Tuesday, July 21, 2020

How We Choose (In A Pandemic): An Interview With Richard Robb

By Michael Liss

On November 11, 2019, I wrote a review of Willful: How We Choose What We Do (Yale University Press, November 2019), by Richard Robb, Professor of Professional Practice in International and Public Affairs at Columbia University, and CEO of the investment firm Christofferson, Robb & Company.  He was kind enough to let me interview him in our changed times.

Michael Liss: Richard, last fall you published Willful, which introduced a new model of how to think about the way we make choices. Willful reached beyond classical “Rational Choice” to something you called “For-Itself Choice.” I know it is an economist’s job to be able to project into the future, but did you ever anticipate having such a bonanza of opportunities to demonstrate your ideas as that which arose because of the COVID-19 pandemic?

Richard Robb: I didn’t foresee COVID-19, Michael, if that’s what you’re suggesting! But yes, the pandemic has given us a “stage”—however ugly—on which to test a variety of ideas, including a few of mine. 

My book was published in November last year, and my hope was that the phrase on which I rest my thesis—“for-itself”—would someday seep into the language. It would have come in handy during the pandemic. For instance, when President Trump, seeking to scoff at those he saw as COVID-wimps, said that we continue to drive cars despite auto accidents, Dr. Fauci called that “a false equivalency.” He could have explained that it’s a false equivalency because the choice of how quickly to de-isolate is for-itself.

Here’s what I mean. Sometimes our choices—as individuals or as a society—involve trade-offs where we can pick what’s best. We rank all possible options on a common scale and choose what best satisfies our preferences in light of our resources. If we think clearly throughout this calculation, we’re exercising what economists describe as rational choice. If we fall prey to biases, like overconfidence in our abilities, then we’ve entered the realm of behavioral economics. Both scenarios fit into what I call “purposeful choice.”
But this can’t be the whole picture. Why? Because there are often times when there’s no comparison or trade-off that we can make. So we choose without regard to whether one option is better or worse than the alternatives. Such a choice is neither rational nor irrational. It stands “for-itself.”

I think the phrase adds analytical value, and has the virtue of being almost self-explanatory. But it will take a while for it to catch on. As far as I can tell, only my wife and children use it right now, and I’m pretty sure they’re humoring me. 

ML: You have pointed out that pretty much all public policy involves trade-offs: setting speed limits on a highway, or regulatory oversight for an industry. These calculations can be both necessary and cold, like literally setting a value on a human life. Given the massive economic cost of extended shutdowns, how do policy-makers decide on a metric of risk? To put it more starkly, what level of fatalities is acceptable per percentage point of GDP? And against what metric are we measuring it? Spanish Flu? Garden-variety Flu? 

RR: Auto safety is purposeful and can be approached via rational choice, even though the stakes are life and death. Motorists choose to take risks every time they go for a drive, and policymakers have to decide on regulations like speed limits. When drivers are in a hurry, they accept a slightly higher risk of dying and of killing others, while policymakers generally follow the “cold” (as you put it) advice of economists: raise the speed limit to the point where the value of the time saved equals the value of the lives lost. And yes, this requires assigning a value to life. 

Economists usually try to infer the value that individuals assign to their own lives from the choices they make, like how much to spend for a better motorcycle helmet that will reduce the probability of death by a small amount. Using this approach, the U.S. Environmental Protection Agency pegs the “value of a statistical life” at around $9.5 million. This may sound cold-blooded, even repugnant, but policymakers don’t have much choice. When departments of highway safety do their job, one way or another, they commit to an actuarial calculation. 

ML: A few months ago, Texas Lieutenant Governor Dan Patrick said “No one reached out to me and said, as a senior citizen, are you willing to take a chance on your survival in exchange for keeping the America that all America loves for your children and grandchildren? And if that’s the exchange, I’m all in.” My first reaction to that was that Patrick was constructing a type of “trolley problem,” volunteering himself and his fellow seniors to be the ones pushed. How would you have analyzed this, both on a personal and policy level?

RR: My book used the trolley problem, originally devised by Philippa Foot, as an example of a pure for-itself life-and-death decision—in contrast to auto safety at the opposite extreme.
In one version of this thought experiment, you’re on a bridge above the tracks of a trolley that’s racing towards five construction workers. The only way to stop the trolley is to throw something heavy in its path. A fat man is standing next to you. You could push him in front of the trolley, killing one person to save five.

