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When Nudge Comes to Shove

Wednesday, November 13, 2013

Obamacare is simply old-fashioned social engineering dressed in trendy new clothing — and as such, it is destined to fail.

Today, the phrase “social engineering” has fallen into disgrace. Yet the policy of social engineering, the idea of which goes back to the time of Plato, is still with us today, most conspicuously in the Affordable Care Act (more popularly known as Obamacare). Within the first few weeks of its rollout, Obamacare began to show the telltale signs of social engineering: nothing worked the way it was originally planned. Soon the words “debacle” and “fiasco” were being routinely employed by the mainstream media to describe Obamacare’s first dismal month — the same words that have been so appropriately applied to the ill-fated social engineering ventures of the past.

Those who remain optimistic that Obamacare will eventually turn around fail to realize that early glitches are not a passing phase, nor mere growing pains on the path toward progress: they are classical symptoms of an experiment in social engineering in the process of falling to pieces.

To understand the significance of the charge that Obamacare is an experiment in social engineering, we must go back and examine why the very term “social engineering” has been so carefully avoided both by Obamacare advocates as well as more neutral observers in the mainstream media. When the phrase was first introduced at the very end of the 19th century, it had not yet acquired its negative connotations. On the contrary, the term “engineering” carried with it the glow and glamor of those majestic feats of late 19th-century ingenuity, like the Brooklyn Bridge, the brainchild of the brilliant engineer John A. Roebling. If regular engineers like Roebling could design such awesome structures, then why couldn’t equally ingenious social engineers construct better and improved social institutions or even societies as a whole? To its advocates, social engineering meant that progress would no longer come about piecemeal or by accident, as it had in the past, but wholesale and through centralized planning.

The Soviet Example

Progress through centralized planning has turned out to be an elusive ideal. Many ideas that sound good in theory have proven disastrous when applied to reality. For example, when the Soviet Union under Stalin decided to collectivize farming in the 1920s, the Soviets sincerely believed that this new policy would rationalize the backward and often blatantly irrational methods of traditional Russian agriculture.

Obamacare’s early glitches are not a passing phase, they are classical symptoms of an experiment in social engineering in the process of falling to pieces.

For century after century, the average Russian peasant had been compelled to eke out a bare subsistence on a few strips of land — often strips of land that were separated by a considerable distance. This fragmentation of landholdings was the inevitable result of the peasants’ insistence that land must be evenly divided among their children. This may well seem fair to us, yet what was fair to one generation proved to be a blight on future ones, as each smaller holding was in turn divided into ever smaller and less manageable units. The cumulative effect of this tradition was that the vast majority of the Soviet population was employed in simply feeding mouths, and even then not always with reliable success. As the Soviet planners realized, something had to be done. If Soviet agriculture could be rationalized, more food could be grown by far fewer hands. These liberated hands could then move to cities, where they would provide an industrial workforce that would allow the Soviet Union to make the critical transition into a major industrial power, like Germany or the United States.

The key to the rationalization of Soviet agriculture was to be the collective farm. Instead of each peasant working his paltry holdings alone or with his ragged children, all the peasants would come together and work cooperatively (and happily) on the sprawling collective farms, where they would enjoy the considerable advantages that economies of scale always produce. Furthermore, the collective farm would instruct the peasants in the most up-to-date methods of agriculture, as opposed to their antiquated and obsolete old routines. The peasants would even be provided with some of the modern farm equipment, such as the threshers and tractors that had already revolutionized agriculture in the United States and in the other advanced nations of the world. In time, it was assumed, the USSR would be able to catch up to America, where a dwindling number of farmers were producing an ever larger amount of agriculture goods, more than enough to feed the ever increasing number of industrial workers. What had happened by accident in the United States would come about by design in the USSR, thanks to the rationality of Soviet planning.

Before we discuss the millions who starved to death due to this planning, it is important for us to stop and admire its intellectual beauty. It looked absolutely fabulous on paper. It was a brilliant solution to a grave social and economic problem — if only it had worked. But it didn’t. Not because the Soviet planners were not rational enough, but because they were too rational. It did not even cross their minds that the peasants, whom they were trying to help, would not meet their own standards of rationality. When a peasant with five pigs was told that these pigs would now become part of the livestock of a new collective farm, instead of happily leading his pigs to join those of his neighbors, he slaughtered them instead. What could be more irrational than that? And it was not just one peasant with five pigs, but millions of peasants who responded in the same self-destructive way, leading not to the bountiful harvests predicted by the Soviet planners, but to famine and mass starvation.

