Amartya Sen is a great economist and social philosopher whose willingness to recognise a central role for market institutions in securing economic development and individual freedom shows considerable commonality with the classical liberal tradition. Sen’s commitment to the values that underpin a free society is, however, equivocal and indeed often points towards what classical liberals would see as a dangerous form of paternalism. This tendency is particularly evident in the discussion of ‘adaptive preferences’ and their relationship to freedom.
Sen questions the traditional liberal view that we should accept that the choices people make in their lives are a reasonable indicator of the subjective value they attach to the choices concerned. The notion of adaptive preference emphasises how the values that people express can be conditioned by the social environment and more specifically by oppressive structures – such as, for example, those that emphasise asymmetric gender relationships within the household. According to Sen, we cannot always trust in the revealed preferences of individual agents as reflecting their ‘true’ best interests because faced with structures that narrow their range of options people may ‘adapt’ to their environment by ‘accepting’ their lot and lowering expectations of what life has to offer. * Just as ‘libertarian paternalists’ attribute the difference between the ‘revealed preferences’ of people for fatty foods or a low savings rate and their ‘real’ preferences to various cognitive biases, so Sen focuses on the role of ‘adaptation’ in accounting for the difference between the subjectively expressed beliefs of actors and their underlying ‘objective’ interests. The assumption in both of these cases is that these biases can be addressed via appropriate policy interventions either in the form of ’nudges’ a la Sunstein and Thaler or via public education in the case of Sen.
From a classical liberal standpoint there are two fundamental problems with this line of analysis. First, it is far from evident that there is anything ‘wrong’ with people adapting their preferences to their particular circumstances. One might adapt one’s desires to be an Olympic athlete, to make the England football team, or to be a champion boxer to the realities of one’s physical limitations. Most people would consider adaptation of this nature entirely rational and indeed essential to having any hope in finding satisfaction from life. Of course, it might be argued that there is a fundamental difference between the constraints set by physical limitations and ‘socially constructed’ constraints which might be thought more malleable. Yet, it is far from evident that this is so. Suppose that most people have a preference for greater social equality and support Rawls’ view that the ‘basic structure’ of society should operate to ‘maximise the position of the worst off’. Suppose also, however, that evidence indicates (as it does) that only societies that tolerate substantial inequalities in income and ownership do in fact raise the absolute condition of the worst- off. In these circumstances, adapting to social inequality would be the rational course to pursue. I do not believe for a minute that the recent London riots were a response to social inequality, but suppose for a moment that they were. One way in which the risk of future social disturbances could be reduced would be for potential rioters to learn to ‘adapt’ their preferences to the necessary inequality.
Second, one can accept the point that cognitive biases or ‘adaptations’ may prevent people from getting ‘what they really want’, but it is another matter to suggest that public policy – or at least policy which is compatible with liberal principles – should play a major role in dealing with these biases. In order for there to be any chance of success in this regard policy-makers need to be able to distinguish between the ‘real preferences’ or the ‘objective interests’ of people and those preferences that result from cognitive biases. In the case of libertarian paternalists they need to distinguish preferences for fatty food that are ‘genuine’ from those that are distorted by ‘weakness of will’. In the case of Sen’ s adaptive preferences, policy makers need to judge whether a woman’s endorsement of asymmetric gender roles reflects her ‘real’ beliefs or whether these beliefs are a reflection of an overly-constrained social environment. In addition, they would need to decide whether this adaptation is rational in the face of social circumstances which cannot realistically be changed, or whether it results from a more malleable set of conditions. There is little or no reason to suppose that policy makers are able to make such distinctions competently and yet in the absence of this competence the danger is that public policy will collapse into a more conventional form of paternalism – which claims to know what preferences people should have.
The suspicion is, of course, that ‘old fashioned paternalism’ is the value system that really lies behind this recent behavioural theory and Sen’s approach in particular. Sen’s commitment to interventionist methods to widen the horizons of women in developing countries reflects a view that traditional gender roles are almost by definition morally problematic and must therefore be ‘explained’ by the existence of oppressive structures which prevent the ‘politically correct’ outcome. I have considerable sympathy with Sen’s distaste for asymmetric family relations, but I do not believe they are a matter for public policy. Better to rely on trade, economic growth and the cross-cultural contact this brings as the best route to unintentionally expose women to the wider world and what it has to offer. To argue for deliberate intervention to transform what are deemed ‘adaptive’ preferences is deeply paternalistic and at root, fundamentally illiberal.
*On this, see, for example, Sen, A. (2002) Rationality and Freedom, Cambridge, Mass: Belknap.
Wonderful post Mark. New or old, paternalism is indeed quite illiberal as you nicely point out.
The mere fact that people are adapting their preferences to the strictures imposed by informal social institutions implies that these social institutions are dense and strong, and that outside coercion could expect to encounter massive resistance and widespread negative consequences outside the narrow practices being targeted. That does not mean that, in some circumstances, the effort will not be worth it, even with the collateral damage (say, punishing honor killings), but it does imply that using the state to blast away certain practices (say, unequal household labor) is likely to be more like using a machine gun to kill a sparrow.
Another excellent – and quite pithy – post. Thanks.
