Tyler instructs all good men to shout Ed Glaeser's new NBER working paper on “Paternalism and Psychology” from the rooftops. I am more than happy to oblige. At a glance, it is clear that this is an important paper. Glaeser stresses a point that Vernon Smith often makes. Sure, folks ain't hyper-rational homo economicus. We make systematic errors in reasoning. But in very many cases, if the price of error goes up, the incidence of error goes down. (We should be less obsessed with the fact that people do make errors and more obsessed with designing market institutions that generate the best kinds of error-reducing feedback.) Because consumers face the costs of their decisions in a way government regulators never do, we should not expect goverment officials, who are subject to the same errors in reasoning, to do an especially good job of guiding our behavior through paternalistic policy.
Additionally, and very importantly, Glaeser notes that expertise in soft paternalistic regulation just is skill at manipulating the beliefs and behaviors of the citizens they are supposed to serve. But the purely altruistic regulator is a chimera. As I emphasize at length in my paper on Social Security as a “noble lie”, the US government has in fact used techniques of manipulation precisely to achieve ideological objectives that could not be achieved through free and open democratic deliberation. There is no reason to believe that nouveau paternalists, armed with the latest behaviorialist research, will resist the temptation to manipulate the public for their own ideological purposes. That may be dangerous. But even if it is not, such programs of manipulation amount to an abandonment of republican ideals of self-government, and undercut precisely those aspects of liberal democracy that are thought to confer legitimacy on government action.
Here is what Glaeser says:
Assume that soft paternalism involved a public education campaign to induce people to think more about the future and make people aware that their own rosy scenarios will not necessarily occur. As Benjamin and Laibson suggest, from the point of view of fighting self-control problems, such a campaign might indeed have beneficial results.
But this public education campaign also offers many degrees of freedom that can be used in other, less benign ways. Perhaps the soft paternalism campaign would warn of inflation, and might suggest that other, less careful political leaders (that is, the opposition party) might print money and devalue nominal dollars. Perhaps the soft paternalism campaign might suggest that the stock market might fall, especially if non-business friendly leaders were elected. Perhaps the government might suggest that investing abroad is particularly perilous, given the unreliability of other countries (especially, say, France). All of these messages might be justifiable, but would also be pernicious.
. . . The commotion surrounding this expenditure [paying Armstrong Williams for pro-NCLB columns] should remind us that the ability of incumbents to ensure victory through the powers of office, which include the bully pulpit, is a constant risk in democracy. Advocating soft paternalism is akin to advocating an increased role of the incumbent government as an agent of persuasion. Given how attractive it is to use persuasion for political advantage, an increased investment in soft paternalism seems to carry great risks.
It is increasingly clear to me that paternalism just can't be squared with a cosmopolitan liberalism. The kind of soft-paternalism Glaeser discusses depends on the assumption that there is a conception of value that is so widely shared that government manipulation meant to make people better off according to that standard would not be suspect, even if government manipulation was OK. But there is no such standard. So, in practice, soft paternalism requires the imposition of a substantive conception of value that some reasonable citizens reject. Additionally, it assumes that there is some way by which government agents could be legitimately authorized to manipulate their fellow citizens.
I think paternalist often have the Fed in the back of their minds–an “independent” bureaucracy manned by “experts.” Public health folks would like to see an “independent” public health bureacracy manned by experts that is authorized to set health policy. The difficulty comes in identifying “experts” according to any kind of neutral metric. The crazy “true cost economics” people, I'm sure, don't think Ben Bernanke's really an expert in economic truth. Public health is deeply moralized domain, turning on substantive questions about the value of health relative to competing values. I think we'd all see the problem if someone proposed to establish an “independent” panel of moral experts to set policy for all of us on matters of moral hygiene. (“Experts on an independent government agency today reported that a 'culture of life' is necessary for any sustainable moral order . . .”)
I think you can detect in some (surely not all or even most) behavioralist work a drive to establish that there is a need for manipulation, that there is a science that tells us how to do it, and that there are experts who are available to do it for us. Glaeser does us an important service by showing us why, on their own intellectual grounds, we should not trust them to manage our lives for us.