A person who was aware that they might succumb to being tricked, might voluntarily agree to a legal regime which authorized judges to void contracts that seemed to be attempts to trick them. On the other hand, if they were not aware of this vulnerability, one might benefit them by forcibly preventing them from being tricked. But it is hard to see how a political regime which does this to them is accountable to such folks. If they had influence over the political system, they would want it to stop this sort of thing. It would have be that other people who had power over politics wanted for force this protection onto them. This brings us to an image of a powerful political elite forcing their protections on unwilling others, for the good of those others. Is this how you see politics?
Robin, as you know from our paternalism debate, I do support a limited paternalistic agenda in what I would describe as “well functioning” societies. But as a practical matter, it is often simply not the case that the kinds of prohibitions that I’m talking about would have to be shoved down the throats of the people they are intended to protect. If you had to guess, would you think that the Fed’s recent action referred to in the post would be popular or unpopular with the general public? Or with credit card customers?
I don’t know if those policies were popular, but if they were popular, that might be because people didn’t understand their consequences. Again the key point is how can an accountable government force people to protect themselves who don’t want to be protected? My guess is that they would prefer private means of protection, but since those private means are not allowed, they must settle for the public means you offer. You argue that the reason we need public means is that private means will not work because they don’t want to be protected. But if they don’t want to be protected, why do they support laws protecting them?
Offering someone a bad contract harms them. (By ‘bad contract’ I mean one that gives negative utility to the party that didn’t draft it.) Either they accept it without knowing it’s bad, in which case the bad terms harm them, or else they find out and reject it, in which case they’ve spent resources analyzing it for which they get nothing in return. And checking a contract for bad terms isn’t cheap; lawyers charge thousands of dollars for that service. Someone who goes around offering bad deals can still inflict massive damage even if none of his offers is accepted. No one has managed to come up with a “private means of protection” which is cheaper than a lawyer on retainer. I don’t think the problem is that people don’t want to be protected; rather, the problem is that most people can’t possibly afford any private protection.
As you know, there are limited instances in which I would support the government protecting people against their will. But I suspect that a lot of legal protections against predatory conduct are popular, even among the people whose conduct is restricted. One possible reason for this is that they don’t understand that the policy restricts their freedom (but then they also don’t understand that the lack of the policy will get them exploited, and I’d rather have them helped for reasons they don’t understand than harmed for reasons they don’t understand).
But another possible reason is that they correctly understand that right now credit cards without those exploitative terms are mostly unavailable (the primary exception that I know of are employee credit unions). They “voluntarily” choose them because there’s no way to get a credit card otherwise. They might perfectly rationally support regulations that will improve the menu of options from which they will make their voluntary choice.
The point of your post was that analysis based on ignorance missed people who just didn’t get that they might be tricked. Now you are saying they do realize they might be tricked, which is why they support the policy. So we are back to ignorance.
People can realize in the abstract that they’re probably being tricked by credit card companies without possessing the legal expertise (or the time!) to go through all the fine print and work out which companies are tricking them most or least. Mandating disclosure doesn’t necessarily change this.
People can also underestimate the magnitude of the tricking, and still want to outlaw it.
They may even believe that mostly other people are being tricked (blind spot bias) and hence “altruistically” support a policy that would actually protect them just as much as anyone else.
And finally, the financially sophisticated may suffer from living in a world of financial products designed to be sold to the financially naive (being too small a market segment, or too hard to market to, or too local or too integrated a market, for specialized products for them to prove effective), and so the intelligentsia/nobility that produces all the visible talk on this subject, wants to outlaw financial trickery from being aware that they are probably being tricked, on behalf of the majority that are not aware they are being tricked (note this is not invalid as justification!)
But ignorance in rational agent models of asymmetric information don’t cause people to be tricked, so it’s can’t be ignorance of that sort.
It seems perfectly plausible to me that people understand that the deck is stacked against them, while at the same time not knowing exactly how to protect themselves and so falling for some of the tricks, and would be perfectly happy to have a government they trusted simply remove the bad stuff from the menu. I know that’s how I see it.
