Paul Krugman Thinks You'll Be Happier With Fewer Choices. Nonsense.

It's true that the freedom to make your own decisions comes with both benefits and consequences, but Krugman is squarely focused on just one side of that equation.


Writing in The New York Times, Nobel Prize-winning columnist Paul Krugman offers a unified theory of everything wrong with America: We're just too free to choose.

Krugman says this is the lesson to be learned from last month's energy crisis in Texas that left some of the state's residents—people who had freely chosen to sign-up for variable rate offerings from their electric service providers—with sky-high bills when demand surged as the state's generating supply crashed. People can't be trusted to choose their electric service, he argues, because some will make ill-informed decisions that come with unexpected costs. From there, he expands this thesis to a general principle, one that he says is to blame for everything from rising health insurance premiums to the subprime mortgage meltdown of a decade ago.

"Many of us are actually offered too many choices, in ways that can do a lot of harm," Krugman argues. "Sometimes people offered too much choice will make bigger mistakes than they imagined possible." That's grounds for denying someone the right to take out a risky mortgage or refusing to deregulate electricity markets, Krugman argues, even though the outcomes he's proposing would leave people with fewer options for obtaining home-ownership and likely paying higher prices for energy.

Indeed, to understand the consequences of limiting choice, just take a look at the Obamacare health insurance marketplaces, which prohibit the purchase of cheap insurance plans that would otherwise be available. They are set up this way for exactly the reasons that Krugman is outlining: because some people might make the "wrong" choice and end up with massive medical bills. The result of that policy is higher premiums for everyone.

But the real kicker is Krugman's contention that "an excess of choice is taking a psychological toll on many Americans, even when they don't end up experiencing disaster."

Nonsense. Krugman is pushing an only slightly more sophisticated version of Sen. Bernie Sanders (I–Vt.) complaints about the wide variety of deodorants available at any American supermarket. Or, if you prefer a more academic take, he's peddling a warmed-over version of The Paradox of Choice, in which psychologist Barry Schwartz argued that a proliferation of choices "no longer liberates" but rather "debilitates" and "might even be said to tyrannize."

That claim has been challenged in subsequent social experiments, including one that reviewed 50 experiments into "choice overload" and found no evidence to support the idea. In fact, a 2009 study found that increasing the number of choices actually leads to people making more reasonable—not riskier or more indulgent—choices, because it is more difficult to justify the outlandish option when so many sensible ones exist.

Psychology aside, it should be obvious that restricting individuals' choices is not a pathway to greater satisfaction. Krugman is right that the freedom to make your own decisions about life's most important things—how to finance a house, how to save for retirement—comes with benefits and consequences, and plenty of stress to boot. But Krugman's argument would suggest that gay Americans were generally happier in the days when the choice to get married was denied to them. By the same token,  were women more content when laws and customs denied them many of the choices they are now free to make every day?

The same is true when it comes to consumption. There aren't 19 flavors of Pop-Tarts and a billion different types of breakfast cereal because Kellogg's is run by a mad scientist who enjoys nothing more than discovering new ways to mash together carbs and food coloring. They exist because the revealed preferences of consumers show that we like having lots of choices.

To be sure, there will always be people who make poor choices—and that includes major, life-altering choices. But Krugman is wrong to fret over the "ideology" of ever-greater choices that "has turned America into a land where many aspects of life that used to be just part of the background now require potentially fateful decisions. You don't get a company pension, you have to decide how to invest your 401(k)."

Before extolling the benefits of having someone else handle your retirement account, however, Krugman might want to take a look at how that's working out. State-run pension plans for government employees are a collective $1 trillion in the red, thanks to a combination of deliberate under-funding and poor investment decisions. Private sector pension systems didn't go nearly extinct because of Milton Friedman's "ideology;" they did so because companies often ran them poorly and left retirees with less than what had been promised.

This is the real blind spot in Krugman's argument, and the question he never bothers asking: namely, who should be making these decisions, if not the individuals subject to the risks?

When it comes to mortgages, electric bills, pensions, health care, and anything else, the person who is going to try their best to make the right choices is the person taking the risk. Putting someone else in charge is no way to reduce the stress of making major life decisions, as Krugman seems to believe it would—it just leaves you powerless.

Human beings are fallible, of course, and some of us like to take risks more than others, so there will always be both winners and losers. That's why the size, scope, and cost of the public safety net—that is, how much the rest of us should invest in helping those who make poor choices or fall on bad luck—is a matter of never-ending debate. And, of course, the government has a role to play in ensuring that outright fraud is not occurring in any marketplace.

But let's not confuse a debate over the government's limited role as a prosecutor of fraud and provider of emergency support to the truly needy for a normative debate over whether we should prefer a world with more or fewer choices.

On that question, there is no debate to be had. A world of proliferating choice is one that includes more possibilities for individual and societal flourishing. Not all choices are beneficial and some consequences of freedom can be painful, but it is beyond bizarre for Krugman to wish away the benefits of the modern world because of a few costly mistakes. It's worse for him to suggest that you shouldn't get to make your own decisions because someone else might have screwed up.