NIM, PUB and Cognitive Paternalism
Please allow me to think aloud. Just don’t be disappointed if I don’t get anywhere . . .
A few posts ago I coined a term: Neutral Institutional Monism (NIM). NIM is the thesis that there are institutions and there are institutions. The primary explanatory distinction is not coercive vs. non-coercive, or state vs. market, but between stable patterns of mutually advantageous interdependent action vs. unstable or mutually harmful patterns. This cuts across the coercive/non-coervice distinction.
Undergirding NIM is what I’ve called the principle of behavioral uniformity, but which I’ll call instead the principle of uniform behavior (PUB), for the sake of a mnemonyic acronym, since PUB is the hard nugget of wisdom at the core of Public Choice theory. PUB says that there is human psychology and then there is human psychology. Whether a person is embedded in a market institution or a state institution will not affect how she will tend to represent her prospects, represent their relative costs, or act on these representations. Psychology is everywhere the same. When behavior differs, it is not due to underlying differences in cognitive or motivational structure, but due to the way alternatives and their prices are represented. People are smart and good when it pays to be smart and good. People are dumb and corrupt when it pays to be dumb and corrupt.
Now, whether “it pays” is a function and consequence of the structure of institutions. Not all institutions are formal. If your community has accepted a norm according to which women who show their ankles will be treated as if they are not there—will be denied any acknowledgement or human contact—then, other things equal, it will not pay for women to show their ankles. This norm is a kind of institution. If we want to go a level deeper, many norms lead to stable patterns of action because they have been fully “internalized,” leading people to impose negative sanctions upon themselves through shame and guilt, even when their norm violations are undetected. Norm enforcement is cheapest when people can’t help but punish themselves.*
Anyway, the point I want to get to from NIM and PUB concerns the justification of paternalistic intervention on the basis of the fact that actual human psychology diverges from some ideal or other of rationality. Many of these paternalist arguments suffer from violations of both NIM and PUB.
First, the Fallacy of Asymmetric Idealization. The cognitive paternalist (that’s what I call them) is very good about getting into the nitty gritty of actual cognition, its foibles and imperfections, and how the real deal differs from idealizations of rationality. Great! And, then they fail completely to get into the nitty gritty of actual political institutions, their foibles and imperfections, and how they differ from idealizations of collective action. In effect they say this:
In the real world, the mind works like this, and this can lead to all kinds of problems. And in an extremely unrealistic abstract model of government action, its agents can easily and objectively identify problems and act to effectively solve them. So, let’s have the ideal government solve the problems of nonideal cognition.
It sounds stupid when you put it that way, doesn’t it? The trick is figuring out how to work with real minds, using real governments!
NIM asks, so how are you going to do it? Most real government institutions are at least as kludgey and means-ends inconsistent as real minds are. “Silly, your sock won’t open that can of spinach! So try your pillow instead, because a model exists in which pillows are can-openers.”
The NIM “what is this wonderful institution of which you speak” question is heightened by PUB. Psychology is general. So if we’ve got nonideal psychology, then we’ve got nonideal psychology, including every single agent of the government. So the cognitive paternalist proposal really depends on a supressed premise that there is some possible institution of government that can solve problems of nonideal psychology, but which is itself unaffected (or only mildy affected) by problems of nonideal psychology.
NIM also suggests that we just slow the hell down before deciding we need a government institution to solve some kind of perceived problem. We might. But we might not. NIM asks us to compare all our possible institutional options.
Consider these combinations with nonideal cognition fixed:
(1) nonideal cognition + ideal markets = no paternalism
(2) nonideal cognition + nonideal markets + ideal goverment = paternalism
(3) nonideal cognition + nonideal markets + nonideal government = ???
Our world, the world of NIM, is (3). Whether nonideal cognition could justify paternalism depends on what our market and government institutions can in fact accomplish.
Let’s call an institution that corrects for some nonideal aspect of cognition an ameloriative institution. An ameliorative market is structured so as to raise the prices of nonideal cognition, resulting in less of it. An ameliorative policy is one the government implements to change the prices of nonideal cognition, through coercion, resulting in less of it.
