Sunstein is perhaps best known for bringing the insights of behavioral science into the realms of law, public policy, and regulation.
[…]Sunstein is particularly intrigued by the science of defaults, those subtle cues (the well-placed tray of bananas, for example) that shape our decisions, often without our being aware of it, making certain choices feel almost automatic.
[…]The design of defaults is thus of great importance. And that importance is only magnified by the flawed nature of human decision making. Although lawmakers, economists, and providers of healthcare and social services used to assume that people based decisions on their own rational self-interest, seven decades of behavioral data have demonstrated that this is rarely true. In reality, people are influenced by random factors and tend to base even consequential choices on convenience and habit. Moreover, the structures that frame how we make individual decisions always exist in a larger context. For instance, offering fruit alongside donuts has social and economic implications. If fewer people choose sugary treats, healthcare costs will come down, resulting in a rise in disposable income, increased consumer spending, and so forth.
Yet the question of who gets to set the defaults sparks contentious debate. Should private-sector companies have the right to pay for preference? For example, should a french fry vendor be able to secure favorable placement in a school cafeteria by offering cash or a discount? Or should school administrators or parents have a voice? And if so, should experts armed with data about the impact of excessive french fry consumption be able to weigh in on the public’s behalf? Does the use of behavioral data by regulators with enforcement powers promote the best interest of citizens, or does it constitute an infringement on their liberty?
The importance of these questions can hardly be overstated. The answers will determine everything from how companies set strategy, to the reliability of consumer information, to the role of the truth in shaping information, to how we understand liberty in the Internet age. Sunstein, who has been at the center of the default debate, comes down strongly on the side of the public as represented by its elected government, arguing for greater and more transparent regulation of how defaults are set — in healthcare, energy consumption, financial services, Internet search, and education. He also argues for the expanded use of data in identifying optimal outcomes, though not in compelling them.
Sunstein coined the term libertarian paternalism to describe how the government’s use of empirical data can improve the operation of the regulatory state. Libertarian reflects his belief that people should be given incentives and alternatives rather than mandates and penalties in civil law. He notes that “to qualify as libertarian, design must always be choice-preserving. Nudges are interventions that individuals can easily decline or avoid. There is always an opt-out or a safety valve.” Paternalism reflects his conviction that incentives designed to make specific outcomes more likely are not just an intelligent but also a benign way to encourage behaviors that can help people lead longer, happier, healthier, and more prosperous lives. Far from seeing such behavioral interventions as an architecture of coercion, he views them as providing an architecture of choice that leaves individuals free to decide.
[…]…before behavioral economics, economists considered themselves the only true scientists of the social realm. That is, they considered their theories to be pure, informed only by metrics. But they turn out to have been influenced by other considerations.”
The fault line exposed by behavioral economists was bound to stir controversy, Kahneman says, because our human belief in our own rationality “leads to specific moral and political conclusions.” If people are entirely rational, as classical economists have always presumed, “they have a clear sense of what serves their best interests and so do not require protection or help from the government. If people really are the best judges of what is good for them, neither they nor society as a whole should be protected from the consequences of poor choices, so even gentle nudges are an unbearable form of paternalism and condescension. Those on the right object to nudges because they believe neither governments nor markets should care about how people make decisions, but those on the left often object only to nudges that disproportionately impact those who are already disadvantaged. For example, they might consider a tax on cigarettes to be a tax on the poor.”
Sunstein counters that taxes are not nudges, but rather blunt and coercive instruments used to regulate behavior that could more effectively be addressed by less invasive means that preserve choice. Nudges, prompts, and reminders are cheap, simple, and inherently choice-preserving tools that regulators can use to increase compliance and encourage better outcomes.
[…]Kahneman notes that choice architecture and nudges have long been used in the private sector. Examples range from the simple opt-out on insurance in rental car contracts to the sophisticated product suggestions that are intrinsic to Google’s and Facebook’s business models. Yet applying an enhanced understanding of what might motivate and engage citizens in their interactions with government inevitably evokes concerns about personal liberty. Glenn Beck once called Cass Sunstein “the most evil man, the most dangerous man in America.”
[…]The criteria people use to assess trade-offs and make decisions has been a contentious topic in the academic world since at least 1955, when future Nobel Prize–winning economist Herbert Simon challenged the assumption that people in a free society decide what best serves their interests in an entirely rational and therefore essentially accurate way. Simon’s experiments demonstrated that, on the contrary, people’s choices are often informed by biases, uncertainties, and partially or poorly understood information. Especially when making financial choices and assessing potential risks, humans tend to be ruled by impulsive desires and overly optimistic assumptions. This optimism extends to how they calculate risks to their personal safety, the classic example being the firm belief of the overwhelming majority of drivers that their driving skills place them far above average.
In the years since Simon’s experiments, behavioral economics has come to have a huge influence, spawning an industry of bestsellers — many of which have become essential reading for business executives. The overarching theme of this body of work has been the extent to which markets are driven by human emotions and perceptions, and their consequent inability to be rationally managed. This has brought the behaviorists into sharp conflict with their more traditional colleagues, who retain their faith in the untrammeled rationality of “homo economicus” and insist that unfettered markets create and serve meritocratic effort and yield the best outcomes.
