EVENT TRANSCRIPT: Under the Influence: Putting Peer Pressure to Work
DATE: 1pm-2pm, 8th March 2020
VENUE: Millbank Tower, 21-24 Millbank Westminster, SW1P 4QP United Kingdom
SPEAKER: Professor Robert Frank
EVENT CHAIR: Dr Rakib Ehsan
DR RAKIB EHSAN: Alright Ladies and Gentlemen, if we could make a start. First I would like to thank everyone for attending this event. I think naturally with everything going on in the current climate some people are a little apprehensive about being at any sort of collective public gathering. We are very thankful for your presence. We are also very thankful to have Professor Robert H Frank with us as well who is going to be discussing his book Under the Influence: Putting Peer Pressure to Work. I’ve tucked into this book already and I’m gripped. We will be selling this book here for £15 which I think is an absolute bargain if I’m being honest, so I would strongly recommend that. So just to introduce our distinguished guest today. Professor Robert H Frank is the H. J. Louis Professor of Management and Professor of Economics at Cornell University’s Johnson Graduate School of Management. He has been an Economic View columnist for the New York Times for more than a decade now. His many books include The Winner-Take-All Society, The Economic Naturalist, which I believe inspires your twitter handle as well, @ecconnaturalist, there are two n’s beside one another there, and Success and Luck. And you are currently based in Ithica, New York. Doing away with these lengthy introductions. With no further ado we will have Professor Frank to talk about his book and deliver his presentation.
PROFESSOR ROBERT FRANK: My thanks to you all for coming out. The book is really based on a very simple idea and it’s a completely uncontroversial idea. It’s the old psychologist’s maxim, they say ‘it’s the situation, not the person’. And by that they mean, when we see somebody do something and we try to explain why she did it, our first impulse is to think about what kind of person would do such a thing? What traits of character and personality? But psychologists tell us ‘no, that’s the wrong way to think about it, normally the most potent explanation for why she did what she did will be the circumstances in which she found herself at that moment.’ And, so for example, if you are worried that your daughter might become a smoker, it doesn’t help you to know that she is a science fiction buff or that she is a football fan or that she’s good at math. Those things are predictive. What you need to know if you are worried is how many of her friends smoke. It’s a very big effect. If that number rises from 20 to 30 percent, she becomes 25% more likely to become or remain a smoker. There is no effect remotely close to that. We know too, and this is controversial, although it’s less widely noted, that the social environment itself is a consequence of the choices we make. So what’s the smoking rate? It is just the sum of the individual choices we make to smoke, divided by the total number of us. None of us worries much about our decision to smoke, whether it might influence others or not. The influence we have on the social environment is so small that we tend to ignore that. But, and here’s the surprising fact to me, policy makers don’t seem to have considered seriously the question of whether it would be practical to get people to act as if they cared about their effect on the social environment. We know, for one thing, that it’s not impractical, it’s quite easy to do that. The smoke example is again instructive. The 1980’s in the US, I’m not sure what the history was in Britain, but the 1980’s saw the first real heavy steps to restrict smoking. We raised taxes on cigarettes, we started telling people they couldn’t smoke in restaurants and bars and even in some places in public jurisdictions. Why did we do those? Well, the reason we gave, the US is a lot more regulation and tax adverse than most other countries including the UK, the reason we gave was the recently released studies from Japan showing that second-hand smoke increased the rate of various illnesses in innocent bystanders. So this was just the usual invocation of John Stuart Mill’s harm principle: the government can’t tell me I can’t do what I want to do unless it’s to prevent me causing undue harm to others. So that was the excuse. It worked. The smoking rate when I was a teenager was about 60% among men and in some circles much higher than that. It’s now less than 14% among adults in the US. No parent I have ever met has said ‘I hope my kid grows up to be a smoker’; most smokers wish they had never started, so I think it’s a virtually unanimous view that the social environment is much better now by virtue of the fact that there are so few smokers in it. We are all so much more likely to succeed in our goal of raising kids to be non-smokers and the reason that is so is that we discouraged people from smoking with those steps. The reasons we gave for the small steps were completely spurious however. Second-hand smoke is real, it causes injury. But the injury can be minuscule compare to the injury caused by actually being a smoker. You might say, it’s not the government’s job to protect you from harming yourself, that was Mill’s view and I agreed with it when I read Mill in high school. But it’s a more interesting question now than I think Mill realised. The behavioural science of the matter has really revealed that