A place for choice

This piece by Catherine Bennett, and the rather vitriolic reaction to it, shows the mess we can get when social science crashes into entrenched prejudice.
The thing is, there is by now abundant evidence that people choose badly. This is not just in trivial areas such as the choice of jam, but in really important matters; Richard Thaler and Shlomo Benartzi have shown (pdf) that even very intelligent people can be bamboozled by choices into getting their pension selections wrong.
However, Ms Bennett’s interlocutors overlook this. There seems to be a reluctance to face the fact that the evidence is mounting against the crude “max U” rational maximizer of Econ 101 myth.
But Ms Bennett is also wrong to infer from this that choice in public services is a bad thing. There’s good evidence that choice can, in the right circumstances, drive up standards. But how can this be, if people are bad at choosing? There are (at least) two possible mechanisms:
1. The mere threat that consumers might choose if not efficiently then at least adequately can prevent organizations getting too sloppy. Bosses who display a contempt for their customers - think of Gerald “crap” Ratner - tend not to succeed.
2. People don’t have to make the best possible choice. They only have to satisfice - pick a tolerable option. This could be sufficient to drive people away from really bad schools and hospitals. In this sense, choice and competition can improve standards not because the best get better or bigger, but because the worst disappear. This seems to be the case in the private sector generally. In this superlative paper, Alex Coad writes:

Selection only operates via elimination of the least productive firms or establishments, while the mechanism of selection via differential growth does not appear to be functioning well.

This suggests there is a middling position. Yes, Ms Bennett and her like wrongly under-rate the importance of choice in public services. But equally, I fear that some on the right might be over-estimating its efficacy.* Which leaves me puzzled, as to why an extremist like myself is left occupying the centre ground.
* I’m thinking here of choice as an instrumental value. One might reply that choice is a good thing in itself, even if it makes us unhappy, and aside from its effect upon standards. I’m not sure how to ajudge such a claim.

Comments

[Jimmy Hill]

"The thing is, there is by now abundant evidence that people choose badly."

This on its own though doesn't mean much.

Even if individuals are riddled by cognitive biases when they make decisions this isn't an open door for the state. What has to be shown is that individuals (who are hopelessly bad choosers) when working for government are able to choose better for other individuals than those individuals can do for themselves.

[Neil]

Well said, Jimmy. Bennett's logic seems to be: Some people make bad choices, so we should ensure that everyone's choices are made for them by... other people.

[Luis Enrique]

well, you're right it's important to understand when "choice" can go awry (and much of economics in recent decades has been about that). But some of these lefty-intellectual whines about choice are pathetic and deserve the vitriol they receive.

[chris strange]

There are options so there is going to have to be some mechanism for making choices. You do not get rid of the need to making choices by taking these choices away from end users, you simply have to have them taken by somebody else.

The problem with Bennett's article is not that that people are bad at making choices. The problem is that Bennett is arguing for choices to be taken form end users and then have them taken by individual experts. Unfortunately these experts will are also going to be bad at choosing and have a whole host of cognative biases, as everybody does, plus not have as much incentive to get their choise right as the end users as the choise they make will not directly effect them. In agregate lots of people making lots of mistakes still give a better end results than individual expert's choices, as can be shown by the way that markets out perform experts over time.

[CharlieMcMenamin]

The problem with all this is that- as an economist - you are naturally focused on the moment of individual decision. Choice never happens in a vacuum though. Power structures choice. I await a refinement of your position which takes this into account.

Try http://orgtheory.wordpress.com/2010/08/11/how-political-science-lost-its-soul/
for a more theoretical reflection in this.

[howardclark@btinternet.com]

Choice is a tool for improvement.

It is a blunt tool, crude and cumbersome.