It looked absolutely fabulous on paper. It was brilliant solution to a grave social and economic problem — if only it had worked.

For many thoughtful observers, the failure of the Soviet experiment was due to a basic flaw with all schemes of social engineering: no set of human beings, however intelligent, could possibly know in advance all the unintended consequences that would inevitably result from the actual implementation of their carefully constructed central plan. Therefore, all social engineering came at a high risk, and since this risk could never be eliminated, it was better to leave all such experiments alone — a position taken by the Austrian School of economics, led by Ludwig von Mises and Friedrich Hayek, and also the theme of Karl Popper’s classic The Open Society and Its Enemies. Yet even those who did not agree with this sweeping indictment of all social engineering projects on a priori grounds could not but remember just how many such projects had failed, and failed abysmally, the relatively benign American experiment during Prohibition among them. During the latter part of the 20th century, even liberals became wary of advancing programs that smacked too much of social engineering overreach.

‘Libertarian Paternalism,’ the New Social Engineering

Yet social engineering was not dead. Indeed, as the 21st century began, it took on a new life, albeit under an alias. Since no one dared call any program social engineering, a new label was needed in order to make it intellectually acceptable in the public mind. This label was “libertarian paternalism,” a phrase coined by Richard H. Thaler and Cass Sunstein, who spelled out the details behind their basic concept in their best-selling book Nudge: Improving Decisions about Health, Wealth, and Happiness.

“Nudge” is the key word here, as Sunstein makes clear when he writes that “the basic idea is that private and public institutions might nudge people in directions that will make their lives go better, without eliminating freedom of choice. The paternalism consists in the nudge; the libertarianism consists in the insistence on freedom, and on imposing little or no cost on those who seek to go their own way.” Whereas earlier forms of paternalism shoved people into their centrally planned schemes, as the Russian peasants were shoved into their collective farms, this new form of paternalism — often called “soft paternalism” — would only give people a gentle, barely perceptible push in the right direction. Of course, those being pushed may not at first perceive it to be the right direction (indeed, they may even push against it), but once they have been nudged into their appropriate place, they will recognize that this is where they wanted to be all along. Indeed, it is essential to soft paternalism that people may only be nudged into doing what they would do if they were perfectly rational actors — that is, what they would do if they only were as rational as those nudging them.

No set of human beings, however intelligent, could possibly know in advance all the unintended consequences that would inevitably result from the actual implementation of their carefully constructed central plan.

Here we have a new twist to the old idea of social engineering. In their attempt to rationalize Russian agriculture, the Soviet central planners assumed that the peasants were just as rational as they were, which is why their experiment backfired so terribly. But the soft paternalists of today do not make this mistake. Indeed, they are fond of dwelling on precisely those judgments and decisions which, though commonly made by most of us most of the time, are subject to one sort of irrational bias or another. It is no wonder that Daniel Kahneman, who has catalogued a wide range of our cognitive frailties, has wholeheartedly endorsed libertarian paternalism.

According to Kahneman’s new paradigm, it is not normal for human beings to make rational decisions. On the contrary, we can only reach such decisions if we are careful to set aside the various cognitive biases that come naturally to us and which deflect us from following the course dictated by our rational self-interest. Thus, few of us are in a position to make genuinely rational decisions, unless we have thoroughly trained ourselves to avoid the cognitive pitfalls endemic to everyday life. A simpler and more realistic approach would be to appoint a group of cognitive guardians to prevent us from making the everyday kind of irrational decisions to which the vast majority of us are so prone. Their job would not be to impose their will on us, but to nudge us into making the rational choices that we would naturally make if we were not subject to so many cognitive biases.