OK. Suppose there is the possibility for an ameliorative market, but the market needs some changes in regulation, legal code, etc., in order to function, and this is something the government has to do. (For example, a Hanson-style futures market in ideas might be ameliorative in some ways, but it cannot exist the US’s present regulatory climate.) Now, if the government is of sufficient quality to implement an ameliorative market, then coercive ameliorative policies will be unecessary, or at least less necessary. But if the government is not of sufficient quality to implement ameliorative markets, then it is probably not in a position to apply effectively ameliorative coercion, either.
And . . . that’s all I’ve got for now.
January 10th, 2006 19:51
If this is you thinking aloud, you’re a lethal weapon when you’re speaking with great deliberation. Excellent post. A similar view has been coalescing in my mind ever since I started taking an interest in public choice, but as usual you’ve put precisely the right words to it. I like the term NIM especially.
BTW, you’ve got a dangling asterisk with no associated footnote.
January 11th, 2006 00:12
Perhaps this has been covered before, but how can “stable” and “beneficial” be paired together like this, in contrast to “unstable” and “harmful” (or, perhaps more succinctly, “not as beneficial”)? Are there not examples of stable-yet-harmful institutions, or unstable-and-beneficial ones? Not to nitpick, but it seems like an important point..
January 11th, 2006 00:50
Great point. I take it that much of public choice theory describes how government can be relatively stable, yet inefficient or harmful. The concentrated benefits/diffuse costs logic shows us how special interests will often succeed in engineering wealth-destroying transfers, for example, but, in the short-to-medium term, this won’t bring a wealthy system down. I’m not so sure about unstable-yet-beneficial institutions, since it’s hard to be beneficial without stability. Let me think about it.
January 11th, 2006 01:15
I’d say that many reciprocal trust norms could be classified as “unstable-and-beneficial”. I guess trying to measure the “stability” of an institution would be mostly a matter of looking at how robust it is in surviving against external pressures. Any institution which exists must be stable in some context, but could be considered unstable in light of its fragility to external circumstances…
But perhaps then it’s merely semantics. An “unstable” institution could be defined in such a way that such a thing, by definition, could not exist. But if one chooses to see stability as a continuous measure, it probably wouldn’t be difficult to think of examples of fragile-yet-existent institutions which we might be inclined to label as “unstable”.
January 11th, 2006 09:12
Is there a conflict between PUB and the internalization of norms? Or, I guess I am asking, does the internalization of norms result in a change in the cognitive structure? If the cognitive structure stays the same, then what is changing with the internalization of a norm?
January 11th, 2006 09:24
I think you are making an unjustified leap in logic at the end of your argument.
You apparently assume that implementing markets and implementing coercive policies require the same kinds of competencies. Are you saying that if a government is not of sufficient quality to, say, manage the market for beef, then it probably isn’t in a position to enforce contracts in the market for beef?
It seems easy enough to imagine that a goverment could effectively work to enforce contracts (by commiting to exercising coercive power against parties that violate contracts), and yet also believe that such a government would be incompetent as implementer of a cattle market.
January 11th, 2006 09:26
Michael, Great point. I think sort of and sort of not. The internalization of norms doesn’t change cognitive structure, so much as changing the representational framework atop the common cognitive structure. An internalized norm affects the way alternatives are represented, and the prices associated with them. We can’t actually represent the entire set of opportunities, so something has to prune the feasible set. Norms can do that, such that some possibilities don’t even occur to you, which ensures that you don’t do them. Or if a possibility action does occur to you, norms help you pin a price on it.
So, yes, people who have internalized different norms may behave differently in otherwise identical external circumstances. Different possibilities will occur to them, and they will order the possibilities differently, because different norms will assign different prices to them.
January 11th, 2006 12:33
I’m not sure if this is the same point Michael made, but your last paragraph reifies “the government” in exactly the way you say NIM forbids. If the “government” is really a whole lot of different patterns in the culture, then a broad brush public choice claim that these patterns are always ineffective is dubious.
