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Category: Economics

Economics / General / Governance / Health / Liberty

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What I Really, Really Want: Why True Preferences Matter for Nudging

In this post, Bart Engelen (Tilburg University) and Viktor Ivanković (Institute of Philosophy, Zagreb) discuss their recently published article in the Journal of Applied Philosophy, where they explore what it means to have ‘true preferences’ and how this affects our understanding of autonomy and nudging.

Failing to do what we really, really want seems all-too familiar in everyday life. You might want to lead a healthier lifestyle or aspire to a career in a girl band but turn out to be too sluggish to go for a run or practice your singing and dancing skills. If you really are committed to those aims, these are clear instances where you fail to satisfy your ‘true preferences’.

Laziness and akrasia

So, what is it that you really, really want? And why does it matter whether or not others can know your deepest desires? In our new article in the Journal of Applied Philosophy, we argue why some of your preferences are truer than others and why policy-makers can and should steer you in the direction of these preferences by nudging you when you veer off course.

Image from DHE-Art

True preferences, we contend, are real and should be taken seriously, by ourselves, by philosophers and by policy-makers. They are more fundamental and stable than our more superficial, impulsive and flimsy preferences. They also have special status and carry special normative weight. We care about them; it really matters to us whether or not we succeed in realizing what we set out to do, whether this is akin to a New Year’s resolution or something more vital to our central life plans.

All of this might sound rather obvious. Who would deny this? Oddly enough, more than a few (behavioral) economists do. In our article, we discuss and respond to three types of objections that they raise against true preferences. First, true preferences have been claimed not to exist. Even when preferences are incoherent, the objection goes, there is no indication as to why some preferences might be meaningfully “truer” than others.

And even if there are true preferences, a second objection states, they remain unknowable to others, and particularly to meddlesome governments. Of the many, changing and often incoherent preferences, how can one possibly single out those that are somehow true or special? How can an outsider know whether you suffer from procrastination or simply prefer not to chase after a life of fame?

Third, true preferences might simply lack normative weight and the fact that someone is veering of course might not justify governmental interference. Governments then, have no business promoting true preferences. Surely, policy-makers shouldn’t make it their business to help you become the next Mel B or Posh Spice, even if that is your deepest desire.

Image from Rawpixel.com

True preferences

In the article, we attend to these objections. True preferences, we show, are quite essential to how we understand core concepts of moral philosophy, like autonomy and authenticity. We point to several plausible ways of understanding true preferences developed by philosophers such as Harry Frankfurt (higher-order preferences), Bernard Williams (authentic preferences), Tyler DesRoches (values-based preferences) and Mark Fabian and Malte Dold (agentic preferences). All of these understandings establish a connection between true preferences and the core concepts of moral philosophy.

All of these philosophers claim that some of our preferences are (more) special (than other preferences), as they express (more) closely who we are. They make up the kind of person we consider ourselves to be or that we aspire to become. Those who deny that true preferences exist or have special normative weight, we argue, undermine our ability to make sense of autonomy and authenticity. When people fail to act on their commitments, they are not leading the life they want to live. We need a notion of ‘true preferences’ to capture the fundamental thought that some of our preferences are more ‘ours’ and that others are more ‘alien’ to us.

Policy implications

So what does this mean for policy-makers? Knowing what you really, really want might be nice for yourself, your partner and your friends but should politicians and policy-makers be in the business of figuring out your deepest desires? In the article, we defend the case for ‘paternalistic nudges’ that promote true preferences. Policy-makers, in our view, can and should nudge citizens when they predictably veer off course and fail to satisfy their own true preferences.

So far, nudge advocates have mostly assumed what people’s true preferences might be. This has been heavily criticized as an objectionable kind of paternalism because it supposedly ends up with policy-makers imposing their values on citizens. Instead of really catering to people’s true preferences, policy-makers will nudge citizens in directions that the policy-makers regard as beneficial, be it health, wealth, or some other aspect of wellbeing. Say, people can be nudged into doing more regular check-ups, eat healthier food, or drive safely, all things that they surely prefer…or do they? How can policy-makers hope to find this out? Economists are all too keen to point out knowledge problems in government operations.