What is the right thing to do?

Most people say they wouldn’t push the fat man. I probably wouldn’t either. And if I did push him, I wouldn’t argue that it was morally right to do so. This decision stands for itself.
In pushing, you would kill a particular human being, what Camus called “the man who shaved this morning.” Unless you’ve talked yourself into a radically utilitarian worldview, you can’t compare one individual in the flesh with another, or even with five others. The highway safety problem and the trolley problem may look similar on the surface, but they lie at opposite extremes on a spectrum of action.

So, where does reopening the economy in a time of COVID fit in here? Is reopening subject to a rational cost-benefit analysis like auto safety, or is it for-itself, like the trolley problem? 
I think it’s somewhere in between these extremes, but feels closer to the trolley problem. While some people will have fatal accidents because the speed limit is five miles per hour higher than it might have been, we can’t know in advance who they will be. They are abstract and far away. But we do know who the “fat man” is. If we de-isolate precipitously, we know who’s most likely to die: people with underlying health conditions and the elderly. In short order, we’ll know precisely who has died.

Even in the for-itself realm, cost-benefit calculations can still be useful. If I’m deciding whether to push the fat man, I’d like to know if he’s dying of a terminal illness and whether pushing him will save five people or five hundred. A cost-benefit analysis for reopening the economy is useful in the same way, as long as we don’t become caught up in the pretense that it dictates the right actions according to a scientific formula.

To be sure, the Lieutenant Governor of Texas would be heroic if he were to choose an excruciating death for himself in exchange for the greater good. But that choice has not been offered to him. 

ML: A Texas Republican might very well react differently than a Northeastern Democratic Governor. Given how fractious American political life is, we would expect polarization here, even as to basic facts. You have lived and worked abroad. Compare, say, Japan, where total COVID deaths are under 1000. Are there cultural differences that reflect themselves in how public and private choices are made in times like these? 

RR: In late February, South Korea experienced two weeks of exponential growth in COVID-19 cases, rivaling that of any country. Within a month, its cases were almost down to zero. My son, who lives in Bucheon, South Korea, has told me of the near-universal compliance with social distancing and contact tracing. (An exception was a fringe religious group.) This happened throughout East Asia. As of mid-July, the U.S. had 10,200 cases per million and rising; the hardest-hit East Asian country is the Philippines with 333 per million. Asia’s voluntary compliance is not possible in the U.S. for several reasons. American individualism is traditionally a source of strength, but not at the moment. Americans are less likely to trust authority. President Trump amplified this reflexive skepticism recently by retweeting the views of a Catholic archbishop who’d said that COVID-19 is a “deep-state” plot to undermine his achievements. 

ML: How do the economic calculations during the pandemic apply to individuals? We know that the economically disadvantaged have been disproportionately impacted, and the loss of income can be catastrophic, even down to basic necessities. It seems society has a moral dilemma: We either command these people to stay home, and possibly starve, or, as in the meatpacking industry, we deem them essential and tell them they have to come in, and take real risks.

RR: People losing their income shouldn’t be a moral quandary. The government can make it up to them—after all, we’re a rich country. And to a great extent, that has happened—both here and abroad.

But it’s a shame to squander public resources on bailouts for industries that don’t need them, like airlines or casinos. Let some airlines go bankrupt. The industry won’t vanish and we’ll still be able to fly. Airlines will reemerge from bankruptcy, as they always do. This is not a financial crisis like 2007/2008—financial markets are working just fine—so the Federal Reserve doesn’t need to buy corporate bonds, exchange traded funds and the like.
Let’s not forget, also, that many professional decisions are made for-itself. Healthcare workers have chosen a noble profession. Some may feel pressured to work on the front lines, but many choose it. Work is tied up with identity and has many dimensions—it’s not just a sacrifice of leisure time for money to buy material goods. The choice to rise to this challenge is partially for-itself. This applies not just to medical professionals, but to all essential workers.