Ooo—sign me up for that! A government I trust that will remove the bad stuff from the menu, and… ohh, hang on. What will the credit card companies, who are a concentrated, highly incentivesed interest group, do next? How will they act on our democratically elected representatives? When we present our carefully thought out policy recommendations to parliament, and the parliament passes the details through to committee… what will happen next? What’s likely to come out the other end of the legislative sausage machine?
When we then try to organize the millions of self-identified likely victims of complexity, and the hundreds of thousands of wise altruists who want to help the likely victims, for all of whom this is a fairly unimportant matter… when we array them against the lobbiests… who’s likely to stay the course and win the regulation that’ll help their tribe?
David, that situation is well modeled as ignorance. So either there are models of ignorance supporting your case, or you need to describe a different situation.
A person who was aware that they might succumb to being tricked, might voluntarily agree to a legal regime which authorized judges to void contracts that seemed to be attempts to trick them. On the other hand, if they were not aware of this vulnerability, one might benefit them by forcibly preventing them from being tricked… This brings us to an image of a powerful political elite forcing their protections on unwilling others, for the good of those others.
This is an absolutely enormous leap. There are very, very few people who do not admit to the possibility of being tricked. Just think of the broad cultural meaning of the phrase “didn’t read the fine print.” You take some hypothetical about humans that is so completely divorced from reality as to render us into fully alien beings, then you develop a model of politics based on this absurd assumption, then ask someone if that’s the model he’s using.
The hypothetical may be interesting, but I don’t anyone, anywhere would argue that there exists a large voting block that believes it cannot be deceived and actively opposes government intervention to prevent deception.
David is saying standard ignorance models are flawed because they do not consider the possibility of people who do not realize they might be tricked. I am responding to David’s assumption.
His claim is that people enter into contracts without contemplating that they might get tricked. They may be aware of the fact that people like them get tricked in contracts like the ones they are signing, but they simply trust the salesmen, or they just decide they need a credit card, sign next to the X, and don’t think about it much further. They sign in near-mode, and analyze policy in far-mode. Your position requires that they are completely unaware of the possibility that they might be tricked in all contracts, not just specific ones they enter into; I think this would require both contracts and policy analysis to occur in near-mode. Your position would also require that they like the options that the law removes, and/or that they are aware of the costs imposed by such laws. In other words, they don’t understand that a credit card contract could contain hidden fees, but they do understand that by blocking hidden fees in credit card transactions, the profitability of such transactions will fall and credit will contract as businesses can no longer exploit consumers. Such a combination of ignorance and sophistication seems rather unlikely.
Moreover, your inference that people who are unaware of being swindled should object to anti-swindling laws makes no sense. People may be unaware that there are rat guts in their sausage; this does not mean they would object to a law that bans putting rat guts in sausage.
His point isn’t about people who do not realize they might be tricked; it’s about people who do not realize that a specific contract is (potentially) tricking them. They can still be aware, in the abstract, that there are businesses out there that will try to trick them, and even that the one they are currently dealing with might be trying to trick them. They need merely be unaware of the fact that they are actually being tricked, which is a requisite of being tricked in the first place.
When you buy sausage at the store, you don’t make a significant effort to ensure that there are no rat guts in the particular brand you buy. However, if you’ve heard that sausage occasionally has rat guts in it, you may reasonably support laws that ensure sausage does not contain such ingredients, even if it costs you a few pennies.
Your position requires people believe themselves to be wholly immune to deception, which is absurd. David’s actual position merely requires they be unaware of the deception in a specific contract, not that they be unaware of their ability to be deceived.
The unaware citizen may be a knowledge specialist (for example, a metro organization wonk) with a friend who is a different knowledge specialist (for example, a financial policy wonk). The two of them would then be able to enter into an agreement where each would attempt to hold their shared government accountable for injustice each could see, while trusting the other to prevent unseen injustice.
