Richard Thaler: Fear of Falling & Libertarian Paternalism

Excerpts (via Cato)

“First, let’s be clear about what Sunstein and I mean by libertarian paternalism. We use the word libertarian (small “l”) as an adjective to modify paternalism, and it implies that we advocate policies that maintain people’s freedom to choose at as low a cost as possible. As for paternalism, we say on page five of our book, and repeat ad nauseam, that we call a policy paternalistic “if it tries to influence choices in a way that makes choosers better off, as judged by themselves.” (The emphasis is in the original.) Nonetheless, Whitman accuses us (and some of our fellow behavioral economics travelers) of wanting to push people in the directions that we ourselves prefer. I am not sure how we could have been any clearer that this is precisely not our intent, and I am not sure how we would have decided what to push for since Sunstein and I do not agree ourselves. I am a lover of fine wines; Cass prefers Diet Coke. With fundamental philosophical differences such as these, we wouldn’t get very far in pushing in the directions we prefer! This applies to the rest of our gang as well. Matthew Rabin prefers to dress in tie-dyed T-shirts, but I have never known him to lobby for a subsidy for this article of clothing.”

….Consider the current interest in the rising obesity rate in the United States. The anarchist would allow anyone to sell and eat everything. No food or restaurant inspections and no penalties even for those who knowingly sell food that makes people sick. The totalitarian would tell everyone what to eat and where to eat it. Nudge-type policies would include things like displaying the fruit more prominently in cafeterias, posting calories in fast food restaurants (where the costs of doing so are low) or making ingredient labeling in grocery stores more prominent and user friendly. Others, soft paternalists such as O’Donoghue and Rabin, might advocate a sin tax on fat or sugar. Camerer et al favor cooling off periods for big ticket purchases, a policy that might have helped mitigate some of the sub-prime mortgage crisis had it applied in that domain. Whatever you think of such policies they are certainly moderate compared to bans and mandates on one side, and eliminating health inspections on the other.

….Instead of slope-mongering we should evaluate proposals on their merits. (We devote a chapter of Nudge to an evaluation of the choice architecture used in Sweden’s social security experience.) Helping people make better choices, as judged by themselves, is really not a controversial goal, is it?

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