Do people do what’s best for them? I don’t think anyone would really try to claim that, ‘Yes, that’s a consistent behavior trait for most people’ as a response that could stand up to scrutiny. Evidence to the contrary doesn’t take much head scratching to come up with – people eat more unhealthy food than they should do, end up being overweight and thus at higher risk of all the associated health conditions; people still take planes, eat lots of meat and heat not very insulated homes even though few would deny climate change is something we need to worry about and take action on.
Now I happen to work in an area where there has been a policy intervention (and a pretty successful one at that too) to address the fact that people don’t tend to do what’s best for them. Like the above examples, it’s also about our long-term futures, but rather than giving regard to the potential health or climate outcomes, it’s about financial outcomes. While it’s good that there is a state pension, for many of us, it won’t be enough to live (roughly £10k a year), and so you need to save now to build up a nice pot to able to draw from in those later golden years. I’m talking pensions, obviously! And it’s not just about having a stash of cash, but converting that cash into invested assets which, markets permitting, grow to represent a bigger final sum than the original amount.
So while auto enrollment means that now close to 90% of eligible employees (19.4 million) were participating in a workplace pension in 2020 (compared to under half of private sector workers in 2012), there are other many areas of life where people aren’t quite operating their ‘best selves’ given the potential options open to them, but there isn’t a big fat policy intervention to push them into what might help to make their circumstances more positive. This was what struck me having read ‘Good Economics for Hard Times’.
It’s a surprisingly readable deconstruction of many elements of economic theory, tested by looking at people’s actual behaviours and thinking about what ‘intelligent interventionism’ might be appropriate. For example, when an industry collapses in one region – think about parts of the US which used to manufacture clothing or areas in the UK involved in heavy industry but which can no longer compete against low cost operators in other parts of the world – it’s not the case that people retrain, up sticks and move to places where their country still has competitive advantage and there are jobs available. As observed in the book, when you’ve worked for several decades or more in a sector, you and your family are established in the community. It’s hard to forsake all of this even if the prospect is surviving on meagre benefits.
In the face of such ‘sticky labour’, one idea discussed is to pay organisations a subsidy for employing older workers who would struggle to retrain and relocate, softening the risk of complete collapse for a region. Or when dealing with other typically disenfranchised sections of society, such as those in extreme poverty or the disabled, rather than just giving them money to live, or other forms of telling them what to do, what about getting them involved in working out the options?
While it may sound as though this all idealistic and unscalable (it probably is to some degree), it’s worth noting that the authors also hint at some approaches which are more in the zone of ‘tough love’. This is in the context of talking about addressing climate change.
“Our sense is that there may not be that many free lunches. Mitigation through better technologies may not do the trick; people’s consumption will need to fall. We may have to be content not only with cleaner cars but also with smaller cars, or no cars at all.”
Not sure how you would get that one through.. Good luck!