Suppose we have found, through trial and error, that requiring people to put money aside for their retirement (or even requiring them to specifically exercise an option not to) helps counteract what you would concede is a nonideal cognitive tendency to discount the future excessively. If we take NIM seriously, then we should be suspicious of an ideologue who comes along and wields the coercive/non-coercive, state/market dichotomy in a utopian fashion.
January 11th, 2006 13:34
Michael, Pithlord,
You’re both right. Which is why it’s so nice to think aloud in front of really smart people! And which shows just how hard NIM makes to think in useful generalities.
Michael, You’re right that the competencies to enforce contracts and to actively run a market are different. What I hazily had in mind by “implement a market” was something like setting in place the legal/regulatory framework for the definition of property rights and contract enforcement. My sense is that the cattle futures market, say, depends on the willingness of government to acknowledge and enforce certain kinds of contractual arrangements. Innovations in new forms of contracts won’t have teeth unless the government will recognize them as valid. So maybe it’s better to say “facilitate” rather than “implement” a market. One of the things that makes good governments good is that they do a good job of facilitating markets, and know that they’ll do a bad job of managing them, and so don’t try.
Pith, I agree that an ameliorative policy about coercing people into savings might work well. What I’m interested in is what government institutions need to look like such that policymakers accurately identify what has been sussed out by trial and error, and implement an effective policy without, at the same time, using the same power and discretion to implement excarbating or harmful policies. Are there aspects of the current policy climate that, say, exacerbate the tendency to “excessively” discount? Perhaps government assurances that people will not be allowed to fall into poverty in old age leads to present overconsumption.
I think lurking in the background here is a fuller NIM story about the institutions of expertise. You need economists, political scientists, psychologists, etc., to identify nonideal cognition, the problems that arise from it, and potential solutions. But these experts don’t exist without institutions of expertise, like universities, think tanks, etc. A society with high-quality institutions of expertise will have a leg up on setting effecive ameliorative policy.
But you also need a way to integrate institutions of expertise into government institutions, while avoiding problems of confirmation bias in choosing which experts to listen to, appointing them, etc. The US Fed I think is an interesting case of a political institution that does a decent job of applying policy on the basis of expert opinion without suffering from too much political capture.
I should say that I think the coercive/non-coercive distinction IS very morally salient. Other things equal, less coercive policy is morally better. So if there is some less coercive means of raising the cost of undersaving, then we ought to prefer it. But, as Michael’s comment implies, state coercion, in the form of the commitment to enforce contracts, is often the assurance at bottom of a well-functioning market. The decision to enforce some contracts, but not others, is a decision about how to bring coercion to bear. Some markets, such as, say, dynamic auction markets for landing spots at airports, are coercively forbidden (as far as I understand). “Letting the market work” in this kind of case involves removing a policy of coercion, and, at the same time, committing to enforcing new forms of contracts, which is an new policy about the deployment of coercion. So.. there’s a bigger point in there somewhere …
Thanks guys, this is really helping.
January 15th, 2006 16:31
Will,
How is the commitment to enforce contracts a form of coercion? Perhaps this is just a verbal quibble, but enforcing a contract amounts to enforcing the property rights of the parties to said contract. Enforcing property rights is not coercive.
Pithlord,
Referring to a rate of future discounting as excessive seems to imply that there is a correct rate. Do you mean to imply this? Do you believe that you know what this rate is?
January 15th, 2006 21:42
James, Of course enforcing property rights is coercive. You’re just saying that you think it is legitimate coercion. If I fail to complete my end of a contract, I can be arrested, my property appropriated, etc. That’s coercion, right?
January 16th, 2006 13:46
James,
I don’t need to know what the “correct” rate for discounting is to know that the rate revealed by behaviour is too high any more than I need to know what the correct calorie intake for a 35 year old male is to know that I overeat. I know I save too little, and I know many others are worse. That is perfectly consistent with their being a range of reasonable discount rates, and even my not knowing what that range is.
January 17th, 2006 13:31
I hope you don’t mind if I think out loud a bit, as well. Without getting into the worthwhile discussions that have already ensued, let me suggest a general solution to many of the problems that come with the NIM and PUB relationship. That solution is “blinding.”