Sort of a technocratic turn of events but my heuristics are pretty heavily pro-technocracy.
A person who was aware that they might succumb to being tricked, might voluntarily agree to a legal regime which authorized judges to void contracts that seemed to be attempts to trick them. On the other hand, if they were not aware of this vulnerability, one might benefit them by forcibly preventing them from being tricked. But it is hard to see how a political regime which does this to them is accountable to such folks. If they had influence over the political system, they would want it to stop this sort of thing. It would have be that other people who had power over politics wanted for force this protection onto them. This brings us to an image of a powerful political elite forcing their protections on unwilling others, for the good of those others. Is this how you see politics?
Robin, as you know from our paternalism debate, I do support a limited paternalistic agenda in what I would describe as “well functioning” societies. But as a practical matter, it is often simply not the case that the kinds of prohibitions that I’m talking about would have to be shoved down the throats of the people they are intended to protect. If you had to guess, would you think that the Fed’s recent action referred to in the post would be popular or unpopular with the general public? Or with credit card customers?
I don’t know if those policies were popular, but if they were popular, that might be because people didn’t understand their consequences. Again the key point is how can an accountable government force people to protect themselves who don’t want to be protected? My guess is that they would prefer private means of protection, but since those private means are not allowed, they must settle for the public means you offer. You argue that the reason we need public means is that private means will not work because they don’t want to be protected. But if they don’t want to be protected, why do they support laws protecting them?
Offering someone a bad contract harms them. (By ‘bad contract’ I mean one that gives negative utility to the party that didn’t draft it.) Either they accept it without knowing it’s bad, in which case the bad terms harm them, or else they find out and reject it, in which case they’ve spent resources analyzing it for which they get nothing in return. And checking a contract for bad terms isn’t cheap; lawyers charge thousands of dollars for that service. Someone who goes around offering bad deals can still inflict massive damage even if none of his offers is accepted. No one has managed to come up with a “private means of protection” which is cheaper than a lawyer on retainer. I don’t think the problem is that people don’t want to be protected; rather, the problem is that most people can’t possibly afford any private protection.
As you know, there are limited instances in which I would support the government protecting people against their will. But I suspect that a lot of legal protections against predatory conduct are popular, even among the people whose conduct is restricted. One possible reason for this is that they don’t understand that the policy restricts their freedom (but then they also don’t understand that the lack of the policy will get them exploited, and I’d rather have them helped for reasons they don’t understand than harmed for reasons they don’t understand).
But another possible reason is that they correctly understand that right now credit cards without those exploitative terms are mostly unavailable (the primary exception that I know of are employee credit unions). They “voluntarily” choose them because there’s no way to get a credit card otherwise. They might perfectly rationally support regulations that will improve the menu of options from which they will make their voluntary choice.
The point of your post was that analysis based on ignorance missed people who just didn’t get that they might be tricked. Now you are saying they do realize they might be tricked, which is why they support the policy. So we are back to ignorance.
People can realize in the abstract that they’re probably being tricked by credit card companies without possessing the legal expertise (or the time!) to go through all the fine print and work out which companies are tricking them most or least. Mandating disclosure doesn’t necessarily change this.
People can also underestimate the magnitude of the tricking, and still want to outlaw it.
They may even believe that mostly other people are being tricked (blind spot bias) and hence “altruistically” support a policy that would actually protect them just as much as anyone else.
And finally, the financially sophisticated may suffer from living in a world of financial products designed to be sold to the financially naive (being too small a market segment, or too hard to market to, or too local or too integrated a market, for specialized products for them to prove effective), and so the intelligentsia/nobility that produces all the visible talk on this subject, wants to outlaw financial trickery from being aware that they are probably being tricked, on behalf of the majority that are not aware they are being tricked (note this is not invalid as justification!)
Not knowing “which companies are tricking them most” is ignorance, and standard models of ignorance can apply.
But ignorance in rational agent models of asymmetric information don’t cause people to be tricked, so it’s can’t be ignorance of that sort.
