In his on-going and wholly justified assault on Richard Layard’s book, Happiness, Will Wilkinson raises a fascinating idea. The best way of dealing with externalities, he says, might be not to tax them away, but to encourage sufferers to change their preferences.
So, if – as Layard suggests – the wealth of the rich makes the poor unhappy, the best solution might be for the poor simply to become less envious, rather than for the rich to be taxed. Or if a wind-farm is built in previously unspoilt countryside, residents should learn to appreciate the beauty of man-made products more than nature. As Will says:
The correct approach to the problem [of externalities], if there is a problem at all, depends on what the lowest cost solution happens to be. If you changing your preference is cheaper than taxing me, then you ought to change your preference.
Glen Whitman raises one problem with this:
Preferences are malleable, but not infinitely so. Some preferences can change easily within a single person’s lifetime, others can change over generations, and yet others may be so built-in to human nature that changing them is essentially impossible.
And Lynne Kiesling adds that this blows apart conventional economics, which rests on the assumption that preferences are stable. And she adds, if preferences are changing, how do we know what the lowest-cost solution is? Do we measure costs by reference to ex ante preferences or ex post ones?
I suspect there are other problems with the idea.
1. Changing preferences can be a way for us to reconcile ourselves with evil. Take North Korea or Zimbabwe. One way to improve the subjective well being of the people of those benighted nations is for them to adopt preferences for tyranny, and to diminish their desire for liberty.
2. Preferences and beliefs are closely connected. One way to change our preferences is to change our beliefs: that toxic waste dump is safe really; Robert Mugabe isn’t imprisoning or killing people. But this is just irrational.
3. Autonomy is a value in itself. If we adapt our preferences to our circumstances, we are creating for ourselves “mind-forged manacles”. We’re losing liberty from within.
One message I take from this – and I think it’s one Will wants us to take – is that the utilitarians have got it wrong: preference satisfaction should not be the object of policy. Another message is that we should all read or re-read Jon Elster’s marvelous book, Sour Grapes.