Libertarian Paternalism

george grombacher 0:02
I’ve got a good friend. And every time we hang out when we’re leaving, he always says make good decisions, as we’re parting ways, and I think that is a nice way to wish somebody off into the world because we are constantly making decisions. Question is, are we making good decisions, we’re making the right decisions, and we’re making beneficial decisions, lots of different kinds of decisions to be made. And a lot that goes into our decision making process. And like everything else like that, the more we know, the more we understand, the better position that we are going to be, the better decisions we’re going to make, the more success we’re going to experience the happy, or we are going to be, it’ll just all be better. I was reminded of something called choice architecture. This week, it’s having conversation, and they were talking about choice architecture, and it was in the context of helping large groups of human beings become healthier, and specifically dealing with chronic conditions like heart disease, and diabetes. And all over the world. The incidence of diabetes and being overweight and obese is just skyrocketing. And in certain parts of the world, it was in Indonesia, the vast majority of new cases of diabetes were diagnosed in the emergency room. So it’s pretty crazy people just being really sick and unhealthy and not realizing, Oh, wow, this is actually caused by diabetes. And so what can government’s do, or nonprofit groups do just entities who are trying to influence human behavior? What can they do to better position people for success and get better outcomes. And, I mean, these are really tough problems to solve, obviously, because I, as an individual, want my autonomy, I want to be able to make my own decisions about things. In fact, that’s one of the main parts of my life is being free to make those kinds of decisions and live life the way that I want to live. And but if I am making terrible decisions, if I’m making decisions that are causing me to be unhealthy, that unhealthy choice, me being unhealthy, is then stressing some kind of a larger system that other people are a part of. That’s, that’s not good. That is a problem. So what can be done about that? What can be done? From a choice architecture standpoint? If it’s the number of choices, if it’s how the different options are presented? If there is a baseline foundational default choice, so that it’s not just, you know, okay, I’m just not going to decide right now. No, if you can’t make a decision, here’s the one that that that you’re going to be opted in on. If you’re in an ice cream shop, and there’s 500 Different kinds of ice cream, you’re like, oh, my gosh, how in the world will ever decide it’s tyranny of choice? Well, you’re gonna get chocolate, or you’re gonna get vanilla as the default, and it’s going to be great. And you can look at those all over your life. Choice is a wonderful thing, but it’s also a terrible thing at the same time. So it just got me thinking, say, Okay, how do we, how do we sort of look at this framework, and evaluate, across all the different aspects of our lives, how it is that I’m making decisions, how options are being presented to me, and then how I actually am deciding and moving forward and implementing them. So on one end of the spectrum, you have absolute freedom of choice. So there’s no outside influence, nobody’s putting their thumb on the scale in any way. There’s no incentive structure or anything like that nothing’s on sale. It’s just you have absolute freedom to do whatever you want. So that’s over here. And then on the other side of that spectrum is forced compliance, you’re being compelled to do something. So no choice. Stand in line, get your shot, whatever it might be. And then in the middle, is a new term that I stumbled upon, called liberal libertarian paternalism. And I thought that this was pretty interesting. It is a middle ground between those two things where there is there are options in the best way to describe our a way you may have a better way to describe it. A way to describe it is opting into something versus opting out of something. And in Austria, and Germany, too. Countries that that share a border, they have both have organ donation programs, Austria’s program, you are automatically enrolled in it and have freedom to opt out if you do not want to be in the program. So you’re automatically end. If you suffer a a horrible life ending disease, or accident of some kind, if you die, and your organs are viable, they will be harvested and used for donation, you’re free to opt out of that. You could say No way, I don’t want that. In Germany, it’s the opposite. Germany, you have to opt into the program. So you’re not automatically entered into the organ donation program, you need to opt into it. And I don’t know if it’s predictable or not. But what do you think happens? Well, in Austria, 99.9% of citizens are in the organ donation program versus 12% in Germany. So this is an example of libertarian paternalism, where the society said it is beneficial to have more people involved in the organ donation program than less. And in the spirit of or in the efforts to get more people into the program. We found scientifically that opt in them in giving them choice to opt out is how we will get more people into the program. And it worked. So there you go, pretty interesting. Just to kind of close the loop on the force compliance piece, a couple of examples, these are things that you’re compelled to do. So car insurance, in most states, in the most states, in the US is a requirement. You don’t get to choose to buy car insurance, you have to do it, or you’re you’re you’re breaking the law, and you will suffer the consequences of that, as are filing your income taxes, we are compelled to do that. And those are, I don’t know that too many people, I know that there are some probably some fringe people out there that that reject the income