And while they make some important points, the knowledge problem for true preferences represents a challenge to be overcome, not a cause for defeatism. We are not helpless in its wake. It is perfectly possible to identify scenarios in which people predictably form false beliefs, exercise poor evaluative judgments or suffer from incompetence. We can use generalizations and statistical evidence for what contributes to a healthy and financially stable life and we can use surveys and other scientific methodologies to gauge people’s desires.

Importantly, we can do all of this while making absolutely sure that dissenters can go their separate ways. This is the advantage of nudges. They can help people get things right (when they steer them in the direction of a true preference), while preserving their freedom to resist (if they steer in the wrong direction). So, even if it turns out that you really prefer to watch rather than be a Spice Girl, you won’t be forced in either direction.

Climate / Economics / Environment / General / Health

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Redefining limited liability

Different phases of economic development call for different institutional arrangements. When an institution outlives the economic circumstances for which it was designed, it can lead to unintended negative consequences. The limited liability of corporations, at least under certain conditions, represents an example for such an institution.

Limited liability is one of the key features that distinguishes a partnership from a business corporation. When a partnership goes bankrupt, it is not just the capital of the partnership that is liable but also the private wealth of each of the partners. When a corporation goes bankrupt, by contrast, the reach of the creditors is limited to the capital that shareholders have invested in the corporation. They are off the hook as far as their private wealth is concerned.

It is easy to see why this arrangement leads to a significant increase in the capital that corporations are able to raise compared to partnerships. Which investor would turn down a setup with significant potential upside in terms of capital gain but limited downside? The justification for limited liability from a social perspective is equally obvious. Separating individual property from corporate property in this way hugely enhances financing capacity and thus output across the economy.

Limited liability under climate change

Limited liability worked well under conditions where any growth was good growth. However, independently of whether that was ever true, it is certainly not true in the 21st century. Some economic growth generates negative externalities in the form of social and environmental costs. Corporations only pay for the private costs of their production, whereas the social and environmental costs are borne by society as a whole.

The classic example in this category are greenhouse gas emissions. Corporations in the fossil fuel sector only pay for the private costs of getting the stuff out of the ground. Beyond the insufficient forms of carbon pricing in place today, corporations do not pay for the human and environmental costs measured in human deaths, respiratory disease from pollution, extreme weather events such as heat domes or atmospheric rivers, food shortages due to droughts, and loss in biodiversity. The results are overproduction and overconsumption of carbon-intensive products at inefficiently low prices.

Investor liability as a complement to carbon pricing

The conventional wisdom in the discipline of economics tells us that the most efficient way to reduce fossil fuel production and use to efficient levels is a form of carbon pricing, for example by charging a carbon tax. It is true that carbon taxes could be effective if they were both high enough and progressive. However, they clearly fall short on both counts today.

The above considerations point to a complementary regulatory lever. Under conditions of climate change, the justification for limited liability breaks down. Letting shareholders off the hook is not a good idea when doing so amplifies irresponsible corporate behaviour in the form of overproduction. Instead, in order to convince corporations to meet the challenge of producing sustainably, we have an interest to ensure that both the corporations and their investors have some skin in the game.

Note that this does necessarily imply that investors would have to be liable with all of their wealth, but a limited liability rather than zero liability would encourage corporations to price in negative externalities right away rather than wait for adequate levels of carbon pricing. One might also envisage a progressive form of liability where wealthier investors have more skin in the game than their less well-off counterparts. Indeed, if they did not, their incentives to invest responsibly would be reduced.

