by Jayson Lusk
The influence of behavioral economics should not be underestimated. It has reached such influence in the food policymaking arena that the USDA held a conference in 2010 entitled Incorporating Behavioral Economics into Federal Food and Nutrition Policy and has published reports with titles such as “Could Behavioral Economics Help Improve Diet Quality for Nutrition Assistance Program Participants?”5 Even economists who tend to be sympathetic to consumer sovereignty have begun to argue with points such as “behavioral economics … may expand the scope of paternalistic regulation.”6 With the popularity of bestselling books such as Predictably Irrational and Nudge, behavioral economics has gone mainstream. The ideas have permeated the highest levels of regulatory decision making at the USDA and the FDA, and one of the authors of Nudge was recently appointed as President Obama’s regulatory czar. Make no mistake about it, behavioral economics is the engine behind the new food paternalism.
My critique of the specific food policies proffered by the food police will come later in the book. In this chapter, I take on a powerful emerging motivation underlying the call for new food policies. It is the idea that you are unable to make wise choices for yourself. If you cannot choose wisely, then the food police have all the motivation they need to decide for you. The paternalistic food police will cite scientific studies to tell you why we need Uncle Sam’s helping hand. We’ll see why those same studies imply no such thing.
WHAT IS BEHAVIORAL ECONOMICS?
Behavioral economics shows that people are … well, human. Behavioral economics suggests that we are irrational and biased; that, on some level, we are incapable of making coherent choices that serve our best interest. If we cannot act in our own best interest, then the food police believe they can step in and make our lives better.
So, what is the evidence that people cannot choose wisely for themselves? Some of the most interesting examples can be found in Brian Wansink’s fascinating book Mindless Eating. Wansink shows that our eating decisions are influenced by subtle cues that seemingly defy logic. We eat more jelly beans the more colorful the bowl; we eat more food and stay at the restaurant longer when we think we are drinking wine from California rather than North Dakota, even though both wines are the same; and we often consume more calories when eating from packages with low-fat labels. If asked the question “When do you decide to stop eating?,” most of us will give answers such as “When I’m full.” Wansink’s research shows that we’re full of it.
In one ingenious experiment, Wansink asked a group of college students to join him for a free lunch. Half the participants were seated in front of a normal soup bowl, and the other half were seated in front of a soup bowl that (unbeknownst to them) was being continually refilled by a tube connected to a large vat underneath the table.
If we stop eating when we’re full, one would expect both groups of students to have eaten roughly the same amount of soup. But Wansink found that those eating out of the bottomless bowl ate 73 percent more soup than those eating from the regular bowl. Surprisingly, the students eating from the bottomless soup bowl thought they had eaten about the same number of calories (and rated themselves as being just about as full) as the students eating from the regular bowl—despite the fact that they had eaten 113 more calories on average! Apparently we stop eating when prompted by some external cues (such as when our bowl is empty or when our plate is clean) rather than entirely internal cues (such as when we feel full).
One of the biggest problems we face when deciding what to eat is the tough trade-off between choosing to eat something tasty (but unhealthy) today with the increased risk of a heart attack or weight gain at some point in the future. Current benefits must be weighed against future potential costs. The research in behavioral economics shows that we tend to be overly impatient. We make decisions that seem to suggest we will always plan to start a diet tomorrow. When tomorrow becomes today, we find ourselves in the same position, choosing to forgo the diet yet another day, telling ourselves all along that tomorrow will be the day the diet begins. It is as though our current self and future self can’t quite get along.
These kinds of findings have led behavioral economists to call for a host of paternalistic regulations to override our preferences. Nobel Prize–winner George Akerlof doesn’t even want to give us a choice in the matter. He says, “Individuals may be made better off if their options are limited and their choices constrained.”7 Writing in Nudge, Thaler and Sunstein say they want to give government the power to nudge us into making the decisions some bureaucrat deems desirable. They seemingly want the government to assume the power to tell restaurants how their menus should look and tell cafeterias how they should be organized. They justify their paternalism by saying that it is “quite fantastic to suggest that everyone is choosing the right diet, or a diet that is preferable to what might be produced with a few nudges.”8 A USDA report says behavioral economics “expands the array of possible ideas” for new food policies and can license the government to alter “elements of the product, such as package size and shape, the amount of variety, the number of calories, or the default options on a menu.”9 Writing for Forbes, Duke University professor Dan Ariely says, “Behavioral economics could help us take steps toward designing a better world.”10 I don’t know about you, but I’m more frightened than comforted by a psychologist confidently asserting he can design a better world with new regulations.
It would be absurd to assert that we never make foolish decisions that, in retrospect, we regret. But despite what we’ve been told by those Ivy Leaguers who have traversed the well-worn highway between academia and Washington, behavioral economics cannot justify the actions of the food police.
