The Power of Paternalism

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Joyce Ross, a 54-year-old British Columbian, knew that she had a gambling problem. In 2007, she decided to do something about it by enrolling in a legally established “self-exclusion” program. She filled out some forms, had herself photographed, and was barred thereafter from the casinos where she had been getting into so much trouble.

But the urge to gamble was too strong. Ross soon went back to betting in the very same casinos from which she was supposed to have been excluded. In three years, she racked up new losses of more than $300,000 (Canadian). So she sued, in effect accusing provincial regulators and the two casinos of letting her do what she wanted—or at least, what she wanted when she was in the mood to wager.

At first blush, the lawsuit might seem to be yet another dispiriting example of people blaming others for their own self-destructive behavior. In fact, it is a healthy sign of progress in the search for effective ways to constrain ourselves against our own appetites.  A number of U.S. states and Canadian provinces have self-exclusion programs for gamblers, and the evidence so far is that they have helped. Stricter enforcement, as the Ross case demonstrates, would be even better. But the programs represent a unique combination of paternalism and individual choice: strictly voluntary, they impinge on the rights of no one but the people who enroll.

Residents of the United States and other Western nations enjoy unprecedented levels of personal freedom, which is a wonderful thing, of course. But freedom is dangerous, and with many traditional institutions losing their power to constrain behavior, moderation can be a challenge. The hazards of relying solely on will power are apparent. Two-thirds of Americans are overweight, millions are overwhelmed by debt, and the incidence of gambling problems has risen along with the number of venues that allow people to wager legally.

Government can only do so much to help. As we should have learned by now from our failed war on drugs and our disastrous experience with Prohibition, banning behavior in which people wish to indulge is rarely effective. It rests, moreover, on the dubious premise that a distant authority knows what is best for us. Once upon a time, it was illegal in many places to marry someone of a different race, have sex with certain consenting adults, buy a drink, obtain an abortion, or wager on poker. Such limits have been falling away for years, and we are likely to see an even greater range of freedom as time goes on. It is hard to believe that marijuana, for example, will remain illegal forever.

The challenge, then, is to control our appetites in the face of ever more freedom to choose. The best technique available to us is also possibly the oldest. It involves constraining ourselves through some mechanism that makes unwanted behaviors costly or impossible. People make such arrangements all the time, as when you say to your spouse, on the way to a restaurant, “Don’t let me order dessert. I’ve got to drop some weight.”

Savers have used such techniques as well. The old-fashioned Christmas club involved a series of payments to a financial institution that typically paid no interest and refused to return your money until an appointed date close to the holiday. Why would customers sign up for such a program? Because it forced them to save and protected them against the possibility of withdrawing the money in a moment of weakness. Employees who up their federal income-tax withholding in order to get a big refund are doing the same thing, giving Uncle Sam an interest-free loan in exchange for deducting money and refusing to give it back until after April 15.

Using such devices is not a sign of weakness or foolishness. On the contrary, people who use these measures to control themselves are considered by researchers to be sophisticates, compared to the “naïve” majority who think that will power alone can do the job. Robert Strotz, an economist who coined the term “precommitment” for just such strategies, cheerfully acknowledged that he instructed his university employer to spread his pay over twelve months instead of giving him the same amount during the academic year. Otherwise, he might not have set aside enough to get through the summer.

The key to any precommitment device is making it sufficiently binding to avert the unwanted behavior. Here is where the power of government can be particularly useful. Banning super-sized sodas and French fries won’t slim down Americans, but what if we could sign up to have ourselves taxed based on health indicators that are within our control? It is not as far-fetched as it sounds. Life insurers already vary their premiums depending on whether a customer smokes, is overweight, or has other health risks that increase the likelihood of a payout. Why not let people sign up to be taxed more heavily if their body-mass index is higher than a certain level of their own choosing? Chances are that it would increase tax revenue and improve public health.

The economists Dean Karlan and John Romalis both found weight control a challenge while in graduate school, so they made a series of agreements with one another to slim down. If one fell short, he would have to forfeit a chunk of his income to the other. By and large, the system worked, even though, at one point, Romalis had to pay Karlan thousands of dollars. Karlan later went on to found stickK.com, a website that allows users to enter into legally binding agreements requiring themselves to do practically anything — or pay a financial penalty that is donated to a charity or even an anti-charity. Did you fail to shed your weekly quota of flab? If you’re a Democrat, you might impose on yourself a $50 credit-card donation to the George W. Bush Presidential Library.

StickK.com facilitates precommitment on a private basis, but to enroll, people have to overcome the power of inertia and seek it out. Similarly, people who want to constrain their own borrowing can do so by freezing their credit at each of the three major credit-rating agencies, which is not difficult but takes a little doing. Subsequent efforts to obtain credit would involve the hassle of unfreezing, which amounts to deterrent by headache. The government can make precommitment easier — and even more binding — through tax returns, the Social Security system, and other means.

Imagine if anyone wanting to purchase cigarettes had to show a driver’s license. And imagine if, on renewal, people had the option of having a “No Tobacco” legend stamped on the front of it. People could make it impossible, in effect, for themselves to buy cigarettes until their next license renewal. A similar driver’s license restriction could restrict the purchase of alcohol or entry to a casino or racetrack. It could also limit the use of payday lenders, who provide instant cash at high prices to those who find themselves strapped a few days before payday. Licenses could contain some euphemism that, in effect, prohibits the holder from borrowing at usurious rates.

Precommitment strategies are hardly foolproof. Joyce Ross is not the only plaintiff to go to court over the government’s failure to protect her from herself. In Ontario, Peter Dennis sued regulators for failing to enforce his self-exclusion request, allowing him to lose $200,000 in addition to the $350,000 he blew before signing the pledge. Mike Lee, another British Columbian, sued after a casino refused to pay out his $42,500 slot-machine jackpot because he was on the self-exclusion list — a list that, under a law passed after Lee signed, requires the forfeiture of winnings.

On the other hand, self-exclusion does seem to help. In a study of 161 self-excluders published in 2007, psychologists at Quebec’s Laval University found that 88 percent felt they could not control their gambling on their own (in fact, 73 percent were deemed pathological gamblers). Despite quite a few breaches — excluding the self-excluded is a problem almost everywhere, it seems — participants reported a reduced urge to gamble, fewer gambling-related problems at home and at work, and a better mood. “The self-exclusion program has many positive effects,” wrote the researchers, adding that better enforcement, perhaps by requiring some kind of identification from gamblers, would make the programs more effective. Joyce Ross might well agree.

Daniel Akst is the author of “We Have Met the Enemy: Self-Control in an Age of Excess,”forthcoming in January from Penguin Press.