Extending the corporate time horizon

Corporations, their managers, and their shareholders are often criticized for maximising profit in the short-term. The current forms of carbon pricing have not succeeded in changing that. Redefining limited liability in the way sketched above promises to have an immediate impact in this regard. After all, under this arrangement, and in contrast to carbon pricing, it is not primarily up to the government to ensure that negative externalities are priced in, but it is up to the corporation and its investors. If the corporation and its shareholders get the numbers wrong, they will have to pay for it.

Some people will no doubt object that liability of this sort would represent a form of red tape restricting private business activity. They have things the wrong way round. Limited liability for shareholders is an enormous privilege bestowed on the corporate sector and its investors. As shown above, this privilege is no longer warranted, at least not for sectors with significant negative externalities. Today, corporations in the fossil fuel sector are able to privatise gains while they socialise losses. This is untenable. Reforming liability arrangements for these kinds of corporations offers one promising path of reform.

Democracy / Distribution / Economics / Social justice

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In Wisława Szymborska Park: Reflections on 15 Years of Citizens’ Budgets in Poland

This is a guest post by Callum MacRae (Jagiellonian University, Krakow)

A photograph of Wisława Szymborska park. It shows a stone waterfeature running alongside an area of mixed wild plants and flowers.
Wisława Szymborska park, photograph provided by Callum MacRae

Tucked behind the public Voivodeship library, connecting Karmelicka street to the east with Dolnych Młynów to the west, lies Krakow’s Wisława Szymborska park. The park is new to Krakow, having opened just last year. But, sitting just a short walk from the historic old town, those who live in the city have already come to know and love it as a precious area of public greenspace. On warm days, the park’s carefully considered design is alive with people; playing, chatting, reading, passing time, watching the world go by.

But the park represents more than just an impressively successful example of green, public, urban design. It is a product of Krakow’s Citizens’ Budget scheme, having been approved in the 2019 round of funding, and as such it also represents the power and potential of Poland’s remarkable modern engagement with participatory budgeting in local government.

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Distribution / Economics / General / Social justice

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The small-mindedness of means-testing

The hot topic in British politics last week was the government’s decision to scrap the winter fuel payment. People over the age of 65 used to be able to claim a lump sum of between £200 and £300 pounds each winter. Desperately scrabbling around for cash, the government has changed the policy so that now only elderly people who are already receiving state financial help are eligible for the payment. This is a classic example of “means-testing”: making state benefits only available to those who do not have the means to pay for things themselves.

Means-testing tends to be popular because it seems to make a lot of sense. Why waste money providing benefits to millionaires? At the most general level, a state with any egalitarian ambitions must treat the rich and poor differently.

Nonetheless, means-testing is generally small-minded and regrettable.

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Animals / Economics / General / Social justice / Work

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From the Vault: The Journal of Applied Philosophy

While Justice Everywhere takes a short break over the summer, we recall some of the highlights from our 2023-24 season. 

The cover page of a recent edition of Journal of Applied Philosophy. (c) Wiley 2024

Here are a few highlights from this year’s posts published in collaboration with the Journal of Applied Philosophy:

Stay tuned for even more on this topic in our 2024-25 season!

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Justice Everywhere will return in full swing in September with fresh weekly posts by our cooperative of regular authors (published on Mondays), in addition to our Journal of Applied Philosophy series and other special series (published on Thursdays). If you would like to contribute a guest post on a topical justice-based issue (broadly construed), please feel free to get in touch with us at justice.everywhere.blog@gmail.com.

Democracy / Distribution / Economics / General / Governance / Punishment / Social justice

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From the Vault: Justice, Democracy, and Society

While Justice Everywhere takes a short break over the summer, we recall some of the highlights from our 2023-24 season. 

A person casts a vote during the 2007 French presidential election. Rama, CC BY-SA 2.0 FR https://creativecommons.org/licenses/by-sa/2.0/fr/deed.en, via Wikimedia Commons

Here are a few highlights from this year’s writing on a wide range of issues relating to justice, society and democratic systems:

Stay tuned for even more on this topic in our 2024-25 season!

