasia
Jon Elster, Ulysses and the Sirens (1984)
43
Examples of self-binding

• Marriage
• Home purchases
• Leverage

44
The Counter-arguments

• Is there such a thing as excessive self-control?
• Prohibition
• The addict and the teetotaler

45
Aristotles anaisthesia
No booze for you, INSECT!
Carrie Nation
46
Is there such a thing as excessive will-power?
Ainslie in Elster, Getting Hooked (1999)
Bergson Life demands not only that we live but
that we live well.
Chardin, The House of Cards ca. 1735
47
Impugning Individual Choice Weve just seen
Paternalism Now Perfectionism

• Paternalism Interfere with personal choices to
  make subject better off
• Perfectionism Interfere with personal choices to
  promote a moral goal

48
Impugning Individual Choice
Perfectionism
Paternalism
The two strategies overlap
49
Impugning Individual ChoiceVarieties of
Paternalism
Perfectionism
Soft Paternalism (good preferences)
Hard Paternalism (immoral preferences)
50
Impugning Individual ChoiceTwo kinds of
paternalism

• Soft Paternalism overrules personal choices in
  order to satisfy subjects deepest preferences
• ? Judgment biases and akrasia
• Hard Paternalism overrules personal choices when
  the subjects deepest preferences are immoral and
  he doesnt know whats good for him

51
Impugning Individual ChoiceVarieties of
Paternalism
Perfectionism
Soft Paternalism (good preferences)
Hard Paternalism (immoral preferences)
52
Now Perfectionism

• Private Perfectionism overrules personal choice
  to make the subject a better person
• Social Perfectionism overrules personal choice to
  protect third parties from moral externalities

53
Varieties of Perfectionism
Private Perfectionism (Hard Paternalism)
Social Perfectionism
Soft Paternalism
54
Private Perfectionism

• The subject has immoral preferences which the
  perfectionist would reform
• The anti-perfectionist as a neutralist

55
Private Perfectionism

• Neutralism cant rest on mere subjectivism.
• And just how many subjectivists are there?

56
Private Perfectionism defies stereotypes

• Right-wing perfectionism
• Drug laws
• Sexual immorality
• Same sex marriage
• Left-wing perfectionism
• Smoking
• Civil Rights laws
• Same sex marriage

57
Social Perfectionism

• Mills harm principle
• The only purpose for which power can rightfully
  be exercised over any member of a civilized
  community, against his will, is to prevent harm
  to others. Mill, On Liberty (1859)
• But what counts as a harm?

58
Physical spillovers










































































Exxon Valdez 1989














59
Moral spillovers?














































































Couture, Les Romains de la decadence, 1847










60
Social Capital

• Das Kapital physical capital
• Human Capital
• Information economies
• Social Capital
• Kingdom of Cooperation
• Republic of Defection (Montegrano)

61
Social Capital

• Social Capital
• So what kind of social virtues would one look
  for?
• The Bourgeois virtues honesty, fidelity,
  prudence, moderation, reciprocity
• The Romantic virtues Transcendence, Passion
• You can have the latter without the former but
  does the former exclude the latter?

62
Social Capital

• Social Capital
• So what kind of social virtues would one look
  for?
• Is this an empirical question? Look at the
  direction of immigration flows.

63
Social Capital

• Social Capital
• So how to preserve social capital? And how is it
  destroyed?

64
Devlins Disintegration ThesisDevlin, The
Enforcement of Morals (1965)

• The Hart-Devlin debate
• Is there a connection between a change in
  (sexual) moral codes and the disintegration of a
  society

65
Devlins Disintegration ThesisDevlin, The
Enforcement of Morals (1965)

• So a society disintegrates. So what?
• Of snail-darters and communities of people
• Communitarian values

66
Devlins Disintegration ThesisDevlin, The
Enforcement of Morals (1965)

• James Fitzjames Stephen Would we accord a moral
  sense to our feelings of repugnance?
• Cloning
• Late term abortions
• How do these feelings change. And is that always
  a bad thing?

67
Devlins Disintegration ThesisDevlin, The
Enforcement of Morals (1965)

• Spillover effects
• Divorce and families
• 1964 Civil Rights Act

68
Neutralism and Slippery Slopes

• The Battle of the Slippery Slopes.
• Will a slight change in moral habits lead to the
  Decline and Fall of our civilization?
• Or would any effort to arrest a moral decline by
  legislative means amount to and Iranian Holy
  Fascism?

69
Can the state be trusted to legislate morals?
No one expects the Spanish Inquisition!
70
Varieties of State Interference with Preferences

• Criminalizing behavior
• Civil or Administrative Sanctions
• Taxing vice and subsidizing virtue
• Laws expressive effects

71
Things weve covered

• The ex ante and ex post perspectives
• The importance of incentive effects of legal
  rules
• How collective rationality differs from
  individual rationality in PD games (The Tragedy
  of the Commons)
• Solutions to PD games Legal rules, self-binding,
  union, reputation and the iterated PD game,
  internalized norms

72
Things weve covered

• Free Riders and Hold Outs
• Risk neutrality and risk aversion
• The Coase Theorem
• Contractarianism and Transaction Costs
• Three meanings of least cost risk avoiders
• Marginalism Minimizing Costs at MC MB
• Rawls and Utilitarianism
• Agency Costs and Monitoring

73
Things weve covered

• Edgeworth Box Function
• Pareto-superiority, Pareto-optimality
• Kaldor-Hicks Efficiency
• The Market for Lemons
• Efficiency Equivalence of SL and Negligence
• Paternalism and Perfectionism

74
Things weve covered

• All in a 20 hour course

75
And to quote Jack Nicholson
76
And to quote Jack Nicholson
Thats as good as it gets!