Further thoughts on my post below about the proliferation of choice. To be fair to the article’s author, he did not actually advocate public policies designed to reign in choice (though I suppose he might in his book). But I wouldn’t be surprised to find out that others have advocated such policies or will in the future. If so, then we have a nice example of the “damned if they do, damned if they don’t” trap that statists set for free markets. If markets don’t produce a wide array of choices, they are condemned for imposing the values of some consumers (those with the greatest influence on producers’ choices about product characteristics) on the population at large. We hear this kind of argument from the high-brow critics of pop culture (“Britney’s driving out Mozart!”), despite the wide variety of non-pop cultural products also available. On the other hand, if markets do produce a wide array of choices (as is, in general, the case), then we get the criticisms discussed in the previous post: that people are paralyzed by choice, that they spend too much time making decisions, that they are less content, etc. One way or another, the market takes the blame.
Similarly, no matter what happens to food prices, markets come under attack. If the price of food is high, markets get blamed for starvation and hunger. If the price is low, markets get blamed for making people fat.
As I discuss elsewhere, alcohol regulations are justified via a similar Catch-22. Franchise termination laws (which restrict the ability of alcohol suppliers to find new distributors) are sometimes justified by the alleged need to restrain the monopolistic power of large suppliers. The claim is that termination laws are required to protect competition, thereby (presumably) holding down prices. But if turns out that the laws actually drive prices up by shielding the large distributors from new entrants and the encroachment of small distributors, as I think is more likely the case, then the regulators fall back on a different argument: that higher prices are good because they cause people to consume less of the devil drink – like a back-door sin tax. Either way, regulations are justified.
Readers are invited to email me more examples (or put them in the comments box).
Saturday, January 10, 2004
Free Markets, Damned If They Do...
Thursday, January 08, 2004
Bet You Won't Hear This in the State of the Union Address
Remember the weapons inspectors who were looking for evidence of weapons of mass destruction after the war in Iraq? The Bush administration is withdrawing them from the country. A different team whose job is to dispose of biological and chemical weapons will remain in Iraq, but it is "still waiting for something to dispose of."
Delegating Authority, Dodging Responsibility
Amy, who writes one of the most prolific one-person blogs I know, calls down the Washington Post for inconsistency. The Post is concerned that the Patriot Act was written in vague language that allowed its actual content to be filled in primarily by the executive branch – which sounds an awful lot like a violation of the constitutional division of powers. But, Amy notes, the Patriot Act hardly breaks new ground in this respect, as virtually every federal regulatory agency works on the same template. To be consistent, the Post should also take issue with the enabling statutes that created the EPA, OSHA, FDA, etc.
One reason that Congress delegates legislative authority to the executive is, as Amy suggests, to allow for a greater expansion of state power. If Congress actually had to specify all the content of regulations, they just wouldn’t have the time to do as much regulating as they’d like. But I would argue that a more explanation of why Congress delegates its power is to finesse disagreements among its own members. Making trade-offs among disparate policy goals is hard work. Members of Congress would rather not make the trade-offs, especially since they will get blamed for any actual decisions they make – possibly losing votes and campaign money. So instead, they pass vague laws that claim to make satisfy everyone. Take, for example, the mandate created under the Emergency Petroleum Allocation Act (which I’ve taken from Gary C. Bryner’s book Bureaucratic Discretion):
[Issue regulations that] protected the public health, maintained public services and agricultural operations, preserved a sound and competitive petroleum industry, allocated crude oil to refiners to permit them to operate at full capacity, resulted in an equitable distribution of supplies to all parts of the country, promoted economic efficiency, and minimized economic distortion.In short, deftly palm the coin. Why should Congress make any hard decisions, when they can tell someone else to do it for them? And then, if anyone complains, just blame the administrative agency in charge.
Wednesday, January 07, 2004
Inefficiency Across the Curriculum
I’ve observed a disturbing trend (it’s gone on far too long for a fad) in education toward “across-the-board” curriculum elements. The most recent example, which affects me rather directly, is the requirement that group-work be included in every MBA class here at CSUN. (Actually, it may not be a requirement, but one of the items on every MBA class evaluation form is “Did this class help you to develop your teamwork skills?” or something to that effect.) The idea, of course, is that teamwork is so important that students should practice their teamwork in every class. Similarly, many high schools and colleges have implemented “writing across the curriculum” requirements, under which every class of every subject -- including math classes -- should have the students do a substantial writing assignment of some kind.