that’s not an obvious claim. The fifty-year-old has good reason to wish somebody has restrained him from doing things that have proved grievously harmful to his fifty-year-old self back when he was twenty. So, what we need to do is think seriously about whether other opportunities like that exist and on close examination there are scores of similar opportunities where the social environment influences us as it does almost always in profound ways both for ill, as in the smoking example but also often for good, as in some examples I’ll mention. Why not encourage the social environment to move in one direction or another thereby to draw out as much from ourselves as we might hope it would do. The objection that taxes are an intrusive way to do that withstands scrutiny here in the US. We have many people who say that all taxation is theft and no, that’s not really an interesting claim. If you don’t tax, you don’t have government, you don’t have an army. You get invaded by another country whose government raises tax from its citizens to finance an army, and then you pay tax to them. So the only really interesting questions are ‘what to tax?’ and ‘at what rate?’ And the obvious claim that, if you think about it, is that the best things to tax are things we do that cause harm to other people. We do those things unmindful, typically, of their effects on others. If we tax those things or adopted regulations that would discourage them, we would do less of them; that would be a good thing. We would raise revenue; that would be a good thing, because every dollar we raise or every pound we raise in tax on a harmful activity is a pound we could reduce taxes on beneficial activities. So in the US we tax payrolls, doing that discourages companies from hiring workers. Why would we want to do that? We don’t need to do that. If we taxed harmful activities, we could reduce the taxes on useful ones.
The economist here that I follow on twitter had this tweet a couple of months ago, I’m glad that I thought to do a screen capture of it. She found a high school student’s Tumblr account on which he had posted the following remark: ‘I’ve always been told to not give in to peer pressure but I’ve never been told not to pressure my peers’. That fact is we, meaning we as a collective, have every good reason to tell one another to act in ways to exert positive influences on the peer environment rather than negative influences. Let me give you an example of a very vivid illustration of peer influence. Some of you are old enough to know who this is. This is Alan Funt, the creator of Candid Camera. If you haven’t seen any of his product go on YouTube, I’m sure there are clips still readily available. He’s a psychologist; he puts people in interesting, awkward situations and then films what they do. The example I’ll describe here is one in which he advertised a job opening. It had very high wages, much higher than the meagre requirements listed for the job and so it was a very attractive option for people. Many people called or wrote in to schedule interviews. He proceeded to book people. And so what we see in the film is a gentleman arrives for his interview. He is shown into a waiting room where there are four others already seated. The subject doesn’t know this but the viewer knows that those four are confederates of Allen Funt, they are working with him. So he sits down, nothing happens, the film goes on about its business, they go to several other scenes and come back each time, nothing is happening in the interview waiting room. They come back one more time and the camera pans in on the subjects face which is impassive as ever. But then suddenly he looks startled and the camera pans back and we see why he is startled. It’s because the other four, at no signal apparently, have risen from their seats and have started taking off all their clothing. He looks more and more agitated at the sight of this until finally you can just see a look of calm come back over his face. He too stands and takes off his own clothing. The scene ends and all five of them are stood there naked, waiting for a signal about what to do next. When I saw the film for the first time in a theatre I thought to myself: there’s no way on earth I would have ever done that. Maybe you would think that too. I don’t know how many people he had to run through the drill before he got somebody who was willing to do it so. Maybe most people wouldn’t do it, but some people are willing to do it. There was more than one such person shown in the film. So this is immediately taken as an example of the folly of being influenced by peers but think about briefly from the perspective of the job candidate. He got there last, it’s a great job, presumably much better than the job that he has. He doesn’t know what’s going on. If anybody knows what’s going on it’s going to be some or all the people who got their before he did. They seem to know that now is the time when you stand up and take off all your clothing and so he has got to decide on that spot. Do I go along or not? If I don’t go along probably I lose my chance at this job. What’s the downside if I go along? A little embarrassment maybe. So it’s not obviously a stupid thing to do to go along. And if you think more generally about it, I don’t know much about the world, none of you does either; collectively though we know a lot about the world and if we see a group of people confidently doing something