The old metaphor of social engineering has been replaced with a new metaphor: the central planners are now architects of choice, to use Thaler and Sunstein’s image, though they speak only of choice architecture, as if a piece of architecture could come about without an architect to design it. But such architects are clearly necessary and what these new architects of choice do is decide which choices we should have and which choices we should not have, as millions of Americans are discovering as they learn that the health insurance policy they were perfectly happy with is no longer an option and that their choice has been nudged away — though this nudge for many may seem remarkably like a shove.

Libertarian paternalism, when it was first presented as an abstract idea, drew criticism from many conservatives. True libertarians argued that libertarian paternalism was an oxymoron, a contradiction in terms. How free can you be really be if someone else, claiming to act in your true interest, decides what choices you have? Other conservatives claimed that soft paternalism was only an attempt to promote a kinder, gentler socialism. The focus of the debate was primarily on whether the new architects of choice, backed by the power of the state, would be a menace to personal liberty.

During the latter part of the 20th century, even liberals became wary of advancing programs that smacked too much of social engineering overreach.

With the rollout of Obamacare, the debate over the merits of libertarian paternalism ceased to be purely abstract. Obamacare was the first large-scale attempt to implement the principles of libertarian paternalism that, as its architects assured us, would make us all healthier, wealthier, and happier. Prior to the rollout, Obamacare’s architects were only able to present their designs in the form of abstract blueprints — blueprints which looked just as beautiful and elegant on paper as the collective farm movement had looked to its Soviet designers. Mandates would nudge the uninsured to buy health insurance. Since many of those who were uninsured were the young and healthy, this would allow insurance companies to lower costs for the old and sick. Federal subsidies would make health care cheaper for those less able to afford it. If all went according to plan, everyone would benefit and no one would lose.

Yet, like all schemes of social engineering, the blueprint for Obamacare was strikingly like one of the bizarrely complicated machines imagined by the great cartoonist Rube Goldberg, where a simple effect, like opening a bottle, was achieved only after a maddeningly roundabout series of oddball mechanical actions, where something could always go wrong, but miraculously never did.

Unfortunately, the Rube Goldberg machine known as Obamacare went wrong, and badly wrong, from the word go. And it didn’t get any better as one new unintended consequence after another revealed itself as the machine kept whirring along. No, you could not keep your health insurance, or your doctor, or your hospital. More of the old and sick are signing on than the young and healthy.

The Obamacare rollout debacle has left many of us wondering how its architects, obviously so much more rational than we are and free from our own cognitive defects, could have made such terrible and idiotic blunders. And can we be expected to trust our appointed architects of choice when they assure us that they are going to fix the mess they have made themselves? Imagine if the first few people who crossed the Brooklyn Bridge had seen it collapse beneath their feet — would they have trusted Roebling to build them another?

Perhaps Daniel Kahneman should add another cognitive bias to his list — a bias that doesn’t affect ordinary individuals very much, but which has always had a profoundly distorting effect on the judgments and decisions made by intellectuals, namely, an irrational infatuation with abstract theories and utopian ideals, despite the demonstrable fact that such theories and ideals, when put into practice, have inevitably failed to improve the human lot and in many cases have led to complete disaster. The small irrationalities of our daily individual lives, so well documented by Kahneman, can never damage society as much as the grandiose rationality of centralized planners — a vital truth that our generation seems to have forgotten, but of which Obamacare is rapidly reminding us.

Lee Harris is the author of The Next American Civil War, Civilization and Its Enemies, and The Suicide of Reason.

FURTHER READING: Harris also writes “The Political Genius of Ted Cruz,” “Sympathy for the Devil,” and “The Spirit of Independence: The Social Psychology of Freedom.” Rich Thau and Celeste Gregory discuss Thaler and Sunstein’s book in “Nudging Conservatives to Harness Behavioral Science” and so does Nick Schulz in “Nudge Not Lest Ye Be Nudged.” Arnold Kling contributes “Fantasy Despot Syndrome and Healthcare.gov,” while Jonah Goldberg shares “Obama: The Myth of the Master Strategist” and “Obamacare's Square-Wheeled Rollout has Democrats on the Hot Seat.” Mark J. Perry writes “Thomas Sowell on Social Engineering” and Joseph Antos argues “Mr. Speaker, Medicare IS Social Engineering.”

Image by Dianna Ingram / Bergman Group

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