It seems perfectly plausible to me that people understand that the deck is stacked against them, while at the same time not knowing exactly how to protect themselves and so falling for some of the tricks, and would be perfectly happy to have a government they trusted simply remove the bad stuff from the menu. I know that’s how I see it.
Ooo—sign me up for that! A government I trust that will remove the bad stuff from the menu, and… ohh, hang on. What will the credit card companies, who are a concentrated, highly incentivesed interest group, do next? How will they act on our democratically elected representatives? When we present our carefully thought out policy recommendations to parliament, and the parliament passes the details through to committee… what will happen next? What’s likely to come out the other end of the legislative sausage machine?
When we then try to organize the millions of self-identified likely victims of complexity, and the hundreds of thousands of wise altruists who want to help the likely victims, for all of whom this is a fairly unimportant matter… when we array them against the lobbiests… who’s likely to stay the course and win the regulation that’ll help their tribe?
David, that situation is well modeled as ignorance. So either there are models of ignorance supporting your case, or you need to describe a different situation.
I think clarifying this disagreement is worth a seperate post, which I’ll write up in the next few days.
This is an absolutely enormous leap. There are very, very few people who do not admit to the possibility of being tricked. Just think of the broad cultural meaning of the phrase “didn’t read the fine print.” You take some hypothetical about humans that is so completely divorced from reality as to render us into fully alien beings, then you develop a model of politics based on this absurd assumption, then ask someone if that’s the model he’s using.
The hypothetical may be interesting, but I don’t anyone, anywhere would argue that there exists a large voting block that believes it cannot be deceived and actively opposes government intervention to prevent deception.
David is saying standard ignorance models are flawed because they do not consider the possibility of people who do not realize they might be tricked. I am responding to David’s assumption.
That isn’t his claim.
His claim is that people enter into contracts without contemplating that they might get tricked. They may be aware of the fact that people like them get tricked in contracts like the ones they are signing, but they simply trust the salesmen, or they just decide they need a credit card, sign next to the X, and don’t think about it much further. They sign in near-mode, and analyze policy in far-mode. Your position requires that they are completely unaware of the possibility that they might be tricked in all contracts, not just specific ones they enter into; I think this would require both contracts and policy analysis to occur in near-mode. Your position would also require that they like the options that the law removes, and/or that they are aware of the costs imposed by such laws. In other words, they don’t understand that a credit card contract could contain hidden fees, but they do understand that by blocking hidden fees in credit card transactions, the profitability of such transactions will fall and credit will contract as businesses can no longer exploit consumers. Such a combination of ignorance and sophistication seems rather unlikely.
Moreover, your inference that people who are unaware of being swindled should object to anti-swindling laws makes no sense. People may be unaware that there are rat guts in their sausage; this does not mean they would object to a law that bans putting rat guts in sausage.
That just isn’t what he is saying.
His point isn’t about people who do not realize they might be tricked; it’s about people who do not realize that a specific contract is (potentially) tricking them. They can still be aware, in the abstract, that there are businesses out there that will try to trick them, and even that the one they are currently dealing with might be trying to trick them. They need merely be unaware of the fact that they are actually being tricked, which is a requisite of being tricked in the first place.
When you buy sausage at the store, you don’t make a significant effort to ensure that there are no rat guts in the particular brand you buy. However, if you’ve heard that sausage occasionally has rat guts in it, you may reasonably support laws that ensure sausage does not contain such ingredients, even if it costs you a few pennies.
Your position requires people believe themselves to be wholly immune to deception, which is absurd. David’s actual position merely requires they be unaware of the deception in a specific contract, not that they be unaware of their ability to be deceived.
The unaware citizen may be a knowledge specialist (for example, a metro organization wonk) with a friend who is a different knowledge specialist (for example, a financial policy wonk). The two of them would then be able to enter into an agreement where each would attempt to hold their shared government accountable for injustice each could see, while trusting the other to prevent unseen injustice.
Sort of a technocratic turn of events but my heuristics are pretty heavily pro-technocracy.