Just as pharmaceutical companies engage in double blinded clinical studies to remove the possibility of human bias in the determination of the safety and efficacy of drugs, so should blinding be used in the planning and execution of ameliorative public policies.
The basis of this is best understood by taking Brian Tracy’s most recent book, Something for Nothing, as a useful description of non-ideal cognition. He says that all humans are naturally (read: genetically):lazy, greedy, ambitious, selfish, vain, ignorant, and impatient. He then explains that all humans have a heirarchy of needs. Starting from the bottom: safety, security, comfort, leisure, love, respect, and fulfillment. The issue is how humans get from their basic attributes to the fulfillment of their needs. The right systems dissuade the pernicious manifestation of our basic attributes, while the wrong systems encourage them. Free markets without an easily accessed safety net are an example of the former. Collective and paternalistic economies are an example of the latter.
So, it would be easy to just say that a well-run free market is the answer to the NIM/PUB problem. However, we really can’t get there from here. So what to do? Start using something akin to blinding in the dispensation of ameliorating government policies.
The idea is that the non-ideal aspect of government is almost entirely due to the disproportionally large influence of special interests. Money from the masses (from federal taxes, for example) goes to specific entities in specific geographies, often for far-from-ideal uses. Imagine - and this is where I am at the moment - imagine a system whereby requests for federal funding are blinded. Decisions as to what organization gets what would be disconnected from the non-ideal (that is, corrupt) process that happens today. This is just means based redistribution, but with a check against inherent human expediency.
Still thinking about how to make it work, but I believe there’s something there. The money to be made by getting a drug to market, even if the drug doesn’t work, is so substantial that we have to expect a constant barrage of invaders looking for a chink in the armor. Blinding, thus far, has been pretty effective in stopping the cheaters. And, as it is philosophically similar to the idea of checks and balances, I can’t help but think it could be a plausible solution, even it is only an incremental one.
Incidentally, you can check out my review of Tracy’s book at:
http://www.enlightenedcaveman.com/2006/01/book-review-something-for-nothing.html
Great post!
January 17th, 2006 19:08
Will,
I reckon our disagreement re: coercion is probably about how we define the term coercion, rather than anything more substantive. I mean it as the initiatory infraction against the property rights of another, so when I say contract enforcement isn’t coercive, I really mean that it isn’t coercive, not that it’s coercive but justified.
Pithlord,
Generaly I hesitate to assign a comparative operator between two quantities when I don’t know the endpoints of the range in which one of them falls. If your discount rate is D and the range of reasonable discount rates is (A,B) where A and B are unknown to me, I have no idea how I could ever be reasonable in making claims about whether or not D is on (A,B). I could be wrong.
January 18th, 2006 02:47
James,
I think you’re asserting the consequent or something. If I know what D is, and I know what B is, then I know whether B
January 18th, 2006 20:11
James,
Odd. I would think it is much easier to accurately rank magnitudes than to know what they are.
More importantly, I took the point of your original comment to be that our revealed preferences can’t be wrong. But they can. I can like carbs too much, or smoke too much, or read crap. I can even know that my preferences are bad, and want to change them.
This does *not* mean that someone is entitled to impose my true preferences on me. There may be a value to autonomy that trumps other-imposed perfection. But we can be liberals without saying that revealed preferences are just given, above cognitive crticism or improvement. That is too high a price to pay for liberalism.
January 22nd, 2006 20:14
Pith,
You write “Odd. I would think it is much easier to accurately rank magnitudes than to know what they are.”
I’m thinking of a number A and a range from X to Y. I won’t tell you what the values of A, X and Y are. Rank them.
You continue “More importantly, I took the point of your original comment to be that our revealed preferences can’t be wrong. But they can.”
Maybe so. I lack the confidence to claim that any particular instance of revealed preferences is wrong. Thre is too much temptation to confuse the right preferences for others to have with my own likes and dislikes.
January 23rd, 2006 15:44
James,
I have here a pug and a Newfoundland. i won’t tell you what their weight is. Which one is heavier?
