Richard Thaler on Libertarian Paternalism

Richard Thaler introduced at UCSD his new book on Libertarian Paternalism. This seems to be a strange title for a Chicago guy (and he gets some heat from his colleagues) and maybe even an oxymoron (which it's not). The talk was, in short, fascinating. The basic idea is that people are not perfectly rational in every single decision they make (which may sound suspicious to economists, but seems trivial for people), and thus they make mistakes. They even make mistakes in a predictable way. They regret these mistakes. The most frequently used example is 401(k) plan: usually, these are opt-in plans - you get in, save money, your employer gives some more money and life is beautiful. Except that people don't opt-in for some reason. Presumably, they face tough choice (easily 80 different hedge funds), they don't have time to thing and decide etc.They end up not only losing possible returns on their own savings, but also employer's contribution. But if they have the opt-out choice, they stay in and save. The designer (government, employer) who has interest of such people in mind might find useful to use opt-out instead of opt-in system. Everybody is free to go (libertarian), if they want to, but if they don't do anything, they are in (paternalism).
The idea of a design of a system that does something for you if you choose not to do anything, but allows you to leave whenever you go will hopefully get more attention in the future. It does not restrict your freedom (costs of saying "no" are negligible), yet it makes the choice for many people easier and they end up satisfied with this decision.
The idea is not limited to 401(k) plans. Among other fascinating examples, I like the one that saves lives and not money. It's the organ donation status. In some countries (Austria, Belgium, Denmark, Finland, France, Italy, Luxemburg, Norway, Singapore, Slovenia, and Spain), everybody is presumed to be willing to donate his/her organs in case of death - opt out is easy. In other countries (USA), one has to opt-in to be considered a donor.So what?

The result is that in “presumed consent” nations over
90 percent of people make their organs available for donation, whereas in the United
States, the corresponding number is below 20 percent.

( (Cass R. Sunstein and Richard H. Thaler)
Simple policy, simple decision and huge impact.

Example like allow me to hope that libertarian paternalism is a future of applied economics. Previously, government simply regulated (enforced, restricted, forbid or taxed) a behavior. We are at the point in which we understand subtler errors of human behavior. And we can use this knowledge to design existing (or even new) regulations better for everybody, especially if some choice about the design needs to be done. The nice libertarian touch is that nobody is forced to do anything, as long as costs of saying "no" are trivial, which they should.

Anyway, if you have an hour to spare, you can listen to Richard Thaler himself at a very similar talk at EconTalk.org

Cultural differences and free lunches

It is often said that there is no such thing as a free lunch. In fact, even free lunch at school for poor students has its price - shame.
To be honest, I quite did not understand where is the problem. When I was at school where subsidized lunches (not free, unfortunately) were available, everybody was happy to have them. Some people did not go to the lunch because they prefer to keep the lunch money, not because it was a shame.
It is a bit different in the US - one has to qualify, which means that at the same cafeteria, there are people who have to pay and those who don't. And those who don't are embarrassed by their (parents') poverty and allegedly prefer to be hungry.
This puzzles me. I would expect the opposite effect - those who get free lunches would boast that they saved more money; that they qualified for an extra benefit; that they get FREE! food. That was the way it worked in a poor country like Czech Republic.
But what do I know, I studied there in 20th century. It's probably similar to the US nowadays.

Suicide

Another number of the day. Among 200 million American older than 20 years, there was 28,497 suicides in 1998 ( source). To put that into (impossible) perspective - it is about 10 times more people than the number that died in 9/11 attacks. And this happens every single year. During 18 years the statistical database contains, it is about 500,000 people.

No, the numbers of suicides per year per 100,000 are not growing. In fact, the are slightly decreasing over time.

Crime

This is somewhat related to the previous post. There is a huge number of people in prisons in the USA (about 1 out of every 100 adults). These people aren't there for "fun", even though some drug laws are clearly stupid. Most of them are there because of some more or less serious crime. Why?
Why there is so many people committing crimes in the USA other than in, say, Europe?
Well, apart from other obvious candidates, I could imagine that it is the economic inequality, which is simply hard to believe. In LA, you get from extremely rich area to extremely poor in minutes(!). People in the poor areas (allegedly) suffer from (occasional) hunger, lack of health care, illiteracy etc. Rich people are among the richest in the world.
We don't have that in Europe - not at this level. And I guess it may be hard for young, angry man to do stupid things. They are angry for being born in the wrong family. They might make a decent human being if their mother did not have 2 jobs and actually had more than 10 minutes a day to make them behave.
I will write later how the poverty leads to higher economic efficiency (both in growth and levels) and this is just one of the side-effects. It seems quite costly side-effect, though.

Number of the day

And the number of the day is 1/15. That's your chance to be in prison if you are black adult male in the USA (source: NY Times). I guess we should do the same thing in Czech Republic to solve our problems with Roma. I'm sure some would applaud to this proposal. Or maybe we can use our tax money to actually help them.

You may have seen this already

But it always makes my day a little better.

High expectations

I know plenty of smart, educated, (soon to be) financially secure, better-than-average looking people who are single and yet wish they were not. By their own account, they don't have too many requirements, so why they can't meet somebody?
Well, first of all, they DO have high requirements. They want the partner to be "reasonable", which immediately eliminates most of the population. But it does not end there. They have high expectations - they are probably at the top 1% of the population in their IQ/abilities. They expect their partner to be similar. They feel (rightly) secure, they don't really need anybody and they can wait for the right person to come.
Such person will never come. Yes, I might be hoping to find girl like Angelina Jolie and you can hope for your Brad Pitt, with brain almost as good as yours, but it's not going to happen. Never.
Chances that you meet such person and that such person will like you back is zero. Fortunately, there is a solution. Lie to yourself - give up your hopes, convince yourself that girl/boy XY is quite nice and quite smart (neither as much as you would hope, but pretty good anyway). Marry her/him!

