Libertarian Paternalism?
(posted by Angelica)
Interesting review/column from Camilla Cavendish on Nudge, a book advocating for a better world through better defaults:
Nudge is an important addition to the “nanny state/no state” debate. We all know about the failures of state intervention. The number of pupils eating school meals has plummeted, we learnt this week, since ministers backed Jamie Oliver’s campaign. The Irish decision to tax plastic shopping bags has simply boosted sales of binbags (since many people, like me, re-used their shopping bags for rubbish). Nudge gives more insight into why some policies are self-defeating. It also shows that “no state” is not the alternative as often as we think.
The authors believe that people should be as free as possible to make choices, but that policy should coax people away from the worst. They call this “libertarian paternalism”, a deliberate oxymoron, which the book tries to resolve. Transparency is fundamental to this effort. Citing one study which showed that people were willing to pay twice as much to go to a basketball game if they could pay by credit card not cash, Thaler and Sunstein propose that credit card companies should send annual statements showing exactly what the true costs of the card are. They want people to understand their own weaknesses better.
The book is not just a useful insight into the lazy shortcuts that I now realise plague much of my own thinking. It is also a political manifesto. Both authors have strong connections to Barack Obama: it will therefore raise the hopes of those who would like to think of Senator Obama as less of a statist than he is painted. We know that Mr Obama disliked the levels of coercion involved in Hillary Clinton’s plan to force people to buy health insurance. He described his preference for giving people cheaper insurance options as a key philosophical difference between the two campaigns. We also know that he is interested in transparency: he authored a Bill, with a Republican senator, to create a publicly searchable database of federal spending. It would be wrong to overstate his embrace of libertarian paternalism, but it gives a new filter through which to watch him.
I can’t promise that Nudge will make you a better person. If you are out to manipulate people, it may be positively corrupting. And that’s the worry, really. What is to stop politicians going from nudge to shove? I support making organ donations an “opt-out”, rather than an “opt-in”, a classic nudge supported in this book. I now realise that my position could be construed as an abuse of the simply enormous power of inertia.
I haven’t read the book, but I really like this idea of better defaults a lot. Jim recently had a post up about how spontaneous order does not necessarily lead to good outcomes. Libertarians often take that for granted, but it’s always struck me as wishful thinking. But they are also right in that when the government tries to impose a better outcome, they often end up making things worse.
If there is a way we can generally shape societal outcomes without compromising individual’s ability to choose, I’m all for it.
Tags: ideas, libertarianism, paternalism
May 23rd, 2008 at 7:52 am
Credit cards have always been one of those things I never quite got, and I’ve come to the conclusion it is because they don’t make any sense - ban them altogether! Its simple. All card payments should come direct from your account. If you need a credit, get a loan.
The credit card business model is essentially trying to fool the owner into servicing an extortionate loan. I mean some capitalism is dubious, but they’ve already foregone any attempt to create net value with their product.
How are credit cars better than loans + debit cards + fees for using those debit cards? Should governments intervene?
States are going to be most effective with simple polices. That can be well scrutinized, and easy to enforce. Furthermore when deciding whether to intervene in a market (although not all markets are so easily defined) a very simple measure of whether its a well behaved market is whether the sale price is close to the marginal cost. Usually you worry worry in the sense that the sale price is too high, but in this case its because they are not charging anything at all (this is normal at least in the UK). Forcing fees on to shops and therefore other shoppers via marketpower and fooling the careless into going overdrawn.
I’m sure a ban is a long way from most policy makers minds, presumably because it is radical, but I scarcely see how that is the case as debit cards do everything credit cards do, or at least they would do. Normal people will just be better off. Where as mandating annual statements sounds like hopeless policy flanel to me.
May 23rd, 2008 at 9:26 am
Link to review?
May 23rd, 2008 at 11:41 am
This may seem like nit-picking on my part, and I certainly can’t speak for RadGeek or anyone else, BUT…
There’s an implication or “shade of meaning” that I might take issue with in:
“…spontaneous order does not necessarily lead to good outcomes.”
…that’s best clarified by noting carefully the distinction RadGeek points out between “spontaneous” in the sense of “unplanned” versus “spontaneous” in the sense of “voluntary”.
Patriarchy has some unplanned aspects (although some contribute to it consciously and quite deliberately). It’s not wholly voluntary, though, in that much of it (as a system of oppression) is involuntarily imposed on others by means of coercive state violence used to limit their choices, such as how they might respond to patriarchy. That is to say, if the choices of others were completely free, at least some could and would demonstrably make choices subversive of the involuntarily imposed system - because they don’t like it.
Thus, depending on what sense of the word “spontaneous” is being used, one could say that patriarchy is “to spontaneous” or “not spontaneous enough”.
The above is comparable to what is said about economics by left libertarian free-marketeers. Where some might see corporatism as to much latitude given to Big Business by an otherwise benevolent state regulatory apparatus, the left libertarian sees unfair privilege for Big Business based on artificially limiting the choices of the working class, consumers and small biz entrepreneurs by means of coercive state threats (imposed by a state regulatory apparatus).
Perhaps I read to much into things, but you seem to think that what RadGeek had to say is somehow reason to pragmatically temper one’s commitment to working towards a wholly voluntary social order — a much needed injection of social democratic realism into the otherwise fanciful world of the libertarian dreamer.
That would be a mistake.
May 23rd, 2008 at 3:41 pm
I’ve actually been following this debate for a while.
The reasons the new paternalists give for an old idea is that even by the judgement of those being “nudged”, they have made a wrong decision. That is, psychology has shown that the temporal dimension to people’s decisions create dissonance within their own “choice set”. People who chain smoke at 25 very much agree that they shouldn’t have when they’re 55. The new paternalists want to help align that current choice with the future choice. But that’s only one angle to the libertarian paternalism discussion. There’s also that of the role of defaults, discussed above, and other cognitive biases such as framing effects.
A good criticism of this comes from Will Wilkinson, who claims that libertarian paternalists commit the “fallacy of asymmetry”. They note that ordinary people have cognitive biases, but somehow forget that this applies to people in government too, those who craft policy.
Additionally, there’s this from David Gordon:
Libertarians need not deny obvious facts. People often do regret their choices. Those who find convincing the explanations of bad choices put forward by Thaler and Sunstein are free to make arrangements with others that will alleviate these problems. If you think that sudden impulses when confronted with tempting food will lead you to fall off your diet, you may contract with a friend to forfeit money should you fail to meet certain weight requirements. But, in a free society, doing so is up to you; the state may not nudge you into this sort of contract. The authors might answer that decisions on whether to restrict one’s future choices are themselves less than fully rational and informed; but to say this is merely to reiterate their original argument, and the libertarian rejoinder to it is unchanged. Also, they do not present any evidence that choices of this kind are flawed by their criteria.
I’m also critical of the idea that decisions should have to somehow justify themselves via all relevant data pertaining to them. That is implilcit throughout NUDGE, according to Gordon.
For public choice reasons I’m skeptical that this isn’t another way for priveleged interests to get what they want - “hey, ‘nudge’ them over my way!” - but I admit it’s not the same ol’ religious or ‘experts say’ kind of paternalism of yesteryear.
May 23rd, 2008 at 4:19 pm
UPDATE:
Will Wilkinson has a post today wherein he claims that the NUDGE authors did not commit the fallacy of asymmetry. So I take that back. It may be a good argument against regular paternalists, but not Sunstein and Thaler apparently.