In defense of choice

by on January 28, 2004 at 8:03 am in Economics | Permalink

Here are some brickbats for my economist and libertarian readers:

†¢ Sheena Iyengar and Mark Lepper, psychologists at Columbia and Stanford respectively, have shown that as the number of flavors of jam or varieties of chocolate available to shoppers is increased, the likelihood that they will leave the store without buying either jam or chocolate goes up. According to their 2000 study, Ms. Iyengar and Mr. Lepper found that shoppers are 10 times more likely to buy jam when six varieties are on display as when 24 are on the shelf.

†¢ In a study that Ms. Iyengar, Rachel Elwork of Columbia and I are working on, we found that as the number of job possibilities available to college graduates goes up, applicants’ satisfaction with the job search process goes down. This is particularly true for job seekers whose aim is to get the “best possible” job – while people in this group receive more and better job offers than those who are aiming for “good enough” jobs, they also tend to be less satisfied with their career decisions than their less demanding counterparts. They are also more anxious, pessimistic, disappointed, frustrated and depressed.

†¢ In another study under way, Ms. Iyengar found that as the number of mutual funds in a 401(k) plan offered to employees goes up, the likelihood that they will choose a fund – any fund – goes down. For every 10 funds added to the array of options, the rate of participation drops 2 percent. And for those who do invest, added fund options increase the chances that employees will invest in ultraconservative money-market funds.

†¢ Carl Schneider, a law professor at the University of Michigan who specializes in medical ethics, has reported that patient satisfaction goes down when the choice of pharmaceutical and medical treatment goes up.

One illustration of the mismatch between how choice appears in theory and how it feels in daily life comes from a 1992 study by Lesley F. Degner and Jeffrey A. Sloan in The Journal of Clinical Epidemiology. People were asked if they would want to be in charge of their treatment plan if they had cancer. For those who had never had cancer, 65 percent answered “yes.” For those who had already had cancer, only 12 percent said that they would want to oversee their own treatment.

Here are eight letters in response. Consider this one:

As a neophyte shoe salesman, I was told never to show customers more than three pairs of shoes. If they saw more, they would not be able to decide on any of them.

My take: No doubt, choice confuses the hell out of us, much of the time. That being said, the question is not whether more or less choice is good. Instead the question is what kind of choice-restricting and choice-regulating institutions we wish to have. Markets, in reality, are the best known institutions for limiting our choices as well as expanding them. When I go into a (good) restaurant, I like to simply tell the waiter that I don’t want to look much at the menu, and he should simply bring me what is best. If he asks what that means by “best,” I (sometimes) respond by telling him I am an aesthetic Platonist and that best is best. Or I will ask the waiter to imagine it is his last meal on earth and to bring me the relevant dishes he would order. Other times, such as when I am buying classical compact discs, I wish to survey all the available information before buying Freddy Kempf’s stunning Transcendental Etudes, composed by Franz Liszt. Have I mentioned it is the sixth recording of those pieces in my collection?

What if you asked people the following: do you wish to choose your own means of limiting your (subsequent) choices, or do you wish to let someone else, perhaps the government, do the work? I suspect the answers would overwhelmingly favor the former option, namely voluntary choice at the meta-level. And if you reexamine the experiments mentioned above, they are all about ways in which people voluntarily limit their own choices. Maybe you don’t wish to run your own cancer treatments, but you wish to choose the doctor who will.

I am indebted to Daniel Akst for the pointer to the link and topic. By the way, check out his old Slate.com column on whether you are free-riding if you buy and hold a broad stock index. He is one of the most interesting financial journalists around, in addition to being an accomplished novelist.

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