then we at least have reason to ask: might it be worth my while to do that too? Maybe it isn’t but you at least ought to have an urge to investigate. So this scene is, at least for me, I saw that film thirty years ago, it’s still the most vivid example of peer influence I can recall and describe to anyone. But to think that you are not subject to peer influences in any way is I think to really deny some deep strand that is, as far as I can tell, universal in human nature. I wanted to take the term ‘peer pressure’ completely out of the marketing materials for the book and the title and sub-title because it has such a negative valence, at least in the US, I don’t know about here in the UK, peer pressure has a negative context. But then my editor proposed: why don’t we make the subtitle ‘Putting peer pressure to work’? and I thought that sounds very man bites dog, let’s go with that. And I think that’s been an effective subtitle for the story that’s told in the book. In the book I survey a broad range of studies showing that peer influence has a very powerful impact in each of these domains. Problem-drinking, sexual predation, cheating. Very powerful in cheating. Lot’s of people want to do the right thing but if they see other people cheating and getting ahead without paying any penalty for doing it, then they feel like chumps and then the unravelling occurs very quickly. Bullying: studies are quite convincing on the influence of peer pressure there. Obesity. It’s very hard to pin down causation in these studies because like people tend to associate with one another or people in a given environment are subject to common environmental influences. Just seeing obesity tends to cluster is not enough to conclude that it is contagious. Sometimes we see natural experiments. In one case military families were tracked when they were sent to a new post. The adult members in those families, if the posting was in a place where the obesity rate was 1% higher than where they had been, the adult members were 5% more likely to become obese during the time that they spent there.
The biggest ticket item on the list, two of them, the last two. The way we spend our money is profoundly wasteful. I’ll talk a little bit about that. The reason is not that we are stupid. Our ability to achieve what we want to achieve depends on how much we spend relative to how much others spend. If others spend more it is our best bet to spend more. It’s analogous exactly to the stadium metaphor: people stand to see better, nobody sees any better than if everyone had remained comfortably seated. You are not irrational to stand under the circumstances, you don’t regret standing but somehow, if everyone could be induced to sit down, everybody would be happier about that. And I’ll talk finally to how social contagion has contributed to the climate crisis and how the last two items in tandem point to a way to do something about the climate crisis. Big vehicles, this started in the US but we are seeing it now in the UK and in other countries. Nobody needs an 8000 lb vehicle. It was just tradespeople who drove these things years ago but then suddenly they became fashionable, and if others had one and you didn’t then you were at greater risk of being killed in a collision. So you bought bigger, you couldn’t see over the guy in front of you, you bought taller still and he bought taller and now we have, this is the biggest category of vehicle sales in a growing number of countries. It has completely wiped out all the emissions reductions due to hybrids and other steps that have been taken into the transport sector. It’s exactly one of those cases that what makes sense for one person to do makes no sense for everybody to do. If we instead, everybody drives a vehicle this size, risk of everybody’s injury and death goes up, not down. If everybody bought smaller cars it would be better for everybody. And we could reverse the cascade that led to this just by taxing vehicles by weight. Does buying a bigger vehicle cause harm to others in most transparently obvious ways? Yes. Could we justify to tax them on that basis? I can’t think why not. Especially since the tax revenue could be used to reduce taxes on beneficial activities. So we don’t have to accept that as a consequence of the market delivers the best possible result for everyone. It doesn’t manifestly in cases like that.
Here’s a first example of positive social contagion. Google will show you your neighbourhood from the air and the houses in it with red dots on them are ones with solar panels on the rooftops. Look at the pattern. The houses with red dots are almost always contiguous with others that also have them, ones without dots are similarly clustered. The seminal study in this area shows that contagion is especially powerful in the California early adoption days. A new installation on day one would spawn a new order within four months’ time on average. So you would have one insulation then two, another four months elapse you have four and in the space of just two years’ time you have 32 installations having arisen from that one. It’s an explosive rate of contagion. It can’t continue forever obviously, eventually the population saturates. But to try and encourage a social environment that will accelerate this process is totally sound public policy; giving a subsidy to the people who are early adopters is a pump-priming mechanism that has very much to commend it.