tax thing and are not interested in paying income tax. That’s just that is what it is. But the most most of us, I think, appreciate and understand what’s going on. And so we we don’t raise too much of a fuss. With COVID, we had the vaccine mandates. And that was a pretty hotly contested thing. So whatever side of that you came down on, I think it’s an important thing as we are sort of having conversations about these things, as a culture as a people that you think about it. Okay, that makes sense, no influence, some influence, absolute influence? Which one of these makes sense to me? Do I want choice. And, again, when we have really, really big groups of people, you know, we need to have that ordered game. We need to know what the rules are, we need to understand what we believe to be the most important things we as a culture are moving towards. And that’s how we make legislation and put laws into effect and then

and then we encourage people to follow those rules and regulations and laws. And if they do not, then there are penalties for that, which you obviously know. So from a top down perspective, I mean, it’s tricky. These laws of large numbers, how do we influence it without violating people’s rights, and turn it into a totalitarian state where you do what we say or else because it just can’t imagine there’s too many people who are interested in that kind of a thing. And that I as an individual, I want the freedom and autonomy to be making my own kinds of decisions. But do most people know what their preferences are? So there was a great, a great article, blog, paper essay, written about libertarian paternalism, which I will link in the notes. And they talked about how the majority of people do not understand what their preferences are. They don’t have clear the language they use that many lack of clear, stable, well ordered preferences. And most of us are not acting or making decisions that in our in our best interests. And the result is that we’re not necessarily making healthy choices. So how can we influence or use some of these, some of these things like choice architecture and libertarian paternalism to help people to better make choices. So obesity, all over the world, which we talked a little bit about, that’s just a wonderful example, that most people are not making good It dietary choices, they’re not choosing the right foods to eat, they’re not engaging in the right behaviors and exercising, and all of that stuff. And here’s another example, is saving money for retirement. This is a tricky one, the way that we used to save for retirement. Now it’s been a really long time, but used to be we had pensions. So you’d work at the same company you’d contributed to the pension, then you’d have that pension? Well, in the 80s, when 401k is came along, that really shifted, and now the responsibility for saving money is on you and I as individuals to be able to contribute into a retirement account like a 401k, for example. So how do we motivate people to do that? Well, you and I have the ability to go to any financial institution in anywhere in the United States, and open up an IRA, an individual retirement account. And anybody can go and do that. As long as you have earned income, you have the choice, you have a million different options for what company to do. And then once you open the account, you have the choice on what kind of investments you want to invest in. So you can buy like mutual funds and exchange traded funds and bonds and stocks and cryptocurrency and Oh, my goodness, so many choices. So that is no influence, absolute freedom of choice. You know, go for it. The other side of the coin is what if we just opted everybody in and made them start saving money for retirement. And this is something that we’re starting to see, we’re starting to see states, because at the federal level, that hasn’t happened, we’re seeing starting to see a lot of states implementing mandatory programs where companies must offer if they’re not offering their own retirement plan to their employees, that they must then opt into the state run program. Okay, that the best example of this is automate automatically enrolling employees into the 401 K plan. So like the organ donation program from from Austria, you are automatically enrolled in your company’s 401k, after you’ve been working at the company for a little while. And there is a percentage that you are automatically opted in to contribute. And there is a default investment option as well. So let’s just use round numbers, because it’s going to vary from 401k plan for 1k plan. But let’s just say that after you’ve been at the company for three months, you’re automatically going to be opted into the 401 K plan. And they’re automatically going to set your contribution amount at 5%. of your of your compensation. Cape, now you’ll have the choice to opt out of that and say no, I’m not interested in doing that. Or you can change the percentage. But what it’s borne out that that is helping to promote positive beneficial action and behavior from savers like you and I came, and if you do not choose, I want to be invested in XYZ mutual fund, there is that default option that you automatically go in oftentimes, it’s some kind of a target date fund, which is an age based investment. Okay. So that seems to be a pretty good mechanism for helping people to start saving for their retirement because we all know that the earlier we do that the better all that good stuff. So a good example of libertarian paternalism if the opt in rate was 35%, well, that probably wouldn’t work very well, that would be a little bit too much that that that that would violate, we just wouldn’t do that. But 5% That’s, that’s that’s probably totally fine. For most people, they won’t even notice it for the most part. But going back to the idea of Do people really have clear, ordered preferences. And if you just said, Well, how much do you need to be setting aside to save for the retirement? Man, I