Will you do it? I won't. I would, if this reasoning happened subconsciously, but it did not. And if you do it, chances are that these small things that bug you today will get bigger. Much bigger - as big as a divorce. Or if you meet the right person, s/he may feel you are not that great for her/him, which you may accept now, but it will eat you from inside over time.

P.S. Even Stephen Colbert takes upon the article

Finally

I finally enjoyed it today. I was running downhill towards the bay cover with reddish sunlight of sun slowly setting bellow horizon, shining beautifully through clouds of dust brought from China from factories in which children work 12 hours a day so that we can enjoy our IPod for a buck less.
It was such a romantic moment.

Don't get me wrong - I love the fact that I can buy IPod for a dollar less.

More and more ...

What makes us keep going forward? Why everybody wants more and more? It's quite sad to watch blogs of rather reasonable people making surely reasonably amounts of money, who just bought a great car but dream for better one. Or they desperately new those historical watches, or some art or bigger house.
Money are great,and it's great if you have them, but why keep pushing for more? Some research is out there and it is as depressing as the fact itself. It's the social status, not the money or things themselves. You don't really need new Porsche, it's the chance to show off. For such stupid thing you spend best years of your life hidden in offices for 80+ hours week. And when you make it, you want more...
I'm smart enough to realize that I'm a victim, too. I want this I surely don't need. It's time to fight this irrationality - I will stop buying thinks right now. I just need to wait for already ordered things to come.

Money bring freedom, things take it away. OK, books are on the exemption list in my household. They costs peanuts, anyway.

Life sucks

So get a beer.

Is she real?

Update: The blog seems to slide from interesting to stupid pretty quickly. Unless you enjoy my embarrassment, don't read further.

Is AK Hoffmeistrova real?

If you really need to ask that question after reading her blog (and the old one), you should probably wake up.
If you don't want to waste the time or you don't read Czech, here is the long short version.

By her own account:

She is about 28 years old
She worked as a director of some part of an international corporation in Prague
She now works in Germany on presumably even higher position ("an offer I could not refuse")
She makes nice moneys in intra day trading on various stock markets
She is a cruel, arrogant, evil boss who yells at her subordinates and works just because she likes to
She wants to marry and move to countryside and live there happily thereafter.
She own a Glock (and couple of other guns) and goes frequently to the shooting range
She likes fast cars and owns couple of them
She has a cat she likes very much
She gives to the homeless people and charities
She considers herself a tough bitch on the outside, yet gentle, fragile, caring person inside
She hates politicians and thinks they all should be killed
She claims to be heterosexual and occasionally describes her lesbian experiences
She likes to watch porn
She has sex in work, and often with anybody (and anything) who is close when she feels like to.
She likes BDSM, but "not much"
She has (by her own word): "firm breast of size 2 (B) and she is happy about them"
She shaves not just her legs and armpits
She uses language that would make even marines blush
She drinks a looooot and downs pain pills with vodka or Metaxa, often in work
She smokes weed and hashish
She is a racist and she is happy about it.
She has political/policy opinions that tell you she has a brain
She likes to walk in the park
She likes to fix her (father's) old country house
She reads a lot - high level literature as well as Grisham's Firm
She presumably does a lot of cultural things (at least she links to many events).
If you think that's not conclusive, this beats everything: She likes (or liked) Vaclav Klaus as president (I know this contradicts the previous point, so read more).

If you wonder why would you read a blog from a person like that, here is what I did.
First, you read 10 posts. You think "WTF?". Than you read some more, get use to the language,sex, alcohol, drugs, abuse of power for fun and notice that if she says something specific about a particular policy, it does make sense. It makes sense so much that I have never read anything that would fit my opinions that closely (still talking about policy/politics). That made me interested - who is this person? In particular, it is the first Czech blog in which the author actually has any idea about economics, policy decisions etc.
However, if you keep reading on (I read the most of her blog in about 24 hours, and she posts a lot), you realize how boring it actually gets.

Often, she claims something is stupid, somebody is idiot etc. without giving any reason. Racism and VK surprise you after some time. The raw language gets boring (what do you need to prove yourself? Are you 18?) The sex is hard to believe. Making so much money on intra-day trading is unlikely. And really, 28 and rich, high level manager with a souls and picture of 22 years old chick? Whom are you kidding?

So after all, I'm quite certain that that blog is design to be appealing to men (sex, drugs, cars, guns, money, power,...) It seems possible that it might be an author (beginning to get some more attention to publish it like "Ostravak", or existing but experimenting) trying to make a buck. Also, it might be a sociologist doing an experiment. Or something else. But it seems quite unlikely that it is a real person, despite obvious amount of effort to show otherwise.

It would interesting to meet her if she existed, but I'm not going to wait for it. Occasionally, reading her blog is interesting, though.

What can be better?

You fast descend through park with unique, old and beautiful pines; sun is slowing setting bellow the horizon, wind is gently cooling you down and from distance, you hear waves hitting the beach.
It's even better if you enjoy it.

There are things...

... you certainly did not know about Czech republic:

Maybe TeraScale

Maybe not. But Windows Vista will boot under 5 minutes, I'm quite certain. Maybe.

Wanted

Any info about the author of this blog. It's rare to find somebody who is obviously crazy yet extremely smart. Or maybe it's not. But I certainly don't know any girl like that.I wish I did.

I told you so

I'm happy to see big guy to agree with me.