I’ve been arguing for decades that we spend our money wastefully. I’m going to give you a simple thought experiment that sort of captures the basic idea. We’ve got a low-tax world, think US. We have a high-tax world, think Norway. In the low tax world rich drivers buy the Ferrari and in the high-tax world they are forced to make do with the Porsche 911 Turbo. The question is if the two worlds were in every other respect exactly the same, in which world would the rich drivers be happier? We’ve got no direct experimental evidence on this but much indirect evidence suggests that it would be very difficult to detect any measurable difference in happiness between the two drivers. Partly that’s because the Porsche has every design feature that has any material impact upon handling and performance. So if these cars are different in absolute terms its by only a smidgen. But more important, drivers in the two countries know that they are driving the best car on the road, that’s the main thing they are deriving satisfaction from. Equally happy these two. But that’s not the right question. The high-tax country has a lot more tax revenue and you can adopt the most angry view you want about how governments waste money. They build bridges to nowhere and so on but they don’t waste all the money. And in fact if you look at government budgets, most of the money gets spent on public services that people, voters, seem to value. So if we compare these two societies, the cars will be different, yes, private consumption will be different but so will public services be different so the real question is: who’s happier? The American driver who drives his Ferrari on roads riddled with foot-deep potholes or the Norwegian driver who drives his Porsche on good roads. And that’s not even an interesting question. Nobody would want to debate the side saying that the Ferrari is happier, you would lose resoundingly. So the moral of the story, it’s the most robust finding in the literature on human happiness. It’s that beyond a point that has long since been passed in the West, further across the board increases in consumption and spending in the private sector serve only to raise the bar that determines what defines adequate to people. It doesn’t make people any happier. If all the mansions got twice as big the rich would be less happy because the bigger properties are more trouble to manage. So no gain from this extra consumption and a real loss from not doing the same investment that the money that they paid for. So the real conclusion is higher taxes on the rich don’t hurt them at all. I’ve been claiming that for thirty years with very little visible effect on policy in the US. So why didn’t I think to ask myself the following question much earlier? I’m embarrassed that I didn’t. If higher taxes would pay for public investment whose value to the wealthy would exceed their loss from the corresponding declines in private consumption, why don’t we vote for people who would do that? It’s maybe to a lesser degree but similar here in the UK, your taxes have been going down. It’s, I’m claiming, because wealthy voters suffer from what I’m calling the mother of all cognitive illusions. Let me say something about cognitive illusions generally. Which square looks darker to you? A or B? I’m guessing there is no one who will volunteer to say that square B looks darker than square A. If you have a normal brain, square A looks darker than square B. You can guess from me calling it an illusion that the two squares are exactly the same shade of grey. The explanation is quite interesting. The amount of light that enters your eye from A is the same as the amount of light that enters your eye from B but why they look different? Because your brain knows one more thing which is that square B lies in a shadow and so it knows, not consciously, but it knows that B looks darker than it really is, so your brain, quite unbidden, performs an adjustment on the fly to tell you that B is lighter than A. That’s what you would want your brain to do. Your brain is trying to tell you as best it can what’s going on out there in the world. You are not defective if square B looks lighter to you. So I heard that explanation. It’s totally plausible sounding. But then I look at the diagram again and say ‘no way A and B are the same shade of grey, that can’t be right’. I then got my graphics programme and I joined the two with a strip and you just can’t detect any contrast at all between the strip and the two squares. It was only at that moment that I finally had to give up and say ‘well damn, they really are the same shade of grey’. I showed this to my wife and she said ‘wow’. I found this a really humbling experience. I was sure that they couldn’t possibly be the same shade of grey, and I very humbly said ‘good we need more experiences like that’. So I show you this just to illustrate that it’s possible to believe that something is obviously true and yet, it’s not true. So I’m going to show you another belief that is also obviously true and yet my claim is that it’s not true. So you are trying to estimate the effect of higher taxes. How will it affect me? The obvious strategy is to try and think about the last time they raised your taxes, how did I feel then? You know, we are going to go to a theme park, we went to Disneyworld a few years ago, how did we like that? So he thinks back and this strategy falls flat, it doesn’t work in the current environment. During WWII in the US the top tax rate was 92%. When I graduated from Georgia Tech in 1966 it was 70%. Reagan’s first term: 50%. Now, 37%. There have been a couple of miniscule increases along the way, too small to notice or remember. You try to think about how higher taxes would affect you by thinking about the last time they did it; that doesn’t work. So what’s plan B? You try to think back to times when you had less money. It’s true that when they raise your taxes you have less money to spend. Unless you have led an unbelievably charmed life there will have been times in the past when you did have less money. So thinking back, you may have had a bad business year, or a divorce or a house fire or a