Too much choice is starting to hurt average Americans

Dan Patrick, the lieutenant governor of Texas, suggested that Texans who found themselves with $17,000 electricity bills after the February freeze had only themselves to blame, because they didn’t “read the fine print.”

Funny, isn’t it, how politicians who denounce liberal elitists sneer when ordinary Americans get into trouble?

But something else struck me about Patrick’s take on supersize power bills: How did we become a country where families can face ruin unless they carefully study something as mundane, as normally routine, as their electricity contract?

And electricity isn’t a unique example.

As The New York Times’ Margot Sanger-Katz has documented, many people end up with heavy financial burdens because they chose the wrong health insurance plan — yet even experts have a very hard time figuring out which plan is best.

Wait, there’s more. One cause of the 2008 financial crisis was the proliferation of novel financial arrangements, like interest-only loans, that looked like good deals but exposed borrowers to huge risks.

What these stories have in common is that they’re snapshots of a country in which many of us are actually offered too many choices, in ways that can do a lot of harm.

It is true that both Economics 101 and conservative ideology say more choice is always a good thing.

The spread of this ideology, though, 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.

Some, maybe even most, of this expansion of choice was good.

But the argument that more choice is always good rests on the assumption that people have more or less unlimited capacity to do due diligence on every aspect of their lives — the real world isn’t like that.

The lesson of subprime mortgages, health insurance and Texas electricity is that sometimes people offered too much choice will make bigger mistakes than they imagined possible. Too much choice also creates space for predators who exploit our all-too-human limitations.

Before the subprime mortgage crisis, Edward Gramlich, a Federal Reserve official who warned about the potential for disaster, asked, “Why are the most risky loan products sold to the least sophisticated borrowers?” The question, he suggested, “answers itself — the least sophisticated borrowers are probably duped into taking these products.”

Beyond that, I’d suggest that an excess of choice is taking a psychological toll on many Americans, too.

There’s a growing body of research suggesting that the costs of poverty go beyond the trouble low-income families have in affording necessities. Because people have limited “bandwidth” for processing complex issues, the financial burdens placed on the poor all too often degrade their ability to make good decisions, sometimes leading to self-destructive life choices.

What I’m suggesting is that a society that turns routine concerns into make-or-break decisions imposes poverty-like cognitive burdens even on the middle class. And it is all unnecessary. Citizens of other rich countries don’t worry about being bankrupted by medical expenses or electric bills.

So the next time some politician tries to sell a new policy — typically deregulation — by claiming that it will increase choice, be skeptical. Having more options isn’t automatically good, and in America we probably have more choices than we should.