An Intuition Test

The conclusions we form about the world are heavily shaped by our fundamental intuitions. Numerous authors have explored how our immediate perceptions of how the world operates significantly affect the development of our worldviews. 

In his work, Thomas Sowell’s A Conflict of Visions argues that distinct “visions” exist concerning the world, which contribute to the varied worldviews observed. Following the thoughts of Joseph Schumpeter, Sowell describes a vision as a “pre-analytical cognitive act”—an initial understanding of reality before any thoughtful analysis is applied. Individuals who align with what he termed the constrained vision (or in subsequent writings, the tragic vision) respond to the world in ways that starkly contrast with those adhering to the unconstrained vision (or the utopian vision). 

Understanding someone’s intuitive framework can clarify much about how they assess various public policy questions. An individual’s immediate response to the idea of “click-to-cancel” regulation can be a telling measure of their regulatory instinct.

Some businesses are designed to make it incredibly easy to enroll in services while rendering the cancellation process cumbersome. A familiar example is fitness centers. I used to have a gym membership where signing up took just about thirty seconds online, with no need to visit the gym. However, to cancel, one had to first notify through the website or app, then physically visit the gym with a handwritten request to terminate the membership, and only then, the membership would be voided after the conclusion of the next billing period.

Some have speculated that such a model helps keep Planet Fitness operational, despite its low $10 monthly fee. They attract new members during moments of resolve (think of the New Year’s resolution spike), while complicating the process of cancellation. Due to its low cost, many overlook the membership, often remaining signed up for years before reluctantly navigating the cancellation hurdles. 

The click-to-cancel regulation would outlaw these practices. With this regulation in place, if a business allows easy enrollment with minimal transaction costs, it must also allow cancellation through a comparably uncomplicated method.

Here are three potential responses people might have upon hearing about this rule:

The first response resembles a classical welfare economics outlook. For the typical welfare economist, the objective of economic policy is to enhance outcomes by refining and optimizing economic interactions. Negative externalities should be taxed, while positive ones should receive subsidies. Therefore, minimizing transaction costs is paramount, as they often hinder efficient outcomes. Such contracts increase unnecessary transaction costs. Thus, a click-to-cancel rule would help lower these costs, thereby promoting greater efficiency, making it appear to be a sound idea. However, the situation is not so straightforward. 

In his book The Revolt of the Public, Martin Gurri highlights concerns regarding this optimization mentality:

The second reaction is more cautious and draws inspiration from ideas associated with Hayekian economics, as well as economists like Vernon Smith. This approach perceives the economy not as a simple optimization problem, but as an extraordinarily intricate ecosystem. We can discern general principles that promote its growth, such as property rights and freedom of contract; however, pursuing targeted measures to achieve specific outcomes can be likened to the misguided attempt to rid an ecosystem of a pest by introducing a new predator. Changing one variable does not merely exist in isolation; it influences an adaptive ecosystem.

The Hayekian viewpoint prompts advocates of this perspective to note that gyms have always had the chance to distinguish themselves by offering an easier cancellation process. If customers desire it and entrepreneurs can supply it, but such services aren’t available, it suggests a deeper complexity exists. This is where caution is necessary: if the situation is intricate, one should proceed with care.

The third response stems from a more hardline libertarian perspective, grounded in the principles of freedom of association and the associated freedom of contract. This viewpoint opposes interference in private agreements. If the terms for both signing up and terminating a contract are transparently outlined, without deception, and individuals willingly consent, then the matter is settled. Regardless of whether prohibiting such contracts would enhance welfare, it misses the crux of the issue. Individuals should not be compelled to alter the terms of their contracts or restricted from entering into such agreements if they so choose. That should be the final word.

Which of these perspectives, dear reader, resonates most closely with your initial thoughts on the click-to-cancel regulation?

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