health crisis. All those things left you with less money but they have in common a feature with which tax increases, which also leave you with less money, completely lack. These events reduce your income or wealth while leaving the income or wealth of others intact. Tax increases lower the amount of money you have to spend but they lower the amount of money others like you have to spend at the same time. Tax increases have no effect on your relative purchasing power. These events affect your relative purchasing power and so if you are a rich person or a prosperous person even, you have everything that you need, nobody is claiming they won’t be able to buy what they need, what are you worried about? Well I won’t be able to buy what I want. The things people want, the special extras in life, they are all in short supply. How do you get them? You have to outbid other people like you who want them. When their taxes go up and your taxes go up your relative purchasing power is the same as before. All the apartments with sweeping views end up in the exact same hands as they would have had taxes not gone up. ‘Oh I’m worried that an Oligarch will come in and outbid me.’ Well then we put a foreign buyers levee on that transaction. This is a complete cognitive illusion to think that higher taxes, if you are a prosperous person all the gains have gone to you in the last four decades. You can be taxed quite heavily and not feel any need to cut back on anything that counts for you. That’s kind of a snake-oil-sounding claim, free money sitting on the table, but it follows logically from just that simple premise I mentioned earlier which is that beyond a certain point additional spending on most forms of high-end consumption just raises the bar that defines adequate.
So I’ll close with just an account of the point which has created by far the most interest when I’ve talked to climate activists on this trip. I’m an economist and I’ve long held the view of most economists that conscious consumption, is that a term that’s in currency here in the UK? Conscious consumption or voluntary small steps to reduce your carbon footprint. Walking instead of driving, eating less meat, taking fewer flights, things of that sort. Economists have long branded those kinds of steps as a distraction at best and maybe even worse than that they keep you from focusing on the main task which is to enact robust changes in public policy without which we don’t really have any real hope of parrying the climate threat. We need a stiff tax on carbon, we need to invest huge sums in green energy. If we don’t do those things it won’t matter how many times we people eat meat or drive their cars instead of riding their bikes. My work on this project has completely altered my view on that claim by the economists and that is for two reasons. The less important of the two is that the indirect effects of what you do are vastly larger than the direct effects of what you do. So if you put a solar panel on your roof the world is the same as if you didn’t do that as far as we are able to measure it is a negligible change. But if you look at the contagion effect; others install panels and it radiates out from there. It might peter out or it might go on and create a massive increase in the installation of solar panels in which case the effect is anything but negligible. That’s one reason, but the more important reason that made me change my mind about this is that doing these things effects who you are. This goes back to Aristotle’s view of why someone would be honest when he could cheat with no probability of detection. He explained that, ‘well we have rules, we enforce the rules. People follow the rules because if they don’t they’ll be punished often if they don’t follow the rules.’ And by following the rules day after day you become a person who follows the rules. So if you get a chance to cheat when no one is looking well ‘no, that’s not who I am. I’m a person who follows the rules.’ We are what we repeatedly do as he put it. And here too, the task is to submit to voluntary cost, costs we could escape in the name of some higher purpose. And doing those things changes who you are. It makes you more likely to vote for the candidate who will adopt the policies we need to adopt. More likely to go out and knock on doors or make campaign contributions to help get them elected. There’s an economist view that there’s a budget constraint for your willingness to participate in social movements. They would say that if you went to the women’s march in Washington DC in 2017, over a million strong, you have used up some of that budget and you would be less likely to go to an event later that year. No, it was the exact reverse. Going to the first event would make you more likely to go to the second event later that year. So my thinking has completely flip-flopped on this issue. I have changed my own behaviour in many ways that I have not thought to do before and I’m convincing others to consider the possibility too. And I would like to think about Greta Thunberg when she started her climate crusade at age 14. This is three years ago now. I’m guessing that she hoped that it would have a big impact but I can’t imagine she thought it would have anything like the impact it has had. And it was just a matter of contagion. So you can think about these small steps you take as kind of like buying a lottery ticket. We always tell the poor: ‘don’t buy a lottery ticket, that’s a mistake’, but the poor seem to know something. You shouldn’t buy too many but if you have a lottery ticket it feels like ‘yeah, I’m in the game. Something good could happen as a result of what I did’ and that’s energising and sustaining. I find it energising to think of these little small climate steps as having bought a lottery ticket. They probably won’t have much impact but who knows, they could have an enormous impact. So, I’m out here risking the coronavirus to tell you about these steps; you don’t have to do that but there are steps that you could take too and share this notion with your friends and hope that they would do it too. That’s pretty much what I wanted to lay out as an opening.