ML: There’s something new about this crisis that seems to demand more nuanced decisions. It’s not a car safety measure, or even something like an occupational hazard regulation, where the number of potential injuries and fatalities is comparatively limited. One person, or one group of people, can effectively act as a Typhoid Mary, and we can’t easily identify any specific group and have to impose far broader restrictions. In effect, the vast majority of us are, temporarily at least, the fat man being thrown on the tracks. How do politicians create public policy on the fly that works, get buy-in from the population (because voluntary compliance is critical) and find the “Goldilocks” balance?

RR: Assuming we could measure the value of life and quantify the impact of social distancing on health outcomes, we’d still have to measure the cost of social distancing. The multi-trillion dollar “bailout” is a transfer from taxes paid back to a subset of taxpayers, not a cost. And since GDP was never intended to measure outcomes during a pandemic, any figure that represents “lost GDP” (even if we could estimate it) could be grossly inaccurate. Forgone restaurant meals, for instance, disappear from GDP, while meals prepared at home (net of the cost of ingredients) go uncounted. Any enjoyment during leisure time is omitted, but so are anxieties and the lost “utility” of birthdays celebrated on Zoom. GDP measures the loss of ticket sales on Broadway, but not the stalled careers of actors that might never get back on track. In the spring, I taught classes online to students dispersed around the world, which was better than I expected. GDP counts the tuition paid as output but can’t adjust for students’ lost social experience. 

Even if we could all agree on how to calculate the welfare gains and losses, most of us sense deep down that decisions about COVID-19 differ from those about auto safety. The deaths caused by de-isolating too soon do not have quite the same proximity as that of a man you pushed with your own hands, but they’re uncomfortably close. Whatever the calculation says, individuals and the government that represents them don’t want to let real people die for an abstraction.

In my view, there’s no rule book to guide politicians to the optimal response. In a Western democracy, it has to be a process that involves the consent of the governed. Public policy “on the fly” doesn’t have to feel reckless. When politicians demonstrate leadership and wisdom, like Governor Cuomo of New York State or New Zealand’s Prime Minister Jacinda Ardern, then a popular buy-in will follow. 

ML: In your book, you talk about altruism. Obviously, in these circumstances, we are seeing both extraordinary acts of selflessness and seriously repugnant behavior. Are you optimistic that we may learn something from all this, and perhaps adjust our values?

RR: I believe people are generally pro-social, by which I mean they usually have an instinctive understanding of what’s good for society and act on it more than serves their narrow self-interest. This is compatible with economic theory, which allows for self-interest to be broadly defined. The satisfaction, or “utility,” that an individual maximizes might depend on inputs like the well-being of others, altruism or adherence to ethical standards.

Most altruistic actions, according to my taxonomy, fall into the purposeful realm, where they can be understood in terms of rational choice. We act to benefit those we care about. The more we care or the lower the cost we incur, the more we do. Voluntarily wearing masks in public is purposeful: we balance the costs against the benefits. Costs are inconvenience (where did I put my mask?), discomfort and fogging up glasses. Benefits are protecting myself against infection, protecting others that I care about, and demonstrating a buy-in to the social contract. The calculation can be rational. And if I overweight small risks, it would be not quite rational but subject to cognitive bias.

Some altruistic gestures, though, are not “optimal” in any sense. Let me give you a personal example. In March, a long-lost former student back in China FedExed me a gift of hard-to-get N95 masks. Why? His altruistic act was random—he can’t lavish this degree of care on everyone he’s ever known who lives in a COVID-19 hot spot, and there’s no special reason to send them to me. But I wouldn’t say my student made a mistake, that if he’d been thinking clearly he’d have allocated those resources more efficiently. We all make for-itself altruistic gestures that we can’t (and shouldn’t have to) explain. Think of the Good Samaritan from the biblical parable. 

Getting those masks was a relatively small matter, of course, although I appreciated it. Others, as you say, are extraordinary. Who can forget Li Wenliang, the doctor in Wuhan who tried to raise the alarm about the coronavirus in the early days of its outbreak. He was muzzled by the authorities and died shortly after. His altruism can be seen in his selflessness and courage.

It’s sort of amazing how cooperative we are as creatures, although there’s no doubt room to improve. We rationally seek to promote the well-being of people we care about, and for many this extends to the whole world and future generations. 