***

Justice Everywhere will return in full swing in September with fresh weekly posts by our cooperative of regular authors (published on Mondays), in addition to our Journal of Applied Philosophy series and other special series (published on Thursdays). If you would like to contribute a guest post on a topical justice-based issue (broadly construed), please feel free to get in touch with us at justice.everywhere.blog@gmail.com.

Distribution / Economics / General / Moral values / Work

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Should We Mourn the Loss of Work?

In this post, Caleb Althorpe (Trinity College Dublin) and Elizabeth Finneron-Burns (Western University) discuss their new open access article published in the Journal of Applied Philosophy, in which they discuss the moral goods and bads of a future without work.

Photo by Possessed Photography on Unsplash

It is an increasingly held view that technological advancement is going to bring about a ‘post-work’ future because recent technologies in things like artificial intelligence (AI) and machine learning have the potential to replace not just complex physical tasks but also complex mental ones. In a world where robots are beginning to perform surgeries independently and where AI can perform better than professional human lawyers, it does not seem absurd to predict that at some point in the next few centuries productive human labour could be redundant.

In our recent paper, we grant this prediction and ask: would a post-work future be a good thing? Some people think that a post-work world would be a kind of utopia (‘a world free from toil? Sign me up!’). But because there is a range of nonpecuniary benefits affiliated with work, then a post-work future might be problematic.

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Climate / Distribution / Economics / Environment / General

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The climate justice debate has a baseline problem

Humanity faces a number of daunting challenges in the 21st century. Climate change and socioeconomic injustice figure prominently on this list. When it comes to tackling these challenges, two possible strategies divide policy makers.

On the one hand, there are those who point out that addressing either of these problems on their own is a mammoth task, and that taking them on simultaneously is simply utopian. This view sometimes comes with a dose of optimism about technological solutions to climate change. On the other hand, an increasing number of voices argue that climate action can’t be separated from social justice. In particular, advocates of the latter position highlight the “triple inequality of climate change”: The global rich tend to pollute disproportionately and thus bear a heightened responsibility for climate change, the global poor are more vulnerable to its effects, and poor countries have fewer resources available for mitigation and adaptation. In political philosophy, we find a parallel divide between “isolationists” and “integrationists” respectively.

My point here will be to suggest that the case for integrationism is even stronger that even most of its ardent supporters acknowledge. To see why, consider the first of the inequalities mentioned in the previous paragraph. Studies suggest that, across countries, the top decile of polluters are responsible for about 50% of emissions, while the bottom 50% of polluters are only responsible for about 10% of emissions. Wealth strongly correlates with carbon-intensive activities – think everything from private jets and yachts, via mansion-size homes, to multiple trips by airplane per year or multiple cars in a single household.

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Academia / Beyond the Ivory Tower / Democracy / Distribution / Economics / General / Public Philosophy / Work

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Beyond the Ivory Tower interview with Martin O’Neill

Not only are there more democratic and egalitarian alternatives theoretically, but also policies being pursued successfully at the city and the regional level, in many places, that do give people a sense of control in the economic sphere. It’s not just wishful and abstract thinking; there is abundant proof of concept. We have to remain hopeful; we have to shine a light on those examples and talk about why they represent elements of a different kind of settlement, a more justifiable and more human political and economic system, that we ought to strive to see realized more widely and more deeply.  

(This interview took place at Alma Café, a beautiful family-owned café in York, England) 

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Animals / Climate / Economics / Environment / General

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How the animal industry undermines consumers’ autonomy

In this post, Rubén Marciel (UPF and UB) and Pablo Magaña (UPF) discuss their article recently published in the Journal of Applied Philosophy on the ethical legitimacy of misleading commercial speech for ‘green’ or ‘ethically produced’ animal products.

Photo by Mae Mu with Unsplash Licence.
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