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Yes for more open data in politics

31/3/2015

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Since we have an election coming up , last weekend I found myself thinking about politics (prompted by some good discussions with friends). How could one improve political decision making?

In modern politics the parliament is a lot like a black box. Every fourth year, we vote in the parliamentary election and select 200 new (or the same old) faces to make decisions about matters national. The problem with this is that us voters, we really don’t know much about what is going on in there. Sure, the media covers some issues, but more often than not the reporting isn’t very good. Including just the outcome of a vote isn’t telling much about anything besides the result. And that is not enough.

If we consider what a good decision is like, it’s pretty clear that is has to be based on something. Sure, you can sometimes get it right by just guessing – but nobody would call that a good decision strategy. A good decision has to be based on evidence. Are politicians using evidence properly, then? At the moment, nobody knows. To really evaluate politicians, we need more than just their voting patterns. We need some inkling about why they chose the way they did. It’s not enough to say “down with cars!” One should at least provide some justification, like “down with cars, because they hurt our health!”  In an even better situation, we would see deeply researched judgments, really explaining how and why the policy voted for is the best way to reach an important goal. For example, someone might say “down with cars, because they hurt health so much that we could their impact on wellbeing is negative”.

Unfortunately, we hardly ever see this kind of reasoning. That’s why I think we need more open decision making, especially regarding the analyses and data that our political decision makers use. If we have more open data, we also have more minds looking at that and evaluating, whether the inferences politicians have made on that are really correct. Publicizing at least a substantial minority of the data used in the political decision making process would invite all kinds of NGOs, interest groups and analysts to really comb through the data. At the moment, none of that is happening regularly. When we do have access to data, it’s often related to decisions that have already been made! For obvious reasons, that’s really not very helpful. I think it’s fair to say that there’s room for improvement, and for moving more towards open, evidence-based policy generation.

The point here is not that politicians would be especially stupid or untrustworthy. No, the point is that they’re people just like you and me (albeit with more support staff). And just like you and me, they make mistakes. That’s why you sanity check your recommendations with your boss before sending them to the client. That’s why I get feedback from my supervisor before I send my paper to a journal. We’re fallible human beings, all of us. But having more people looking at the same things, we can average out many biases and avoid obvious mistakes. To do that in politics, we need more open data.

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Defaulting to the Default Option

24/2/2015

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Imagine that you’re coming from work really hungry, and you’ve agreed to meet you friends at the local pub in 15 minutes. You need a quick bite, and get a Big Mac meal from the McDonalds next to your office. Of course, as usual, you get the regular side fries and a Coke. But wait – did you actually decide on that?

As far as psychology goes, my best guess would be: no, you didn’t. I certainly haven’t, many times. It’s what comes as standard, and it’s good, so why change what works? What happens is that instead of explicitly thinkin oh, I can get fries, or a salad or nuggets – which is the best? we’ll just go with the standard bundle without really thinking about it.

Well, a restaurant order is surely no big deal, but unfortunately we’re plagued by the same lack of attention also in more serious matters. We just don’t realize that one of the options is the default, but still changeable. Quite likely the most famous example of this is organ donation. Some countries have an opt-in system, which means that if you want to have your organs donated once you meet your maker, you’re going to have to explicitly state that. Other countries have an opt-out system, which means that your organs will be donated, unless you’ve explicitly told no. The big fuss about which system each country is using stems from the fact that countries with different systems vary widely in organ donation rates: those with an opt-in one have most of people not donating, and those with an opt-out one have over 90 % participation rates.

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Why the case is so widely cited is because it’s such compelling evidence of the power of the default. For example, Germany and Austria are culturally very similar, but Germans have a participation rate of 12 %, while Austrians have a rate of 99,98 %. So it’s quite clear the effect is not due to cultural differences. And if you went around and asked Germans and Austrians about why people choose to donate or refrain from donating, they would quite likely be capable of coming up with some kind of reason. But, I’m also sure very few people would cite the default as the reason for their behavior! Certainly, it is the reason, but people would just try to rationalize their decision after the question, simply because they just haven’t given it a lot of thought.Well, you can still argue that no biggie – we’re so unlikely to die by accident that people are just not interested about organ donation, and save their energy for more meaningful decisions.