Two things irk me about “across-the-board” requirements. The first is their apparent lack of regard for the value of specialization. I was trained in economics, and that’s where my comparative advantage lies. Fortunately, I have reasonably good writing and editing skills, so I’m not worthless to my students in those areas. But the same cannot be said for all economists, or mathematicians or physicists. Moreover, I don’t have time in an economics class to spend on grammar and writing lessons, because I barely have enough time to cover all the economics material I want to cover. As a result, the writing assignments in my classes probably don’t actually improve anyone’s writing skills. The good writers get good grades, the bad writers get bad grades, and that’s all there is to it. To make people better writers, you have to assign them multiple papers and provide extensive feedback on each one, and you need to make them revise each paper to correct the problems. But doing all of that would seriously detract from my ability to teach my students economics.
My second problem with “across-the-board” requirements is their susceptibility to political bias (for lack of a better term). Why are writing and teamwork skills required across the board, while quantitative skills are not? In my experience, I’ve found students’ quantitative skills to be just as bad as, probably worse than, their writing and teamwork skills. A writing-across-the-curriculum requirement imposes no additional burden on an English teacher, because writing is already the crux of the course, but it imposes a substantial burden on me. Why isn’t the English teacher required to test his students’ quantitative skills, just as I’m expected to test my students’ writing skills? My best guess (readers are invited to suggest others) is that the people who impose such requirements don’t emphasize math because they, too, are deficient in their quantitative skills, and they feel awkward about requiring of students what they lack themselves. But if this hypothesis is true, it’s evidence of a greater need for quantitative skills.
Not that I would advocate a “math across the curriculum” rule, because I wouldn’t trust most teachers in other subjects to do it correctly. I would settle instead for the weakening of the current across-the-board requirements that place a disproportionate burden on one subset of the faculty.
Monday, January 05, 2004
Chained by Choice
An article by Barry Schwartz in yesterday’s Parade magazine says that people can actually be made worse off by having more options (the full text is apparently not available online). According to the conventional wisdom of economics, Schwartz’s claim verges on nonsense: In most microeconomic models of choice, it’s logically impossible to decrease a person’s well-being by increasing the size of his choice set. But the article argues otherwise. Here’s a sampler of the article’s claims:
• “But if the number of choices keeps growing, negative effects start to appear. As choices grow further, the negatives can escalate until we become overloaded. At this point, choice no longer paralyzes us; it might even be said to tyrannize.”
• “At any large drugstore, you’ll find 80 types of painkillers, 40 kinds of toothpaste. … A choice that once took only 5 minutes now could take most of the day.”
• “The American ‘happiness quotient’ has been going gently but consistently downhill for more than a generation. In the last 30 years – a time of great prosperity – the proportion of the population describing itself as ‘very happy’ has declined. The decline was about 5%. This might not seem like much, but 5% translates into about 14 million Americans.”
• “Here we are, living at the pinnacle of human possibility, awash in material abundance. We get what we say we want, only to discover that it doesn’t satisfy us. The success of 21st-century life turns out to be bittersweet. And I believe that a significant contributing factor is the overabundance of choice.”
The notion that more options can make us worse off is not a logical impossibility, but I’m highly skeptical of its importance. In defense of the standard economic view, consider the following:
• If the burden of choice is too great, you can nearly always discard some portion of the choice set. Pick the first outfit you pull out of the closet. Buy the first can of coffee you see on the shelf. Go with the waiter’s recommendation at the restaurant.
• The process of searching for something – the best pair of jeans, a better job – often generates net benefits, at least in expected value. Otherwise, we could just terminate the search earlier. The fact that a choice that would have taken you 5 minutes now takes longer does not, in itself, indicate that you’re worse off, because you will only incur the added search time if the increase in value you expect to get exceeds the cost of search.
• Sometimes the search itself is enjoyable. If someone spends a whole day looking for a pair of jeans, I’m betting that person actually enjoys shopping.
The most plausible argument in support of Schwartz’s position is not that your own larger choice set makes you worse off, but that others’ larger choice sets do. The reason is that you might measure your happiness in relative terms, so that if everyone gets better off (say, wealthier) by an equal amount in absolute terms, nobody’s actually any happier. This approach transforms a positive-sum game (everyone can improve their condition) to a zero-sum game (one person’s gain is another person’s loss). But even if that’s part of the story, it’s nowhere near the whole story. I enjoy my DVD player immensely, not because I have one and others don’t (almost everyone I know has one now), but because I enjoy the superior picture and sound quality, the ability to turn captions on and off, etc.
Surveys like the one mentioned above, showing that fewer people are “very happy” than 30 years ago, don’t really show that people are worse off or that people only measure happiness in relative terms. On the contrary, it might be that people engage in benchmarking: they look toward the success of others to gauge how well they are doing relative to their potential. If lots of other people around me are managing to achieve more with similar initial resources, that’s a valuable signal that I could possibly be happier than I am. Knowing this, I might be reluctant to classify myself as “very happy” when I know I have the potential to be happier. Thus, we may rely on a relative definition of happiness to answer survey questions, but declining scores might merely indicate that people now have more unexploited opportunities to improve their absolute happiness than they did before. It does not follow that their absolute happiness level has fallen.