The Ethics of Behavioral Economics

Time Magazine recently published an article by author Michael Grunwald entitled "Making Change" about President Obama's team of advisors like Cass Sunstein and Peter Orszag using behavioral science to help Americans arrive at healthy and energy efficient life-style choices (April 13, 2009, page 28-32). This excellent piece about motivational strategies to help change behavior by public administration, a kind of self-described "libertarian paternalism" should be read by anyone interested in public health, the environment and economic policy change.

Grunwald points out how scientific studies suggest when we make things clear with better information, when we make things easy with less paperwork, when we make things popular by way of social norms, or when we make things mandatory by conformity, law or outright bans, we can be encouraged to make better choices when it comes to managing money, personal health and caring for the environment along with energy use.

The author cites such best sellers as Cialdini's "Influence," Dan Ariely's "Predictably Irrational" and Thayler & Sunstein's "Nudge" as possibly being the inspiration behind the Obama team's use of behavioral economics. The science behind what will work and what will not work in encouraging Americans to behave responsibly has been tossed about for years.

Unfortunately, the infrastructure may not be in place to properly implement many government programs. As the article points out "we can't take public transit if there's none in our neighborhood" (page 32). How will the team of scientists and politicians be able to reach into those areas of conscience, benevolence, self-sacrifice and altruism for a society which has basically been based upon capitalism at its core for generations? How will they convince states and cities to spend money for infrastructure and education when money is so tight already?

Even as corporate CEOs are humbled into begging for government-funded handouts, they continue to distribute undeserved bonuses and executive buy-out parachutes with tax-payer money. You cannot mandate nor manipulate ethical or benevolent behavior and therein lies the problem. We do have one great saving grace in this modern age of technology, however, and that is public accountability. Very little escapes the overseers of the internet. Personal video cameras posted in public places catch even the craftiest conartist. If the current administration's plan to create a health-care data base online materializes, I believe government will be shocked to learn about the cost and waste that actually goes on behind the scenes.

It is precisely for this reason that lobbyists will special interests may try to block legislation designed for "making changes" which will affect them. Loopholes in laws and taxes may be created, found and abused, which has always been the case. Some group may ask for exemption or exception to the rules and norms. But most importantly there will be some kind of cost-ratio factor behind the rationality akin to Medicare, The Foundation for the Arts and Workers' Compensation, which begs the question who decides what matters and what does not.