Unfortunately, it gets even worse. As Shlomo Benartzi and Richard Thaler – both professors of economics – have shown, the same default problem plagues retirement savings. An example that’s so ridiculous to be scary is from the UK. The UK has some defined benefit pension plans that are fully paid by the employer, and require no contribution from the employee. Essentially, it’s free money – the only thing an employee needs to do is to sign up. However, data on 25 such plans reveals that only 51 % of employees had signed up!

The lesson from all this is twofold. First, in many domains there usually is some kind of default option. Be it a retirement plan, a restaurant side dish or the seating on your brand new car, there’s usually an option that’s offered as the default. A lot of marketers are realizing the power of defaults, so I think we can expect the power of defaults to be even higher in the near future. The second lesson is that in decisions that matter, you should be paying attention to whether you’re really getting what you want – or just taking what’s within easy grasp. Especially with wily marketers using the lessons of behavioral economics against you, it’s a wise move to keep up your guard. This requires effort, of course. But hey, who said making important decisions was going to be easy?

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Ethics of Nudging: The Freedom of Choice Argument Is Suspect

17/12/2014

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Today’s post started from a question concerning the ethics of nudging. To be clear, I’ve always been of the opinion that nudging is a no-brainer: if you’re not decreasing choice options but just changing the default, nobody should object. After all, you can still choose as you wish, so what’s the problem? Well, there are problems involved, as it turns out.

But first, to sensibly talk about nudging, we need to define what we mean by a nudge. Specifically, what I mean (and what I’ve understood Thaler and Sunstein to mean in their book Nudge) is the following:

A nudge:

  •  is a cue that drives behavior in a collectively beneficial direction
  • does not reduce freedom of choice
  • is behavior-based, not just an incentive
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The problem with this argument is the assumption people choosing rationally, according to their best interest. This is directly in conflict with another assumption of nudging, which is that people do not choose rationally. After all, if we didn’t assume that, why would we do nudging in the first place? So, it seems to me that first nudging assumes (quite correctly) imperfect rationality, but when people question the ethics, then suddenly we’re assuming perfect rationality. Something seems off here.

On the other hand, I don’t think this is a knockdown argument for all nudges. The above fruit section example seems ethical to me, since it’s not really imposing any extra costs for the DM. The tax letter, in contrast, is more difficult. Paying taxes is a direct cost to the person, compared to not paying them. On the other hand, if she doesn’t pay her taxes, she’ll probably have a lot of trouble with the authorities on the longer term, thus ending up to be even more costly. But can we use such a long-term argument? Where’s the limit? How much better does the long-term benefit have to be so nudging is justified?

A final thing is that nudges aren’t really independent. For example, if an organization would start building all kinds of nudges using defaults and the status quo bias, at some point there’s just too many for us to pay attention. For example, the BIT in the UK once said companies might enroll employees into plans that automatically donate a percentage of their paycheck to charity. Even though you could of course opt out, this is very suspect. Imagine, if a company made tens of such choices: at some point you’d probably be too tired to think things through, so you’d just accept the defaults – which would cost you money. So even though charity is beneficial for the society as a whole, I don’t think it’s justifiable to have a default option donating to charities.

So, all in all, the freedom of choice argument that defenders of nudging often use (I’m one, personally), doesn’t really seem to be as strong as I thought before. With this problem in my mind, I just want to wish everyone a perfectly Merry Christmas and a Happy New Year! Bias Hunter will be back in January again!

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The problem with this argument is the assumption people choosing rationally, according to their best interest. This is directly in conflict with another assumption of nudging, which is that people do not choose rationally. After all, if we didn’t assume that, why would we do nudging in the first place? So, it seems to me that first nudging assumes (quite correctly) imperfect rationality, but when people question the ethics, then suddenly we’re assuming perfect rationality. Something seems off here.