Excellent post. Once the Sen thesis is accepted, of course, any intervention could be justified on the ground that the “all-knowing” government arbiter knows what the underlying preferences are. But, what if the arbiter is also affected by social pressures (eg pressures to take a politically correct line on matters to do with sex differences)? Who knows and how do we know which biases are genuine and which are socially formed? Also, having preferences influenced by social pressure is a way of economising on information and creating opportunities for socialisation. It is not that Sen is necessarily wrong about how preferences are formed, but the idea that his observations have any interesting policy implications is surely wrong.
I have to disagree… I think the major flaw in most economic models today is the belief that individuals make rational choices. (Perhaps only at the aggregate market level, perhaps not) It’s beyond dispute that we can firmly demonstrate that while there may be individuals who do, the vast majority make irrational ones, and the science of behavioral economics attempts to map these sort of choices out. Regardless of the ‘social planning’ aspect of policy making which may be questionable, until Austrian/Libertarian/etc economic models are revised to account for the lack of the ‘rational choice’ they assume exists, we lack a model that works in the real world. Sen and Sunstein might be flawed, but the message they are communicating is not: ignoring the irrational way people act is the core problem, and they are responding to that problem by paying attention to it, and trying to describe tools to work with it.
Seth, two comments. ‘Austrians’ do not believe that actors are rational – either individually or at the aggregate level. The entire approach is based on recognising the limits of rationality. The case for markets merely claims that given limited rationality a competitive framework increases the chance of securing better decisions relative to some system of ‘social planning’. This analysis is equally relevant to the kind of issues discussed by Sunstein,Thaler and Sen – given the limited rationality of policy-makers ( as well as private citizens) we should rely on competitive ‘nudging’ rather than ‘central nudging’. There is no guarantee that it will work, but we increase the chance of success if we rely on a diversity of private actors to develop there own nudging strategies than if we concentrate power in the hands of supposed policy experts.
“given limited rationality, a competitive framework increases the chance of securing better decisions relative to some system of ‘social planning’.”
You made my point: it can be shown, through experimental testing, that we don’t have limited rationality, we actually tend to irrational decision making. And while it’s true that some competitive frameworks will yield better results, those who understand the irrational marketplace can and do manipulate to yield what are NOT better decisions, in some cases. I’m not saying social planners are the answer, by any means. But ignoring that the rationality assumed to govern overall decision making (and thus signaling the market correctly) FAILS to exist means that the economic systems are using a false premise.
Competitive Nudging is a good thing, yes.. and I’m not saying that policy experts should be in charge. I’m saying that a new economic model need to take into account the lack of rationality, in a solid concrete way, and so far, I don’t see that happening.
The invisible hand isn’t rational, that is what the 21st century will have to face.
Seth, I think you have made my point. I do not claim that competition is some perfect answer or that ‘the market’ always gives the ‘right’ signals. Rather, I’m claiming that if people have limited rationality ( I don’t go along with your claim that the experimental evidence shows that people are completely irrational) then competition is a ‘concrete way’ of reducing the negative consequences that might flow from that limited rationality (Vernon Smith’s experimental work is very good on this). The invisible hand may not be rational, but there is no evidence/reason to suppose that the ‘visible hand’ is any more rational – that in my view is what the 21st century will have to face. Alternatively, perhaps we should just give up on the idea of rationality entirely – whether it be the rationality of market participants or of policy-makers – if so, I don’t see how we can generate any ‘concrete’ institutional/policy conclusions whatsoever. Perhaps that would be a good thing – I don’t know.
I agree thoroughly with Mark Pennington. I’d also make some additional points which I’m sure Mark would agree with. i) I’d question your use of the word ‘rational’ – you seem to believe that there is always a rational choice between two alternatives e.g. being healthy and having a long life or eating fatty foods and shortening one’s life. But if an individual were to prefer eating fatty foods even at the cost of shortening their life span, who’s to say they’re irrational in doing so? They have simply selected a preference ii) Individuals and markets may have ‘bounded rationality’ but so do governments! Governments face incentive and knowledge problems that individuals face as well – and always remember that governments are merely collections of individuals anyway. Unlike markets, however, governments do not allow an exit mechanism – we’re forced to accept their diktats – and nor do they have the discovery capacity that competition and markets allow. Having wrongly assumed that there can be a rational choice you then wrongly assume that government intervention is the appropriate way to achieve such a choice! iii) Many of the problems of ‘adaptive preference’ are actually caused by an initial government intervention anyway. For instance, family structures are often determined or affected by legislation or the tax system. For many centuries, women were denied property rights by legislation! At present, the UK’s tax and benefit systems discourage two parent households or subsidise those on benefits to have children they struggle to support, usually necessitating further state intervention to ‘help’ the children, although it invariably has the opposite effect (Mark – I would argue that inequality was a (not THE) necessary cause of the riots but it was inequality of circumstance and opportunity which government had created). Similarly, the UK’s NHS socialises the costs of eating fatty foods, thus subsidising unhealthy lifestyles – so actually such lifestyles cannot really be termed ‘real’ preferences but are, to a degree, actually the result of distortion by intervention. A market system using insurance might well be able to incentivise healthy lifestyles – but it would certainly not incentivise unhealthy ones!!