Saturday, 26 January 2008

When choice ATTACKS!

There's an interesting post over on Dave's Part about choice. This is a really interesting area and it's a shame that we lefties get ourselves in a muddle over it. I don't think we should ever find ourselves in a position where we are arguing against choice full stop, but that doesn't stop us from criticising the extension of choice where it doesn't help, or is even counter-productive. As Dave's post makes clear, not all choices are the same, or as important/valuable (to the punter) as each other.

In the bit of the world I inhabit, pensions, the Government has effectively accepted that choice does not work effectively. The decision to set up Personal Accounts on an opt-out basis reflects the belief that in choosing whether or how much to save, people frequently make sub-optimal decisions. They don't save even when their employer will make a significant contribution. The Government has therefore decided on a system where a choice will be made for you unless you actively make another. This is very similar to the approach being advocated for organ donations and Stumbling And Mumbling has a good run-through of the arguments around sub-optimal decisions here.

And here's the first important point about choice. If you ask people if they want a choice, they will tend to say yes. But if you you ask people to make a choice they will often put it off, or stick with their existing choice (ie not exercise their freedom to make another choice). There is a clear divide between our idea of choice at the theoretical level, and what we actually do in practice.

As an example of this there was an experiment done where one group of people were asked to plan their lunch choices for a few weeks in advance (ie they couldn't choose on the day). A seperate group were allowed to choose what they would eat each day. The first group chose a wider variation of dishes than the group who could decide on the day, who often tended to go for the same thing even though they were 'choosing' anew each day. You could read this in various ways. Maybe the first group overemphasised their desire for variation. Alternatively maybe the latter group were using their existing choice (the day before) as a shortcut for deciding. If it's the latter then maybe choice can be a burden.

In fact as I have posted before there is quite a bit of evidence that the extension of choice can lead to less actual choices being made. In the examples I have linked to this is shown in respect of investment fund choices in DC schemes. However it occurs elsewhere. In Barry Schwartz's book The Paradox of Choice a similar example is given of choices of jam in a supermarket. With too many options the retailer can actually end up selling less jam overall.

The fact that different choices affect us differently is also a reason to treat choice carefully. As Jospeh Stiglitz has pointed out, 'learning' a suitable choice might be relatively painless when it comes to deciding what foods you like, but getting it wrong in terms of your retirement provision can do you a lot of damage and you can only really discover the impact of your error when you retire. I would add that there is also no pressing need to address the choice in the latter case. If I am hungry I go into the supermarket and buy something to eat. I might discover I don't like it, so I won't buy it again, but I will need to eat again soon and at that point I can make a 'better' choice. But with retirement saving there is no short-term need for me to address the issue, or to correct my choice. Which is exactly why procrastination and inertia are a significant problem.

Ultimately the decisions on Personal Accounts and, potentially, on organ donors, demonstrate that the Government recognises the problem with choice. Such opt-out approaches seem to be most often described as either 'managed choice' or 'libertarian paternalism', the latter seemingly aimed at soothing right-wingers who are unsettled by the idea that choice can be a bad thing. I also think that these developments open up opportunities for the Left to show it can be relevant in the choice debate. If we can demonstrate an understanding of how choice really works, and therefore where it might not be a good idea, it could be the Right that ends up painted into a corner. However that means discussing choice properly, rather than bristling at the idea that it might sometimes be the right option.


Tom Freeman said...

Yes, I think there are quite a few people on the left who too readily throw up their hands in horror at the notion of choice in public services. We hear the slightly clumsy word 'marketisation' spat out by opponents, but that seems to conflate issues of user choice with private payment.

If choice is to have a useful role in public services, then (among other things) the ability to exercise choice has to be thoroughly decoupled from personal wealth.

There's plenty more to be said on the subject, of course, as the example of your post makes clear.

Tom P said...

I take my lead on this stuff (as always...) from my wife. She wants a choice in public services. She's not a scheming right-winger secretly trying to dismantle the NHS, so (being rhetorical) why should I find the idea that she wants a choice politically difficult? If we are to maintain taxpayer support for public services then we have to meet the punters halfway at least.

It is complicated, and there are problems. Clearly it's likely that better-educated more aspirational punters are more likely to use the choice available to their advantage. But that doesn't mean you deny them choice.