bet vast majority I bet 90% of Americans would have no idea. This is the amount that I ended up saving in order to be able to retire. How about you? It’s not easy. But this is the whole thing is do we really understand do we really know? So another way to think about this just looping at a final example, because I’m interested in kind of closing the loop on the diabetes thing and healthy eating is if you thought about just food in buying buying groceries. From a no influence standpoint, at this stage. With the internet and online shopping. You could probably buy any food Do you want and have it delivered to your home? Okay, so freedom, absolute freedom, no influence, buy any food that you want, you know what what items you want, you know what kind of cereal you want, you know what kind of bread you want, you know what kind of ice cream you want, you know, the store all of it. So you can go to each one individually or you can buy it from whatever, the Libertarian paternalism. A good example of that is when you go to Costco, and you go to Costco, and they have lots of different food choices within certain categories. But I’ve noticed that they have a lot of healthy choices, they have organic choices, as well. So they are attempting to provide some influence and saying, Hey, I know that you like, I know that you like oatmeal, well, here’s an organic oatmeal option, if you’re interested in that, and we’re going to put it right next to the other kind of non organic oatmeal. So now we’re positioning you to make what we perceive to be a healthy choice. Okay. And then the other side, the you are compelled, forced compliance is government cheese. It’s ration food, here is your ration of food, you have no choice, this is what you will eat. Another example could be when you were in elementary school and you went to the cafeteria, you weren’t choosing, you’re getting your tray. And there was one of those square piece of pizza on there, and some vegetables or fruit or whatever, and then an actual pouch of milk. They still do that they still do pouches of milk. Anyway. So there’s our spectrum. And the whole idea here is again, how do we position ourselves for success? And then keeping in mind that there are these large groups, governments, states, municipalities, school districts, who are also utilizing choice architecture, and trying to figure out how to get people to act in a certain way. And when it runs afoul, when things go sideways, you know, that’s, that’s when that’s when things go sideways. You look at the USDA food pyramid that was in place forever. And now you look at it, you know, like why would anybody think that that was the right way to eat or consume food. And unfortunately,

that was perverted by special interest. And all too often. That’s kind of what happens. And that’s the danger of top down stuff. That’s the danger of if we are not making good choices on our own, well, then we’re going to lose our autonomy, we’re going to lose our personal sovereignty. And that’s really what I wanted to talk about today was, how do we position ourselves for success? How do we make sure that we are leading happy, healthy lives that we are physically and mentally and emotionally strong, and that we are independent, and we’re able to remain autonomous for as long as we possibly can for as long as we need. And that all means that we need to know our preferences need to know what matters to us, we need to know what’s most important to us. And we need to act on it. So the first step of that is just literacy. Not just but it’s literacy. How well do I understand all the things I need to be doing? How well do I understand nutrition? And food choices? How well do I understand diet or exercise and fitness, strength training, cardiovascular health? How well do I understand these things? And in every aspect of our lives, you can wonder and think, Okay, how can I better educate myself? And then from there? How do I put structure in place that’s going to help me to make good decisions? And then how do I automate that? How do I utilize technology and all the different things that are at our fingertips these days to position myself for success, because I love self discipline, but we don’t just go from learning about something to all of a sudden, I have this wonderful self discipline, we need structure first, and then that will help us to start developing that self discipline muscle. When he puts structure in place, you start doing things, you start shopping correctly, you start eating right, you start moving your body, you start making good choices, because you’re positioning yourself for success versus not putting yourself in position for success. That’s how you start to develop self discipline and confidence. And that’s how you eventually move on to wellness. So there’s this massive behavior gap between what I intellectually understand I should be doing and what I actually do, we’re interested in closing that. So we need to first understand or make sure that we intellectually do understand things. So get the literacy going, find the support you need to do these things. Develop self discipline, and then eventually you will be walking picture of absolute wellness. So fast donating. So keep an eye out for libertarian paternalism and different examples of it that you see, obviously, we want to avoid totalitarian control over our lives. Nobody wants that. And no, I love to have no influence on my life at all from outside forces, and I just know that I’m making my own decisions. But that’s incumbent upon me, I have the ability to educate myself and to act the way that I want. But that’s not guaranteed. And if we are not doing the things that we need to do, well, then, you know, then we will have our freedoms and our ability to be autonomous and to make our own decisions stripped away from us, and that’s not a happy thing at all. So, as always, do your part by doing your best

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