I suspect you get the right answer more often than chance.
I don’t disagree with you that we should be cautious about imposing what we believe to be the right preferences over those that revealed by uncoerced behaviour. One reason is that we might be wrong. Another is we might be biased. But even if we are right, and unbiased, there is still a third answer, which is that we are all entitled to make bad choices if we pay the consequences.
That third answer is a pretty good one, 99% of the time. But you wouldn’t use it for four year olds wanting to cross Sixth Avenue.
January 27th, 2006 14:46
this has seemed obvious to me for a long as i’ve considered such things. hovever you, myself and other readers of your blog are obviously outliers given the popularity of paternalistic solutions. thanks for expressing this more elegantly than i ever could - and for your other good work.
January 27th, 2006 20:15
Pithlord,
I have prior empirical knowledge about what different breeds of dog weigh. For your analogy to work, I’d need prior knowledge about what fraction of their income people ought to save, or the range in which this fraction falls. I don’t get my knowledge about “ought” from empirical evidence and my introspection just comes up blank on the question of how much others should save.
But suppose that I though I really knew what other people should be saving. Well, I tell my friend he saves too little. He tells me that actually I’m saving too much. How do we decide? At best, we should be able to adress the issue with some method sufficiently clear that we can tell whether or not we are even applying it. Well, we can look at the consequences of different savings rates, but how much we value those effects is subjective. Then what?
Finally, I’d agree with “…we are all entitled to make bad choices if we pay the consequences,” except that it has some odd implications for a person who really wants to do something terribly bad: May I smash your foot if I’m willing to pay your hospital bill and serve jail time? I guess there are bullets to bite that go along with any view, but I’d rather bite the bullet that says a kid really has the right not to be interfered with crossing the street.
January 13th, 2007 04:10
Your point is a good one: when one is trying to find a solution to a problem with markets, it’s easy to idealize government beyond all recognition, and vice versa. Morals legislation is all to often based on the most extreme version of this irrationality: the omnipotence of law. If you outlaw prostitution or marijuana, you are punishing prostitutes and drug users, and possibly driving up the price of both, but you are certainly not wiping out either one by fiat.
Paternalism is justified by reference to the imperfection and irrationality of human nature, but these same traits count against human beings acting through government to limit imperfection and irrationality.
This is a good point, but the level of abstraction at which you raise it makes it sound more damaging to the paternalist case than it really is. A smoker intentionally lights up under the influence of nicotine cravings. Even a legislature consisting only of chain smokers will not be led by their nicotine cravings to write a law promoting smoking. The imperfections/irrationalities of human beings in government are not necessarily the same as those of the individual. In a particular instance (e.g., smoking bans) a paternalist might argue that government is clearer-sighted and deliberative IN THAT INSTANCE than the individual. (At the same time, leaders’ besetting vice is a tendency to lose touch with reality — submitting them to elections by the people, sobers up the government in ways that IT needs sobering up.)
I can certainly see how two imperfect friends, who are imperfect in different ways might make each other more perfect by offering their advice and recognizing each other’s area of superiority. Individuals and their democratically elected, constitutionally limited government might balance each other similarly.
As for your final conclusion, if I understand what you mean by ameliorative markets correctly (e.g., sulfur-tax or carbon-tax, cap and trade?), these seem best suited to getting agent A to recognize a cost to agent B as a cost to himself — they “internalize” externalities.
When we come to correcting for an individual’s failure to appreciate his own long-term good, they seem to fall afoul of a much more pernicious version of the problem you raise for paternalism: they attempt to use the individual’s long term rationality to correct for his deficiency in long-term rationality. They try to correct individual long-term irrationality (with respect to health) by appeal to his long-term rationality (with respect to money). This seems silly, because very few people value their money more than their health — the problem is an irrational discounting of future satisfactions brought by either health or money. What you need to compensate for the long-term irrationality of smoking is a short term inconvenience, like having to go out and smoke in the cold, not another long-term disincentive, like finding yourself more deeply in debt at the end of the year than you would otherwise have been (a disincentive you can avoid by never adding up how much cigarettes have cost you over the year).
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