THREE MYTHS OF BEHAVIORAL ECONOMICS
Myth 1: The findings from behavioral economics are really important.
If you want a depressing afternoon, spend some time scouring the psychological and behavioral economics literature. There you will find that we are prone to a plethora of decision-making biases that are apparently limited only by the researchers’ abilities to find catchy new names for them. You might begin to wonder how it is we are even able to make it out of bed in the morning and find our way to work. If we are truly as irrational as the behavioralists suggest, wouldn’t they have to have some way of accounting for the success and prosperity most Americans enjoy? It is a bit odd that we are just now getting around to finding out that our decision-making abilities are so poor that new regulations are needed to improve our lot in life. If we aren’t truly more innately irrational than our grandparents, how can the case be made that there is a new need for paternalism?
The answer lies, in large part, in the peculiarities of the academic publishing world. We academics are rewarded for novel ideas. One cannot publish by repeating what everyone already knows. The rise in behavioral economics can be explained in large part because the field offered an alternative: a novelty. But it is important to keep in mind that what sells in academic journals does not necessarily possess real-world importance.
Consider a striking comparison. At about the same time behavioral economists were making headway arguing that people were irrational, a different group of economists were arguing that animals (rats, pigeons, and pigs) were rational. Whereas leading behavioral economists wrote papers concluding that people can’t figure out how to make themselves better off, another group of economists publishing in toptier economics journals concluded that, of all things, animals can!11 The counterintuitive claims that were novel enough to fly in academic journals were that animals were rational and people were not. But no one in his right mind would claim that rats are more rational than humans, no matter what was published in peer-reviewed journals.
If the findings of behavioral economics are really as powerful and influential as claimed, then an entrepreneur should be able to profit from the mistakes consumers make. It might not be surprising, then, to learn that Richard Thaler, one of the pioneers of behavioral economics, is a partner in an asset management company that makes i
nvestments based on the premise that “[i]nvestors make mental mistakes that can cause stocks to be mispriced.”12 Note that this is the same Thaler who coauthored Nudge, which argues for regulators to use knowledge of decision-making biases to improve society’s welfare. It is a little unclear whether Thaler believes that our decision-making problems represent an opportunity for him to extract money from us or improve our lives, but at least we know he’s confident we often don’t choose well.
Alas, a Morningstar analyst concluded, “This mutual fund’s distinctive approach may not be enough,” in reference to one of the behavioral funds Thaler advised.13 More generally, research into dozens of mutual funds constructed to capitalize on traders’ supposed decision-making problems has concluded that “there is no conclusive evidence to suggest that these strategies outperform [a respective benchmark]”14 and that “behavioral [economics] mutual funds are relatively synonymous with value investing and not much more.”15 Believers in behavioral economics can put their money where their mouth is by investing in funds designed to capitalize on investors’ decision-making biases. Here’s my advice: don’t do it. And if traders with hundreds of millions of dollars on the line can’t put the behavioral economics research to work to earn a buck, what makes you think bureaucrats and politicians can?
The failure of behavioral economics to generate superior performance in consequential matters, such as making money in the stock market, has not prevented some from taking simple findings from academic experiments and drawing grandiose claims about the promise of behavioral economics for creating new regulations to improve our health.
For example, in his bestselling book Predictably Irrational, Dan Ariely describes some creative studies he conducted with college students and Halloween trick-or-treaters showing that choices were highly influenced (seemingly irrationally so) by whether a chocolate was advertised as free. Based on the behavior of the preteen ghosts and goblins, Ariely concluded, “We can use FREE! to drive social policy.” He suggests, “Want people to do the right thing—in terms of getting regular colonoscopies, mammograms, cholesterol checks, diabetes checks and such? Don’t just decrease the cost (by decreasing the co-pay). Make these critical procedures FREE!”16 Notice the statement “Want people to do the right thing”? The implicit premise is that we are either unwilling or unable to make the “right” food and health care decisions on our own. But even if we could get everyone to check his cholesterol, wouldn’t we need to know how much it costs before we could say the decision was “right”?
In another set of experiments, Ariely shows how college students reacted to different opportunities to set class project deadlines. Then, without showing that regular people will respond to health care interventions in the same way that students responded to assignment deadlines, he makes the leap to conclude, “Think how many serious health problems could be caught if they were diagnosed early. Think how much cost could be cut from health-care spending … So how do we fix the problem? Well, we could have a dictatorial solution, in which the state (in the Orwellian sense) would dictate our regular checkups. That approach worked well with my students.” While Ariely explicitly recognizes the heavy-handedness of his proposal, he goes on to defend it by encouraging us to “think of the other dictates that society imposes on us for our own good.”17
Ariely is a first-rate scholar and perhaps we should cut him some slack for trying to publicize his research, but when the elite turn around and use the same book as “scientific evidence” to support new paternalistic food and health regulations, surely we must take pause.
