Knowing What’s Good for Me

February 25, 2008

Let me get away from all this talk of “rationality” and “preferences” and say what I really mean: people are better off when allowed to make their own choices. As illustrated by the “Newcomb problem” presented on Overcoming Bias, rationality isn’t something we should value for its own sake. In the game presented in this problem, people who behave rationally always lose. On the other hand, acting irrationally seems to be a winning strategy. In this situation, then, there is no reason to be rational, because you aren’t getting anything out of it. Thus, when talking about smoking, I don’t really care about whether people are rational or irrational, per se. Instead, I care about whether their decisions are making them better off. When I say that smoking is rational, I’m not making some metaphysical claim about whether a person truly chooses to smoke; I mean that they are actually better off for doing so.

The purpose of Becker’s addiction model, as described in Lemieux’s “Why Do People Smoke?” is just to extend to the realm of addictive goods a very standard economic conclusion: it is impossible for us to improve on another person’s decisions. In the most basic and (I hope) least controversial understanding of what preferences mean, economists look at a person who chooses, say, broccoli over asparagus and conclude that the person under study has, in effect, gotten it right. You can’t make the broccoli-chooser better off by giving him asparagus instead. In fact, as long as he has proper information about the items in question, there is no way we can make him better off by forcing him to take some bundle of goods that he wouldn’t have chosen himself.

In a previous post, I made the case for extending this argument to cases like that of the person who spends any money he manages to get right away, only to find himself broke and homeless. It’s not a choice we would make, but nonetheless, we can’t make him better off by requiring that he spend and save his money in the same way that we do. He is not choosing to behave in the same way that we do because he would be worse off if he did.

Becker goes even further and claims that you can’t make an addict better off by preventing him from acquiring the addiction. A person choosing to consume addictive substances understands the current costs and benefits of consumption and is capable of properly discounting future costs and benefits, in this situation no less than in the previous ones.

Unfortunately, none of this better off/worse off stuff is testable, and without testable claims, it’s hard to pinpoint what we are arguing about. What is testable is the claim that addicts tend to be people who discount future costs and benefits more heavily in other areas as well. This is the focus of the Lemieux article. Addiction isn’t just a random event that affects some people and not others. There are certain characteristics and patterns of behavior found in addicts that aren’t found in other people. This finding doesn’t settle the question of whether addiction is really making addicts better off; you could still claim that they systematically underestimate the future costs of their behavior. But the fact that there is a consistent method to their behavior does make their choices harder to dismiss as mere error.

The challenge for people who seek to alter the behavior of addicts is to explain how we determine where improvement is possible and where it isn’t. Economists tend to say that whether you are choosing between broccoli and asparagus or smoking and non-smoking, we can’t do any better for you than you can do for yourself. What is the alternative view? Who is supposed to be able to improve your situation, and how will we recognize a genuine improvement opportunity when we see one?

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