On the other hand, I don’t think this is a knockdown argument for all nudges. The above fruit section example seems ethical to me, since it’s not really imposing any extra costs for the DM. The tax letter, in contrast, is more difficult. Paying taxes is a direct cost to the person, compared to not paying them. On the other hand, if she doesn’t pay her taxes, she’ll probably have a lot of trouble with the authorities on the longer term, thus ending up to be even more costly. But can we use such a long-term argument? Where’s the limit? How much better does the long-term benefit have to be so nudging is justified?

A final thing is that nudges aren’t really independent. For example, if an organization would start building all kinds of nudges using defaults and the status quo bias, at some point there’s just too many for us to pay attention. For example, the BIT in the UK once said companies might enroll employees into plans that automatically donate a percentage of their paycheck to charity. Even though you could of course opt out, this is very suspect. Imagine, if a company made tens of such choices: at some point you’d probably be too tired to think things through, so you’d just accept the defaults – which would cost you money. So even though charity is beneficial for the society as a whole, I don’t think it’s justifiable to have a default option donating to charities.

So, all in all, the freedom of choice argument that defenders of nudging often use (I’m one, personally), doesn’t really seem to be as strong as I thought before. With this problem in my mind, I just want to wish everyone a perfectly Merry Christmas and a Happy New Year! Bias Hunter will be back in January again!

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Who Generates Options in Public Policy?

24/11/2014

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A naïve view of public policy (like mine, for example) might be that a body of public servants gets a set of options from the parliament, studies them and their effects, and then returns a report replete with recommendations about what the outcomes of each of the legislative options might be. A good report would say clearly “If you do this, you get A. If you do that, you get B.” The parliament’s job then is to reflect on this information and decide on the tradeoffs that the nation should accept.

In reality, however, I feel that instead of choosing from a set of options, a lot of public policy seems to be looking at options one at a time, instead of choosing the best one from a set. Suppose the economy is doing badly, and we would need either to get that back on the track, or cut costs from government. An exchange might go like this.

- Parliament: So maybe we can raise taxes?
- Right wing: NO!

- Parliament: So cut benefits to lower costs?
- Left wing: NO!

- Parliament: Reduce work legislation to increase efficiency?
- Unions: NO!

…and so on. Instead of going “OK, we have to do something, and we have options A, B, C and D”, politics employs a method I call piecewise running into a wall: evaluating one option at a time, with each being rejected by some advocacy group.

Since there is an advocacy group for almost anything, presenting options in this piecewise fashion means they will all get rejected. Following the rule “don’t do anything someone might object to” is not good policy-making: it just ensures nothing at all will be done. What is needed is a comparison of options, and then deciding which of them is the best one.
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Like I said - there really is an advocacy group for anything!
On the other hand, presenting options as a list and saying we need to choose one of them – well, that’s one of the oldest political tricks in the world. There’s nothing better than creating a false dilemma, asking a voter to pick whether for cutting taxes or reducing prosperity. Or whether he supports corporate rights or human rights. And so on.
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Ah, framing the policy options of your opponent.
A crucial question emerging from this is: who generates the options, and how? Letting a small group generate them invites the false dilemma trap. Getting to choose the options means you have a lot of power. Your decision may surprisingly much depend on the options that you are given. However, letting the public generate the options directly is unlikely to work, either. Most people do not know enough about the complexities of law to be able to do that. If you asked me how unemployment benefits should be structured, I would have some kind of opinion, but the opinion is way too vague to be an option directly. That’s why we need public servants and assistants in the parliament: somebody needs to generate the actual legal text.

But one thing seems clear: openness and direct communication about our options would be good for democracy. Lobbying is small in Finland, but likely to increase in the future. The more opaque the process of option generation, the more power is given to the lobbies. If politics would be more transparent, it would be harder for lobbies to slant the option set badly. But not knowing the option set, or pretending there are no other options – that’s no good. Not for us, not for the nation, not for anyone.
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