DR RAKIB EHSAN: Thank you Professor. We will open the debate to the floor now. I’ll be taking questions on a one-by-one basis. I just kindly ask that before you ask your question if you could just state your name and if relevant your formal affiliation as well. So do we have any questions?
AUDIENCE MEMBER: Riveting talk, thank you. I am hoping that a contagion effect would follow from the fact that I have already bought a copy of the book as everyone else must do. It’s very interesting in a sense in the confluence between economics and behavioural science and the overlap between the two but what I want to explore a bit with you is what I would call the underpinning moral dimension that attaches to all this. I’m frustrated that you’re not, on your visit here, you are not spending time with the behavioural insights team which is this sort of government stroke private sector..
PROFESSOR ROBERT FRANK: I am speaking to them.
AUDIENCE MEMBER: You are speaking to them. Good. That’s exciting because they have been using all sorts of contagion effects for some time to deliver good policies. But they have run up against this difficult moral dimension that sometimes it is tempting to use the effect on the basis of science… You cited the case of the Japanese research on passive smoking, and our capacity as human beings to follow the herd, you cited the Candid Camera experiment, there are other, much uglier ones. Christopher Brownings book about the individuals who volunteered for the Einsatzgrupen in the early parts of the war is a terrifying indictment of how willing people where to do what they felt would otherwise let down their colleagues. These weren’t necessarily evil people volunteering for a task, they were people who didn’t want to let down their partners. And in all of this we are left with that awkwardness morally between wanting the do the right thing and wanting to deliver the right outcome and being tempted towards the whirlpool of using slightly dodgy science to get people to do that. Do you think that citing that Japanese passive smoking study, instead of the many studies that show that passive smoking is actually a pretty illusory concept, is morally doubtful or do you think that the ends justify the means?
PROFESSOR ROBERT FRANK: I think it was completely unnecessary to offer that as the reason for the intervention that we mounted. The science was quite clear about the contagiousness of smoking long before those studies were published. I think the reluctance to act on that basis, there was some feeling that ‘oh, it isn’t the government’s job to prescribe which behaviours of peers you should mimic and which ones you should avoid’. That’s your responsibility. I totally embrace the sentiment that motivates that objection. But the social environment has huge effects on us. Still that objection acknowledges that and says it up to us to deal with. What about the innocent victims of the influence? So, I started smoking at age 14. My parents didn’t want me to smoke. They were frustrated that I did. I fortunately read a book and quit two years later. Most people have much more trouble; lifelong, if they start. My four adult sons, none of them are a smoker and that’s not because I was so brilliant at persuading them that they shouldn’t. I did my best to do that. If you try too hard to get your kids not to smoke you make them more likely to smoke. And the reason that they didn’t smoke is that their friends didn’t smoke. And so the fact that we have taken steps to make kids less likely to start smoking means that, for sure, it’s a statistical certainty, millions of parents are not frustrated in their attempts to try and achieve that important and very realistic and laudable goal: to raise kids to be non-smokers. If we hadn’t done that they would have suffered harm. If you invest much of your life raising kids and then you see them go down a path that is desperately one you didn’t want them to go down, you have suffered an injury. I mean a lot of the Utilitarians would say ‘well if your daughter is here and there are two strangers here, and the train is about to run over the two strangers and you can pull a lever and have it run over your own daughter, you got to do that because one life is better to lose than two lives.’ I don’t think that we would want to live in a society where people would do that. I wouldn’t do that. I’d hate to be in that situation but to raise a kid you have got to care deeply about that kid and it’s asking too much. So not to count the injury that parents suffer. We don’t need to invoke false science. The social environment influences us. Sometimes in good ways, sometimes in bad ways. We can tax as a mechanism for changing people’s behaviour towards it. We can adopt fairly unintrusive regulations. You are inconvenienced about where you can smoke now because of where you can and can’t do it but you are not prevented from smoking. So, I don’t think you really confront that moral dilemma, especially since every dollar of tax you raise means you can reduce a dollar on some useful activity.