Sunstein says he was attracted to public work because government is problem driven, not theory driven, and so requires putting theory into action. “You’ve got 20,000 people a year dying on highways, so you need to figure out the most cost-efficient way to reduce the carnage,” he said at the New School event. “You have x number of people living in poverty: How do you bring that number down? You have a high rate of small business failure: How do you ameliorate that? If you as a regulator don’t know the nature of human biases, you can’t design laws and programs that people will be motivated to use. Behavioral data helps us know how to do this.”
[…]Sunstein views having simplified application and compliance procedures as one of his signal achievements, and in so doing he likely saved both citizens and businesses tens of millions of dollars in paperwork costs. He says that during his tenure, he met with people in hundreds of regulated companies, “and the complaints I heard were rarely about the regulations themselves but about how confusing they were, how much time and guesswork compliance required. This kind of complexity constitutes a tax in itself, and [is] deeply frustrating to people. So redesigning rules to be easier to comply with was a primary goal.”
[…]Sunstein notes that “in terms of health, safety, national security, and consumer behavior, the use of behavioral science is now part and parcel of ordinary government work. Those uses are not partisan [and] will definitely endure. They are popular because they save lives and money.”
[…]Sunstein is fascinated by how the proliferation of choice that has transformed our consumer culture is currently transforming how we understand what constitutes news. And he is concerned about social media’s ability to give biased or unproven news wide exposure and so deepen divides among citizens, a capacity now on vivid display both at home and globally.
The ability of powerful algorithms to sort through masses of information and “suggest” items and sites that suit our interests and tastes has resulted in a high degree of personalized curation. In 1995, MIT Media Lab founder Nicholas Negroponte prophesied this state of affairs, terming it “The Daily Me.”
[…]This kind of subjectivity might strike some as the ultimate architecture of choice, but Sunstein has a different view. When we outsource our search for information to algorithms, we eliminate serendipity and chance encounters, protecting ourselves from information we might prefer to ignore and enabling us to avoid what Sunstein calls the “unchosen exposures” upon which robust public involvement depends. As a result, our ongoing retreat into “gated communications communities,” says Sunstein, diminishes our ability to understand other points of view, making it difficult to imagine how reasonable people could even hold different perspectives. Because democracy thrives in a cultural environment where opposing ideas can be freely aired and vigorously debated, custom curation has the effect of narrowing our understanding of the world and how we assess which issues are important. This diminishes our capacity for self-government and ensures that we have ever less in common with our fellow citizens.
Custom curation also facilitates the spread of inaccurate or biased information, popularly known as fake news. Sunstein notes that cybercascades — those online rumors, factoids, or urban legends that get amplified through repetition — occur in isolated communities where “what others believe” is the standard by which truth is judged. In a climate where news comes via personalized feeds, fakeness becomes relative, defined differently depending on which sources you follow. “Cybercascades,” Sunstein writes, “are inherent in the echo chamber of Twitter and Facebook. This is a primary reason that conservatives tend to question ‘what science tells us’ in regard to climate change, while liberals tend to question science when it comes to GMOs [genetically modified organisms].” We are all getting different information.
[…]Behavioral science is clear about why we are so eager to surrender to customization: It’s easy and convenient. The field since its start has been insistent about the limited nature of human attention. Daniel Kahneman’s first book, Attention and Effort (Prentice-Hall, 1973), described our aversion to whatever is demanding. Because attention requires focused effort, our brains are always on the lookout for shortcuts and defaults. Social media is built to provide them and so gives us a way to plunge into the fray without having to give the effort much, or even any, thought.
[…]Not surprisingly, Sunstein sees a role for government in mitigating the effects of information filters. Most democracies are deliberative rather than direct, relying on representatives who debate and reach compromises rather than putting every question before the voters. As a result, government, in Sunstein’s view, has a responsibility to ensure that “opinion [is] reflective and well-informed,” enabling people to understand opposing viewpoints so they can come together in support of the compromises that lawmaking inevitably entails. By contrast, the development of niche speech markets makes self-government less workable by reinforcing the clustering of the commons.
Those who disagree may object that government has no business messing with the Internet, which is assumed to operate best when it is most free from regulatory intervention. But Sunstein sees this view as incoherent, given that the Internet relies on government to enforce contracts, protect property rights, and prosecute the hacking of websites and the hijacking of personal information and social media accounts. Because online activity can flourish only when government upholds these protections, he believes that ensuring “a well-functioning system of free expression” is a proper use of regulation.
Sunstein therefore advocates regulatory measures that expand our range of choice — the kind of nudges, tweaks, prompts, and defaults he pursued during his tenure at OIRA. “Must carry” policies (similar to those regulations that require cable providers to carry locally licensed television stations) could bring information that would otherwise get filtered out of social media forums. “Opposing viewpoint” or “serendipity” buttons could enable Twitter users not only to receive but also to pass along different perspectives, diminishing the intensity of fake news cascades. “Deliberative domains” could offer users a chance to try to persuade those skeptical of their cherished beliefs rather than endlessly preaching to their choirs. Algorithms could be tweaked to lead searchers to new sources of information rather than continually pushing them to the most frequently used channels. Such proposals, limited and optional, reflect Sunstein’s passion for incremental and inexpensive fixes, for weighing costs and benefits, and for finding middle ground between competing claims and interests.
Source: strategy+business (Autumn2017)
Subjects: Articles & Links, Economics | Economy, Excerpts, Life & Society, Politics & Public Policy, Psychology | Behavior
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