In an article entitled "Too Many Choices", Barry Schwartz claims that government does people a favor when it restricts their choices. Schwartz argues that people are so paralyzed by choice that they're more free when they have fewer options. Nothing could be more fundamentally wrong.
What's unfortunate about the article is that Schwartz took a concept that makes sense at one end of the spectrum, then applied it with a broad brush to the entire rainbow in a way that makes no sense at all.
He uses the metaphor of being overwhelmed by the number of choices of jam in a grocery store. Now, if you've been living in Siberia and have never bought jam before, you could hypothetically be overwhelmed by the number of choices in your local Hy-Vee, Ralph's, or Albertson's. And you'd probably end up either making an uninformed first choice or relying on the counsel of the stocking clerk who may or may not know jack about whether you'd like boysenberry better than apricot on your toast.
But Schwartz's supposed "behavioral economics" is nothing more than putting lipstick on a pig. And the pig here is the nanny state.
Schwartz's argument presupposes that everyone's as naive as the Siberian in aisle 4. But that's absurd. Once you've been to the grocery store a handful of times, you start to learn what's what. You learn from past choices, adapt, and make new choices. And before long, Boris and Natasha from Irkutsk know that they like Smucker's Apricot-Pineapple Preserves on their crackers and store-brand Concord grape jelly on everything else.
But the Big Fat Smoldering Lie that Schwartz is trying to sell you is that Boris and Natasha would've been better off if they'd never been allowed in the door of the big grocery and instead had to buy their jam from the two or three choices on the shelf of the government-run 7-Eleven on the corner.
Lie, lie, stinking, heaping, vile lie!
But because Schwartz is a professor of psychology, he has credibility. And when he tells you that you're not smart enough to make choices for yourself, you have to believe him. He's a professor, right? He must be telling the truth!
What he had to say in that article is so bilious because it's wrong both philosophically (choice is dangerous, so we'd better not offer any) and it's a radically incorrect application of the research he waves around as his justification. It's like saying you've discovered something about relativity on the scale of quarks and then applying it to the physics of a game of bowling. His scale is wrong, wrong, wrong.
Unfortunately, market economists haven't been doing enough to explain to people how choice and markets allow everyone to emerge happier and more satisfied with almost everything we need to do. We've been losing out to people like Schwartz, who would have you believe that Americans aren't smart enough to plan for retirement -- even though most of us are somehow magically smart enough to have bought our own homes, raised our own children, managed our own bills, purchased our own cars, selected our own insurance, picked our own doctors, and made a million other decisions, many of which are vastly more complex than choosing how to invest for retirement. Further to the point, half of all American families already have retirement plans. Fear of choice is preposterous in a nation where the average household drives more than 21,000 miles a year. When we drive, our lives are literally in our own hands as we make decision after decision, some of which (like any left-hand turn) could be life-threatening.
If there's one thing a person learns in the study of economics and choices, it's that people respond to incentives. And over time, in the course of responding to choices and incentives, every adult (save for a very small handful of truly developmentally-disabled people) learns from previous choices, adapts, and becomes better at making future choices. Each choice is also a lesson, since we live to observe the consequences of our own actions. Anyone who's mowed the same lawn more than once learns ways to do it on mowings 2, 3, 4, and so on that they didn't know before they started the first time. The same goes for buying jam in a grocery store or picking mutual funds in which to invest for retirement. And that, moreover, serves to reinforce how important it is that people learn to invest for themselves early on -- the earlier you start saving for retirement, the more advantage you'll inevitably get from the power of compound interest. But just as importantly, the earlier you start, the sooner you learn which choices are best for you.