AUDIENCE MEMBER: My first question is, today, do you think there is enough evidential proof, scientific proof, to start doing something. I think it’s very interesting what you are saying about essentially taking into account someone else’s, your social proof, to someone else? Do you think there is enough science to say for instance in the UK we have done a sugar-tax recently. So that’s something that is demonstrable when you go into a shop, people see you doing that, suppose something else like a closed online purchase. You might tax that less or de-incentivise that less because it has less power as a social proof.
PROFESSOR ROBERT FRANK: In the book I have an imaginary conversation between myself and a conservative who is opposed to taxing sugared soft drinks and to make it easier for me I imagine that we are both members of the Pigou Club. I don’t know if any of you is a member of the Pigou Club. It was started by Bush’s chief economist in 2006, named after AC Pigou who was the British economist who pioneered the thinking about how to deal with pollution. Firms pollute because it is cheaper to pollute than to filter the pollution out and so if you want them to pollute less you should charge them for the amount of effluent they discharge and that’s both fair and efficient he argued. So there are many conservatives who joined the Pigou Club and many liberals. I’m a member of it. Paul Krubin is a member of it. There are some of the most conservative republicans in the US who are members of it too. So we all agree that taxing pollution is a bad idea. My argument is in the book, I call drinking sugared soft drinks a behavioural externality. It doesn’t put pollution into the air, it pollutes the social environment. It makes other people more likely to drink 32-ounce sugar drinks. And so my claim is that we should treat those exactly like we treat pollution and there is just no cogent basis for saying no to that. If you believe the arguments that Pigou offered, one by one now they apply in the case of behavioural externalities too. Now if you have a behaviour that no one can see and you can do it in a closet somewhere where no one sees it then you aren’t influencing the social…
AUDIENCE MEMBER: Online Viagra sales was going to be my example for that.
PROFESSOR ROBERT FRANK: That might pollute the social environment in other ways. It might create expectations that people would feel compelled to meet that they couldn’t otherwise meet. So I think it’s not just behaviours that you see directly, I mean so behaviours leave footprints. So any time your behaviour, either directly or indirectly, influences somebody and causes harm. That’s a reason to try to discourage it. If it makes the social environment more productive or supportive that’s a reason to encourage the behaviour. I worry about a meddlesome bureaucrat reading this and just wanting to pull every lever in sight and micromanage life to an offensive degree, we don’t want that. We elect representatives. We charge them with acting on the basis of legitimate evidence when they intervene or tax us in various ways. So no, I think there’s really no principle basis for having to apologise for policies enacted on this basis.
AUDIENCE MEMBER: Thank you for your talk Professor. When you mentioned about the smoking, your sons, you said they didn’t smoke, not because I didn’t smoke, but because their friends didn’t smoke. And we take a lot of queues from people who are like us particularly, and don’t really care about people we don’t think are like us. What therefore do you make about social cohesion and quality and things? In your example of the two cars you said there was a low-tax society which you said was the US, and there was a high-tax one, maybe Sweden. But the immigration levels and so on, of those two societies are very different. The US is argued, by some, the US is very low tax rate simply because it is very diverse and they don’t have such a, sort of, ethnic identity. What do you make of that?
PROFESSOR ROBERT FRANK: That might be descriptive but that essentially has zero normative force that I can discern in it. If money is free. If not spending to make the mansions all a little bigger. If the money that would be saved by not doing that, and invested it instead in say green energy which would create benefits for everybody in the US and for everyone else in the world. Why wouldn’t you want to do that? There just doesn’t seem to be any cogent objection to a step like that.
AUDIENCE MEMBER: People like Rosalind Barr or someone would say something like, ‘I don’t want money wasted on people not like me’.
PROFESSOR ROBERT FRANK: Yeah, that is in fact what they say or what they feel if they don’t say it. They don’t want to see people they don’t like get benefits. I’m not sure, is there a question? Do I agree with that? No, I don’t agree with that. That seems like a wrong-headed way to think about things in my view.