Where it works it works because it fits in with the what Professor John Seddon calls nominal value. Namely if it is what is important to service users (it meets their nominal value) then it will work. Choice when you go into a supermarket is a simple proposition, intimately based around each individual's decisions on taste, perceived quality, lifestyle aspects (healthy eating). Tin A or Tin B, C, D, or E. Choice in this context works and is a basis for our market-based capitalist system.

When I as a patient goes to hospital or to see a doctor, I am concerned (preoccupied even) with getting better. My nominal value is 'help me get better' and if I need to go to hospital 'at a place near me'. For me these are the two criteria. No 1 above No 2.

Not only do I not know how to choose between Doctor A or Doctor B, I wouldn't trust my judgements as I am not medically qualified to decide. If I chose Dr A based on bedside manner I may be discounting the good Dr in favor of the bad Dr who is nice.

The government is about to begin to introduce a whole raft of comparison measures so that patients can make these choices. However, If I as a patient do not want to choose, and just want to get better, this tool called 'choice' will not work.

Choice is an ideological tool used by both the right and recently the left. It doesn't work in this context, and it won't work. If this is the case, why isn't the government considering other methods?

[Jim]

@HowardClark: so when you go to your doctor (as chosen for you by the all-knowing State experts) and tell him your problem, and several months later, when he has singularly failed to get to the bottom of whats wrong with you, and you are still in pain and discomfort, what do you do? Sit back and be philosophical about it - "the State has chosen this doctor, he therefore must be the best one for me, therefore I must accept that my complaint cannot be fixed" or do you think "B*gger this for a game of soldiers, I'm getting a second opinion, and a third, and a fourth if necessary, even if I have to pay for it, until I find someone who knows whats wrong with me"?

When your child comes home from school after a number of years, and still cannot read properly yet do you think "Thats fine, the State has allocated my child to this school, I'm no educational expert, it must be the best choice for him/her"? Or do you move heaven and earth to get a place for your child at a school that can be bothered to teach the rudiments of reading and writing?

If you choose the second option in either scenario, then you are exercising choice, something you seem to wish to deny others. Some might call that hypocrisy. I couldn't possibly comment.

[Agog]

It's hilarious how right-wingers, who portray themselves so often as hard-headed realists, so often project market-properties onto non-market processes. Any talk of 'choice' in public services is a pretext used by people who want to bring about a tollbooth economy. "Can't pay the toll? Sorry, you can't pass through."

Too right it's all about power.

[Guano]

The argument is between collective choices and individual choices. Public services (and the public realm in general) involve collective choices and it is difficult to redesign them to make them responsive to the sum of individual choices. Collective choices often involve so-called "experts" but the final decision is supposed to be taken in a transparent way by politicians who are accountable to the electorate.

There is a high risk that we will be offered "choice" with one hand while with the other hand "voice" and "influence" over collective choices will be taken away. The choices that we will be offered meanwhile will be highly constrained.

[Guano]

"Moving heaven and earth to get your child a place at a good school" may be a good individual strategy, but it isn't a useful collective strategy for improving the general standards in schools. A large-scale movement from one product to another in other fields may signal that one product is below standard, it doesn't work that way with schools. There would have to be a considerable amount of spare capacity in schools to allow for parents to be able to move their children from one school to another, and that spare capacity doesn't exist. A parent does need to move heaven and earth to get their child into a better school because in most areas it is next to impossible. It is highly unlikely that this spare capacity is going to be created just so that school access can work like a market. Secondly, when it has been possible for children to move to better schools, the response has not been to improve the product in the poorer school: the response has usually been to allow that school to go into a spiral of decline and then be allowed to fail and close.

There is an alternative: beseige the governors and the head teacher and your councillor to get improvements made. That is more difficult now of course: Academies have fewer parent governors and your councillor and LEA has no control; the school is likely to say that you chose to send your child to that school so you should keep quiet (even if the choice was a Hobson's Choice). As I said above, there is a risk that the offer of "choice" removes the possibility of "voice" and "inflence". But it is a strategy that is more likely to have some effect on the overall standards in schools.