Libertarian Paternalism Redux

by Will Wilkinson on November 14, 2005

I just looked at Sunstein & Thaler’s paper again, and, again, it strikes me as amazingly empty of content. The entire rhetorical effect of the paper comes from its abuse of language.

The pivot of the paper is to call any instance of institutional choice based on concern for the welfare of the people who will live within the institution “paternalism.” So, if you prefer institutions or sets of rules that would tend to make everyone involved better off than they would be under the alternatives, you’re in favor of “paternalism.” Which is, of course, a position that everyone has agreed with pretty much forever. Because “paternalism” is a term that actually has content narrower than “in favor of a good set of rules,” that can’t be what paternalism is.

Usually, paternalism is thought of as essentially involving interference with someone’s liberty or autonomy for their own good. As Dan Klein notes in his totally dispositive reply to Sunstein & Thaler, a restaurant manager’s putting the dessert bar at the back isn’t intereference with autonomy. Nor is eliminating the dessert bar. A guy who wants to order a burger at a sushi place isn’t having his autonomy meddled with, even if sushi is better for him.

We call the Founding Fathers “fathers” because the republic is their progeny, not because the separation of powers is good for us. Vernon Smith, to take another example, has studied experimentally how different forms of market institutions result in different outcomes (even if formally identical), because of the way actual people actually interact with the set of rules. Is Smith’s program “paternalistic” for promoting the use of market designs that are actually as opposed to notionally efficient? Is an improvement in the floor rules of the Chicago Mercantile Exhchange “paternalistic” because it makes the trader and his principals better off? Of course not.

And, of course, when somebody exercises their liberty, the action isn’t therefore “libertarian.” Libertarianism is a poltiical philosophy that is about the minimization of state coercion. When I choose vanilla over chocolate, that’s not “libertarian ice cream flavor selection.” And when a restaurant manager, or human relations director, excercises the legitimate powers of her role in an organization, and decides where to put the salad bar, or decides how to structure the benefits package, there’s nothing specifically “libertarian” about that, either. None of S&T’s example of libertarian paternalism are examples of libertarianism or paternalism. And otherwise, the paper is more or less empty. (”If you’re picking rules, pick good ones!”) So you’d think that would be a problem.

I’m not saying anything Klein doesn’t. So, if you haven’t read his paper, do. And read his rejoinder to Sunstein’s evasively glib reply. As Klein points out, it’s part of Sunstein’s long-term project is to abuse the meanings of words so that his opponents’ positions come to appear conceptually impossible.

So, don’t let people get away with calling an employer’s choice to set their benefit or investment defaults one way rather than another “libertarian paternalism,” since such choices are neither libertarian nor paternalistic. Accuse them instead of making a category error and speaking nonsense. And why not? There is no better way to win friends.

Viewing 5 Comments

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    One thing that wasn't entirely clear in Klein's article was why we should value freedom if we don't effectively pursue our own interests. Klein lists some possible reasons such as "liberty accords people ownership of their story, including their errors and vices, and thereby allows them to learn the contours of action, experience, and consequence." I admit these considerations have some weight. Yet if it's truly the case that individuals are poor at securing their own interests, doesn't the case for paternalism look much better? The studies that S&T; cite are evidence along these lines. So why shouldn't we deny people some liberty in order to better advance their interests?

    What I would like to know is whether this boils down to an empirical question or not. That is, does the case against paternalism depend on empirical issues such as whether people are good at pursuing their interests, whether politicians and bureaucrats are in fact better at pursuing other people's interests than they are themselves, etc?
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    Javier, None of the cases S&T; spoke of involved a denial of liberty.

    Also, S&T; seem to assume that your interest = what a fully informed rational being would choose. But they need to be careful. What is best for a counterfactual being may not be best for a real one. See Tyler Cowen's preference sovereignty paper on this.

    Your question is important. Bureaucrats and politicians are not cognitive psychologists. Even if you established that people were systematically undermining their interests, and that a set of authentically paternalistic rules would help advance them, you need to show that actual political processes, enacted by the same people vulnerable to the the very errors in choice you are trying to correct, would actually implement the corrective rules.
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    I was stunned at first reading the S&T; paper. Do they really see no difference between the government forcing you to do X and your employer requiring it as part of your employment contract?

    Are they actually making such a silly error, or am I misreading them?
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    This post badly misrepresents S&T;'s position. They don't define paternalism as any policy that intends to make people better off. Rather they say any policy that aims to "influence the choices" of people with a view toward making them better off. Their quarrel, and it is a substantive one, is largely with Robbins-inspired revealed preference theory. The authors have substantial work in behavioral economics to back them up.

    S&T; may be willing to respect preference sovereignty. But their point is that libertarians do not and cannot reasonably assume that the choices people make always actually express sovereign preferences. Since we have to make policy choices we should take into account how we can encourage people to choose in line with their soveriengn preferences as objectively as we can know it. The only way to rule this move out as illegitimate is to assume that sovereign preferences = revealed preferences. Even a Cowensque move of arguing that we often really prefer not to take a long-run prudential perspective with respect to every decision (and are really better off for it) does not go this far.

    S&T;'s unwillingness to dichotomize governmental and non-governmental policies (e.g. employers' automatic 401(k) enrollment policies) is also justified. To illustrate, 401(k) programs are (for one thing) incentivised through public tax law and (for another) provide benefits that are a substitute for increased reliance on a government program, Social Security. If we have evidence (I'm not saying that we do) that most people will save more for retirement if incentivised to do so (or required to pay into a public pension system) then the particular decision about whether or not to undertake this policy is essentially the same for 401(k) management as it is for public pension fund management.

    You may say: "But we don't let people opt out of social security." That misses the point. We could do that. And we could also allow management to make 401(k) participation mandatory. The important point is that the decisions are morally the same whether we're talking about government or company management and they have to be made whether by the elected government or the contracting company. Or would the libertarian claim that they are obliged in anti-parternalistic principle to oppose letting employers require pension participation from every employee? Probably they would say that people can choose a company that did not require mandatory pension participation. Well, then its an empirical question how much choice (and how attractive a choice) employees would have. There's no a priori reason to think that we have less choice with government involvement.

    Lastly, the libertarian could say that he's in favor of respecting peoples' preferences to not save for retirement and die or burden other private parties as they age and cannot work. So, he's non paternalistic through and through right? Wrong. Unless he thinks that no other parternalistic force would invervene to influence peoples' choices. Did mutual aid societies not exert paternalism when they encouraged people to join them rather than risk exposure to the risks against which the societies insured.
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    Will says:
    None of the cases S&T; spoke of involved a denial of liberty.

    Ah, but they could. Employees could be forced to contribute to 401(k) plans and the company could choose how the money would be invested. The company could argue that this is because the company knows better than the employees how to invest their money, and most would concede that this is a form of paternalism. Varieties of this argument are made all the time about pensions as well as other issues. The claim is made that people can't handle choice, that they're better off with someone making their choice for them, etc.

    They are responding to this claim by arguing that "paternalism with choice" is superior by capturing the benefits from people who don't feel capable of making choices but still allowing those who want to do their own research and make their own choices to do so. It's a belief that people sometimes want choices to be made for them, and sometimes want to make their own choices, but that different people want to make their own decisions about different issues.

    I've always just thought of it as a crude type of dialectical argument. "Paternalism" is the thesis of having all your choices made for you, "libertarianism" is the antithesis of having to make all your own choices (with no defaults), and, voila, "libertarian paternalism" is their synthesis of "choice with defaults." Isn't that all that they're claiming?
 

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