AUDIENCE MEMBER: There’s a lot of people who think like that I think.
PROFESSOR ROBERT FRANK: Sad to say. They are shooting themselves in the foot. I would try and explain to them that in the process of trying to deny benefits to the people you don’t like you are shooting yourself in the foot. You are bequeathing a world with three or four degrees’ centigrate temperature increase. It’s going to cause enormous heartache for your kids and grandkids. Is denying people who are not like you some public relief worth that price? Would they have the courage to say yes to a question like that? I’m guessing no.
AUDIENCE MEMBER: I want to push again on this balance between our desire for conformity and our desire for justice. So conformity, you illustrated amply is a natural human thing. We are sheep basically. We take our clothes off because the other interview candidates are doing that. We buy better cars because other people are doing that. There’s a sort of logic to it. It’s a sort of underpinning driver and other reasons. But we also have a sense of justice and if you work hard and make a lot of money, you do feel a sense of injustice that someone who doesn’t gets the same benefits from society as the ones you are working hard to deliver. How do you balance these two, what I would call the sheep and the outrage?
PROFESSOR ROBERT FRANK: You know it’s a separate but very interesting question about whether the rewards that are doled out in the market place follow our intuitions about what justice requires. My previous book, the Luck book talks about how the biggest rewards are distributed these days. They are what Phil Cook and I call, in the orange title there. In winner-take-all markets, the idea here is that because technology let’s whoever is best at what she does, serves the whole market now, there is a contest to see who is the best in each arena and if you are the best you get a huge reward worth thousands of times perhaps more than the second best who is just a tad behind you. And not only that, if you are a winner in one of those markets. Let’s find the finalists, the contestants, there are lots of them. Find the one who worked hardest and who is most talented. That person will on average have had only an average run of luck through life. We picked that person on the basis of the other two characteristics. So he might have been lucky, he might have been unlucky, on average he is average luck. Breathing down his neck among the other finalists there will be at least some who are very lucky and one of them will almost certainly have jumped ahead of him in the final queue. So the best guy and the hardest working guy won’t be the winner. He’ll be one of the also-rans. He’ll earn a tiny fraction of what the winner earns and so it’s one thing to say you worked 10% harder than someone else, you should get 10% more money. That’s not the way the distribution scheme works. When people are led to discover for themselves, ‘hey, I was pretty lucky on my path to where I am’, they become suddenly much more generous in terms of that benefits we should make on behalf of the next cohort that is coming along. It’s hard to get them to see that. You have to ask the right questions. So Obama reminded people who were successful in business that ‘they had shifted their goods to market on public roads, they had hired people we had paid to educate collectively, the police and fire department protected them. It’s your responsibility to pay forward so that the next group has a chance.’ They got so angry at that, at the ‘you didn’t build that’ speech. ‘We are not entitled to our loft positions. We worked hard. We deserve all this’. If you just ask a successful person: can you remember any examples of times when you were lucky along the way? They don’t seem defensive at the question. They don’t get angry. They think about it. Their eyes light up when they think of an example. They tell you about it. Telling you about it kindles a memory of another time when they were lucky. They tell you about that too. And then suddenly, ‘why aren’t we investing more in this and that?’ They volunteer on their own. So I think, yeah, I think it’s quite common for the people at the top to think they did it all on their own and in fact most of them are hard-working and talented but what about the other people who are hard-working and talented, maybe even more hard-working and talented, who didn’t earn what you did?
AUDIENCE MEMBER: Following on from that. It’s quite common for people at the bottom to think of heroes and villains and we can see that particularly in the media, the newspapers are either vilifying or (inaudible) Meghan Markle. Then suddenly the newspapers are full of (inaudible). So behind all of this is the contagion effect giving answers to everything, most of it in terms of success and failure.
PROFESSOR ROBERT FRANK: I bet that would be an example of negative contagion. Our political leadership is generating a lot of negative contagion. You know, we are seeing acts of hate and violence towards minority groups at rates we haven’t seen in decades because people at the top seem to have given license to this sentiment. So yeah, it matters what people do. They have an effect on the social climate and I think trying to push back on that is a totally just and sensible response to it.
DR RAKIB EHSAN: Well Professor, I have to thank you for speaking on your book. And as I said we are selling the book and I would encourage you to buy it. So please show your appreciation for speaker today.