Paul Krugman and the Notion of Choice
In one of his recent New York Times columns (“Too Much Choice Is Hurting America,” March 1, 2021), Nobel economist Paul Krugman worries about the United States having become
a country in which many of us are actually offered too many choices, in ways that can do a lot of harm.
It’s true that both Economics 101 and conservative ideology say that more choice is always a good thing. …
In the real world, too much choice can be a big problem. …
Too much choice creates space for predators who exploit our all-too-human limitations.
… people have limited “bandwidth” for processing complex issues.
This is not an original opinion. It is typical of the authoritarian left and of the authoritarian right. Even Trump might agree, he who did not mind preventing people from buying dolls made in China. Krugman should know why, for nearly three centuries, mainstream economics, and not only at the 101 level, has taken an opposite stance.
As a positive science, economics shows that individuals make their choices on the basis of their preferences and their constraints. Individuals generally prefer more choices because that increases the possibilities of satisfying their preferences. One is more limited if he can choose between only a rotary telephone and a push-button one. If we use economics normatively on the basis of classical-liberal values (from which Krugman has far drifted), every individuals should have the right to choose what he wants—except for committing crimes such as murder because a social system allowing such crimes is presumably in nobody’s interest.
When Prof. Krugman states that “many of us are actually offered too many choices,” he doesn’t include himself, but only the poor or those who he thinks don’t have his intellect. What would he say if some intellectual told him that he has too many book choices? What if we told him that he is manipulated by “predators who exploit our all-too-human limitations”?
Of course, it is true that some individuals make choices that turn out to be bad for their own future. Errare humanum est. But what is the alternative?
Mr. Krugman only dislikes individual choices. He loves the alternative: collective choices imposed on everybody, choices where individuals are much more impotent and blind. Impotent because the typical individual—as opposed to a Nobel Prize winner with a column in the New York Times—has only one vote that will not change the result of any election; and moreover because, “in the real world,” politicians and bureaucrats make most of the collective decisions anyway. Blind because, for the reasons we have just seen, the ordinary voter remains “rationally ignorant” (as public-choice economists say) of politics and spends less time getting information on politics than when, as a consumer, he buys a new car. Even if you think that you are buying something when you vote, it is nearly infinitely more difficult to figure out what you buy than when you purchase for yourself a car, a computer, a health insurance policy, or a mortgage.
Given his predilection for collective choices, we can suspect that Krugman wants his elitism to be imposed by laws and regulations, mandates and bans. His columns are not meant to be about aesthetics and literary criticism. Isn’t he worried that, in collective choices, political predators, with the same cognitive limitations as “many of us,” will “exploit our all-too-human limitations”? Who is more dangerous, a political demagogue or the VP Marketing at Ford?
Krugman cites the case of the Great Recession as an example of individuals being incompetent to make choices:
One cause of the 2008 financial crisis was the proliferation of novel financial arrangements, like interest-only loans, that looked like good deals but exposed borrowers to huge risks.
To be fair, he does speak of one cause but why does he not mention the major role played by the federal government, which was already guaranteeing nearly half of residential mortgages and was controlling the whole market? The main “novel financial arrangement,” the mortgage-based security, was created in 1970 by Ginnie Mae, a federal government agency that long boasted about it on its website. Krugman knows something about this because he wrote in a 2009 book that securitization was “pioneered by Fannie Mae,” a government-sponsored enterprise created by Congress. Moreover, the federal government had spent decades encouraging poor people to buy mortgages and coercing banks into not discriminating against people likely to be incapable of reimbursing them. In 2003, congressman Barney Frank declared (all citations in my 2011 book Somebody in Charge):
I believe that we, as the Federal Government, have probably done too little rather than too much to push them to meet their goals of affordable housing and to set reasonable goals. … I would like to get Fannie [Mae] and Freddie [Mac] more deeply into helping low-income housing and possibly moving into something that is more explicitly a subsidy. … I want to roll the dice a little bit more in this situation towards subsidizing housing.
All that is a bit troubling. How can somebody like Krugman, who is, after all, an economist and obviously an intelligent man, defend such simplistic ideas? Should we just suppose that his New York Times columns are so heavily edited that they don’t really represent his own opinions? (The New York Times is apparently known as an “editors’ paper” as opposed to a “writers’ paper.”) But if so, why would he accept to play that game?