Even some leading behavioral economists agree that the government will be unable to use the findings of behavioral economics to substantively impact the nation’s health. George Loewenstein, a prominent behavioral economist and professor at Carnegie Mellon University, surprised many people when he wrote an op-ed for the New York Times admitting that behavioral economics cannot reverse the rise in obesity. He said, “For all of its insights, behavioral economics alone is not a viable alternative to the kinds of far-reaching policies we need to tackle our nation’s challenges.”18 It seems Loewenstein believes some type of regulation is needed to “correct” our food choices, but the findings of behavioral economics lack the oomph to nudge people in the right direction.
Myth 2: Paternalism is different from elitism.
I have a confession to make. I’m a paternalist. With two elementary school-aged children at home, I don’t have much choice, unless I’m willing to let the Wii run 24-7 and allow my kids’ teeth to rot from Pop-Tarts and Twizzlers. Yep, I think I know more about what will affect my kids’ future happiness than they do, and I exercise my parental authority to make it happen. Although I’m a paternalist with my kids, few would say that makes me an elitist. Why? Because, as Bill Cosby used to say about his children, “I brought you into this world and I can take you out of it.”
Whether by law or by social custom, I have a nearly universally agreed-upon right to be master of my children (at least within some reasonably wide legal boundaries). But since when did Richard Thaler or Cass Sunstein or Dan Ariely or any number of the other folks who apparently think they know what is better for me gain the right to make choices on my behalf? When did I become someone else’s responsibility? Assuming the right to care for someone when they haven’t asked for it is only slightly shy of tyranny.
When paternalistic policies are advocated on regular people such as you and me, it becomes clear that the food elite seek to impose their particular notion of morality on others. By trying to supplant each of our own individual decisions, made in different contexts with our own insights into the options facing us, with a uniform plan of what they believe we should choose, the food police reveal the height of their elitism.
For example, many of the food police want to follow the example of the European Union and ban ranchers and farmers from using growth hormones in dairy and beef cattle production. “Good for them,” you might say. After all, aren’t these added hormones the cause of the declining age of puberty among American girls? Hardly.19 For those folks who want to avoid added hormones in meat and milk, they are free to pay higher food prices for the organic varieties.20 The rest of us can take comfort in knowing that fears over the cost-saving technology are vastly overblown.
A one-pound burger from a steer administered growth hormones has about 3 nanograms more estrogen (the primary hormone compound used to promote growth) than cattle who have never received the added hormones (a nanogram is one billionth of a gram). Yet the same amount of raw cabbage contains 10,896 nanograms of estrogen, and the same amount of soybean oil contains almost 1 million nanograms of estrogen! A birth control pill has many thousands of times more estrogen than that contained in a serving of beef.21 You might still want to eschew burgers from cattle fed growth hormones, but clearly it would help to have a bit of perspective.
Rather than letting each of us weigh the evidence and decide if the extra cost of organic beef is worth the minuscule increase in risk, the food police want to make the choice for us. Here is the irony. The behavioral economists have told us for years that humans make mistakes by exaggerating the importance of low-probability risks.22 Yet I have not seen a single behavioral economist use this insight to tell the food police to relax and put their fears about growth hormones, genetically modified food, or pesticides into perspective. Instead, we see the behavioral economists partner with the food police to advocate policies they want even if it means ignoring the implications of their own research. The truth is that the many millions of decisions we shoppers make at the grocery store every day reveal that we’ve decided it simply isn’t worth exploding the grocery bill to have beef from cattle that haven’t been given added growth hormones. The food police have determined that all these decisions are wrong, and they have no justification for the conclusion except their own desire to remake the world as they want it.
If we no longer use an individual’s choices to define what is or is not “good,” then who
se do we use? Many behavioral economists attempt to skirt this subtle but critically important point. In Nudge, Thaler and Sunstein call for paternalistic policies “to influence choices in a way that makes choosers better off, as judged by themselves.” Is this not a logical inconsistency? If people’s preferences are incoherent, as Thaler and Sunstein argue they often are, then people cannot “judge for themselves.” Thus, the elite seek to replace each individual’s judgment of the “good” with their own. Paternalists aim to remake the world as they want it—a world that differs from the one people have actually created through their own individual actions. According to Kerry Smith, a leading environmental economist and member of the National Academy of Sciences, this is “simply an effort by one group to convince others they are really the ‘smart folks’ and should make decisions for others in the truly important, complex situations.”23
Recall that many behavioral economists contend that we do not have sufficient self-control to take care of our future selves. The supposed proof of this irrational behavior is said to be found in survey responses in which we say we wished we weighed less or saved more. But our current self will always wish that our previous self had dieted and saved more, because we are now in the position to reap the benefits without paying any of the costs. The paternalist has simply decided that your abstract future self is right and your current-acting self is wrong, and the only possible excuse the paternalist can give for his paternalism is his own preference for your actions.