Am I just another dumb consumer?

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My wife recently passed along a clever Atlantic article entitled “The 11 ways that consumers are horrible at math”, focusing on some of the mental mistakes that we tend to make in our economic decisions and how vulnerable we are to the influence of marketing. In true Atlantic fashion, it introduces no real new insight, but does a good job summarizing and explaining some of the existing research. Here’s a snippet:

(5) We do what we’re told. Behavioral economists love experimenting in schools, where they’ve found that shining a light on fruit and placing a salad bar in the way of the candy makes kids eat more fruit and salad. But adults are equally susceptible to these simple games. Savvy restaurants, for example, design their menus to draw our eyes to the most profitable items by things as simple as pictures and boxes. Good rule of thumb: If you see a course on the menu that’s highlighted, boxed, illustrated, or paired with a really expensive item, it’s probably a high-margin product that the restaurant hopes you’ll see and consider.

As the paragraph above mentions, the influence of “framing” on individuals’ decisions can be powerful. That’s just one of many ways that we fail to even come close to performing rationally in our routine economic decisions (if we were perfectly rational, the framing effect would be nil), a point I’ve made on this blog many times in the past. Yet the passage above also contains another important point: framing and other strategies can be used for things we commonly think of as bad (like pushing restaurant goers towards higher-priced items), or for things we find good (like getting school kids to eat healthier foods).

This is the whole idea behind the recently conceived concept of “libertarian paternalism“, championed by Richard Thaler and Cass Sunstein and popularized by their book, Nudge. Thaler and Sunstein are keen to argue that while it’s wrong to force people into a particular decision that would benefit everyone, we can still “nudge” them with certain mental tricks. Organ donation is the classic example; most everyone agrees that the decision on whether or not to donate one’s organs should the individual’s own and never the government’s, yet the evidence suggests a country’s default setting — ie starting everyone out as donors and giving them the freedom to opt out rather than the other way around — has a huge impact on how frequently people actually participate. You can “nudge” people to be organ donors, that is, without forcing them or even providing any real incentives.

I’m a big supporter of libertarian paternalism, even though I think the term is a misnomer (it’s much more paternalistic than libertarian, if you ask me). I think it’s important to acknowledge its limits, though. Proponents of policy-led “nudges” or other public interventions are coming from the angle that since we humans do not behave consistently rationally and that markets are inherently imperfect, public policy can identify and fill in the gaps wherever markets fail.

That second part about the power of public policy is a fantasy. First, it’s technically tricky (figuring out exactly how much to spend on government-led efforts to encourage kids to eat vegetables, for instance). But secondly, government simply doesn’t have the firepower to offset all the purposeful “bad” nudging that private industry pumps out.

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Slightly random thoughts on the Baha’i Fast

Today marks exactly the middle of the Baha’i Fast, which runs from March 2nd through 20th each year. Without boring you with useless details about what I’ve been eating for breakfast, here are some slightly random thoughts on this special time of year, in no particular order:

– It took me a while to figure out that the fast was a largely symbolic, spiritual gesture, and not an exercise in not eating. When I was a teenager, I would either 1) eat obscene amounts of food in the morning and evening in hope of staving off hunger as long as I could, or 2) sleep through as much of the day as possible. As I got older, I kinda realized that there’s nothing virtuous about, for instance, rushing to eat an entire box of Cinnamon Toast Crunch in one’s pajamas as the sun comes up.

– One of the most beautiful and telling passages from the Baha’i Writings about the Fast is this one below, from ‘Abdu’l-Baha:

The material fasting is abstaining from food or drink, that is, from the appetites of the body. But spiritual, ideal fasting is this, that man abstain from selfish passions, from negligence and from satanic animal traits. Therefore, material fasting is a token of the spiritual fasting. That is: `O God! As I am fasting from the appetites of the body and not occupied with eating and drinking, even so purify and make holy my heart and my life from aught else save Thy Love, and protect and preserve my soul from self-passions… Thus may the spirit associate with the Fragrances of Holiness and fast from everything else save Thy mention.’ (Star of the West, v.3, p. 305)

– In my slightly-less-naive current state, I think I’m getting the hang of the spiritual part. Prayer helps, in the morning when the sun comes up and in the afternoon when it sets. This year my wife, even though she’s pregnant and thus not fasting, has helped me a lot simply by settling down the house, corralling our two year old, and sitting down everyone around the dinner table to say a short prayer before sunset. That’s made a big difference in the feel and mood of the whole period. And it’s not an easy task to get everything still even for that brief moment, mostly because our toddler has the energy and table manners of a rabid chimpanzee.

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