Monday, February 16, 2015

Having Power

Once upon a time when we mostly looked the same, smelt the same, and wanted the same things stories tell us we liked the idea of a King. In a very complicated world which we did not understand, this King would be delivered to us by God to make decisions on our behalf. If we were lucky, we got a Philosopher Warrior Poet Servant King. Good or bad, the King decides.

At the opposite extreme is a world where we all make our own decision. The Governments role is simply to ensure that we are safe and assist with dispute resolution by adjudicating law where decisions clash. Good or bad, you decide.

As tribes have gotten bigger, the difference between the life of the decision maker and the life of each decision receiver has gotten huge. Even if we elect a leader, she is unlikely to be able to represent all our views. We have definitely favoured moving to a world of more liberty. The challenge is what happens when we feel people are making decisions about their health, wealth and happiness which we don't think are in their best interests? We can't believe these decisions are made consciously. Making decisions for people is at best parental, and at worst very condescending. Richard Thaler and Cass Sunstein suggest the idea of a 'Nudge'. The way decisions are framed or given to us affects us. It is almost impossible to frame things neutrally. If that is true, they argue that choosing to favour the 'better' choice isn't being condescending or parental and benefits society.



An example they give is on opting in and opting out of organ donation. The difference between consent rates in countries which require you to choose to be an organ donor are remarkably lower than those which ask you to choose whether not to be an organ donor. Most of us go with the default. It seems we are making our own decisions, but we are really following the path of least resistance. Even where we 'have the power', those setting the path have a very powerful role. 

Source: Eric Johnson and Daniel Goldstein

Even then, there is more power over future little changes than over the current way we do things. Another powerful idea is the 'save more later' principle. It is well known that people don't save or invest enough. Most live hand to mouth and so never build up enough capital to work for them so they don't have to. It is hard to cut back your spending. With 'Save More Later', you commit to saving a bigger proportion of any increases you receive. You commit in advance. Like saying you will go to gym tomorrow. Like saying you will wake up early tomorrow. We are good at that. Unlike going to gym or waking up, saving more can be a default. You can set up a debit order and the money gets taken off your account immediately as it comes in. Your stronger self can make good decisions for your weaker self.

People have far more power than they think they do in liberal democracies. But it is true that our decisions can be impacted by those who understand how we tick better than we do. Having power is one thing. Knowing you have power and making decisions consciously is another.
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