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Chris Hoofnagle writing at the TAP blog about Facebook’s comprehensive privacy options (“To opt out of full disclosure of most information, it is necessary to click through more than 50 privacy buttons, which then require choosing among a total of more than 170 options.”) claims that:

This approach is brilliant. The company can appease regulators with this approach (e.g. Facebook’s Elliot Schrage is quoted as saying, “We have tried to offer the most comprehensive and detailed controls and comprehensive and detailed information about them.”), and at the same time appear to be giving consumers the maximum number of options.

But this approach is manipulative and is based upon a well-known problem in behavioral economics known as the “paradox of choice.”

Too much choice can make decisions more difficult, and once made, those choices tend to be regretted.

But most importantly, too much choice causes paralysis. This is the genius of the Facebook approach: give consumer too much choice, and they will 1) take poor choices, thereby increasing revelation of personal information and higher ROI or 2) take no choice, with the same result. In any case, the fault is the consumer’s, because they were given a choice!

Of all the policy claims made on behalf of behavioral economics, the one that says there is value in suppressing available choices is one of the most pernicious–and absurd.  First, the problem may be “well-known,” but it is not, in fact, well-established.  Citing to one (famous) study purporting to find that decisions are made more difficult when decision-makers are confronted with a wider range of choices is not compelling when the full range of studies demonstrates a “mean effect size of virtually zero.”  In other words, on average, more choice has no discernible effect on decision-making.

But there is more–and it is what proponents of this canard opportunistically (and disingenuously, I believe) leave out:  There is evidence (hardly surprising) that more choices leads to greater satisfaction with the decisions that are made.  And of course this is the case:  People have heterogeneous preferences.  The availability of a wider range of choices is not necessarily optimal for any given decision-maker, particularly one with already-well-formed preferences.  But a wider range of choices is more likely to include the optimal choice for the greatest number of heterogeneous decision-makers selecting from the same set of options.  Even if it is true (and it appears not to be true) that more choice impairs decision-making, there is a trade-off that advocates like Hoofnagle (not himself a behavioral economist, so I don’t necessarily want to tar the discipline with the irresponsible use of its output by outsiders with policy agendas and no expertise in the field) typically ignore.  Confronting each individual decision-maker with more choices is a by-product of offering a greater range of choices to accommodate variation across decision-makers.  Of course we can offer everyone cars only in black.  And some people will be quite happy with the outcome, and delighted also that they have avoided the terrible pain of being forced to decide among a wealth of options that they didn’t even want.  But many other people, still perhaps benefiting from avoiding the onerous decision-making process, will nevertheless be disappointed that there was no option they really preferred. Continue Reading…