Thomas C. Leonard on Nudge
By David Henderson
See Update Below.
While web surfing the other day, I came across work by Princeton economist Thomas C. Leonard. There’s a lot of good work there. In this post, I want to highlight his review of Nudge by Richard Thaler and Cass Sunstein. Up until now, my favorite review of their book has been my own [Scroll down]. I do what only a few reviewers do: get the exact argument made by the author completely accurate, never exaggerating, never playing cheap rhetorical tricks. Then, when I criticize, the author can’t claim that I misstated him.
Thomas Leonard, based on this one review, at least, seems to follow the same rule. And, in doing so, he comes up with a more fundamental criticism of Nudge than my own. As a result, my review of Nudge is now my second favorite.
Like Thaler and Sunstein, I had taken it as given that a libertarian paternalist–I explain in my review why this isn’t a contradiction in terms–should be trying to design the “choice architecture” so that people make the choices that their “rational” side–the “Planner”–would make. But Leonard points out the problem with this. He writes:
Set aside the problems of bad nudges and evil nudgers. Assume effective instruments and benign intent. What does mean to make a time-inconsistent person better off when her Doer and Planner incarnations have opposed views of what is better? Tom Schelling posed the dilemma this way: ”how do we decide which side we are on?” (1984, p. 87). On what grounds should a paternalist privilege the Planner?
Say I prefer $100 today to $110 next week (Doer), and I also prefer $110 in 53 weeks to $100 in 52 weeks (Planner). My preferences are inconsistent: I am more impatient in the near future than in the far future. But there are two ways to nudge them toward consistency: promote impatience (Doer) or restrain impatience (Planner). Thaler and Sunstein acknowledge the dilemma for the paternalist facing a divided self: ”If the arrangement of [cake and fruit] alternatives has a significant effect on the selections the customers make, then their true ‘preferences’ do not formally exist” (2003, p. 1164).
We certainly don’t want Homer Simpson at the helm of Ulysses’ vessel when the cost of succumbing to the Sirens’ song is mass death. But the choice between Doer and Planner is rarely so stark. How much should a person save? What is the optimal tradeoff between cost of weight gain and the pleasure of tasty calories? Are workaholics, anorexics and misers–what happens with a dictatorship of the Planner–any less immoderate than slackers, the overweight, and the profligate?
Sure, more people make New Year’s resolutions to lose rather than to gain weight, but that’s just Planner talk. Many others resolve to spend less time at the office, and more time enjoying life with family and friends, Doer talk.
And, immediately following, the crescendo:
The irony is that behavioral economics, having attacked Homo Economicus as an empirically false description of human choice, now proposes, in the name of paternalism, to enshrine the very same fellow as the image of what people should want to be. Or, more precisely, what paternalists want people to be. For the consequence of dividing the self has been to undermine the very idea of true preferences. If true preferences don’t exist, the libertarian paternalist cannot help people get what they truly want. He can only make like an old fashioned paternalist, and give people what they should want.
UPDATE: In response to commenter Ted Levy, here is a link to much of Thomas Leonard’s other work. There’s a treasure trove there.