ML: There is a strong undercurrent in American political life of disdain for technical expertise and technocrats. Yet situations like this cry out for them. How do we climb that particular wall when many resent the costs and do not see the benefit, primarily because the benefits are just the absence of infection and don’t necessarily feel “real”? 

RR: In my book Willful, I argue that we don’t just care whether our beliefs hold up against data. As Charles Sanders Peirce explained, we adopt beliefs that are “agreeable to reason,” fit with our other beliefs and are held by authorities that we recognize. Our beliefs have a for-itself element; they constitute our identity and are more than just instruments to help us get ahead. I don’t consider this irrational, but rather essential to being human. We are what we believe in. 

Adherence to social distancing protocols, for instance, goes together with a certain constellation of beliefs. People who voluntarily follow the rules tend to believe that scientific evidence is the highest standard and the system that generates this evidence can be trusted. Others, as you suggest, distrust elites, and won’t follow their advice until they can see the disease spread in their community. 
Once there’s a vaccine, I imagine the two sides will square off in a titanic battle. I reckon it will be worse if the vaccine comes out during a Democratic administration. A few weeks ago, self-described Republicans were asked about their view of the theory that Bill Gates is planning to use a COVID-19 vaccine to plant microchips into billions of people and track their movements. A shocking 44% said they believed the conspiracy theory was true, only 26% said it was false, and 31% said they weren’t sure.

ML: I’d like to talk a little bit about the implications of the social and emotional costs of distancing and the shutdowns. Is this one of those traumatizing events, like the Depression and WWII were for the Greatest Generation, that may influence future behavior for decades to come, and, if so, what are your expectations?

RR: For young people entering the labor market, the evidence suggests that the consequences will be long-lasting. Those who graduated from college during the 1980-81 recession, as I did, tend to have lower earnings than the cohorts that graduated a few years earlier or a few years later. If you begin your career during a recession, it takes longer to establish yourself, and you don’t develop the human capital to “reinvest” to generate more human capital. You never catch up.

Forecasts are tricky, of course, but I don’t think we’ll go back to the pre-pandemic normal, unlike 9/11, which was a trauma with relatively few lasting consequences for most people who were not directly affected. The social and emotional effects of the pandemic may be accompanied by a loss of dynamism in economies of the West, de-globalization, and a decline in American influence. As Leonard Cohen said, “You’re not going to like what comes after America.” 

ML: You said, “We are what we believe in.” But your professional life is built around an ongoing, dispassionate analysis of risk, and you recalibrate when the facts on the ground change sufficiently. Do you think, given people’s differing beliefs, and the intensity with which they are expressed, we are capable of that recalibration? Can we alter, just enough, what going into that “for-itself” element to avoid Leonard Cohen’s warning? 

RR: According to legend, which I believe to be true, Keynes quipped, “When the evidence changes, I change my mind. What do you do, Sir?” But this was rhetoric to disarm his enemies to coming around to his point of view. Like almost everyone, Keynes held reasonably consistent views over his life. 

As an investor, sure, I try to be dispassionate and recalibrate in response to the facts. But I also conduct that job in a social setting. We manage money on behalf of institutional investors, applying a steady process shaped by judgment, experience, data and consensus among my colleagues. The important facts on the ground are usually subject to ambiguity. Sometimes we have to take a for-itself leap based on evidence that can’t be readily quantified, but that leap needs to measure up to investors’ expectations.

As for the social and political fracturing in the U.S., I don’t know that beliefs differ nowadays any more than they usually do. Nor are the problems we disagree about, such as the economy or international relations, objectively more acute than in the past.

It is not practical that the country will recalibrate and settle on a common view to overcome our political dysfunction. Take free trade, for example. A lot of Americans—slightly less than half—are against it. One more lecture, “Now listen here, everyone gains from trade” is unlikely to succeed where all the previous ones have failed. As Walt Whitman said, “Logic and sermons never convince.” But it isn’t necessary that everyone agree. 

There is hope that America will reinvent itself. The next few months will, quite probably, shape the next few years.

ML: Thank you, Richard.

How We Choose was first published on July 20, 2020 in 3quarksdaily.com

You can find other work by Michael Liss at 3Q, and you can follow us on Twitter @SyncPol