Saturday, April 10, 2010

Is Nudging more 'paternalism' than 'libertarianism'?

Cass Sunstein and Richard Thaler's popular book "Nudge" has generated a big debate about the utility of "libertarian paternalism (or "new paternalism") in addressing important public policy challenges. Its fundamental premise is based on learnings from behavioural economics which finds that far from being rational, real human beings are subject to cognitive biases, which cause them to make choices inconsistent with their own best interests.

However, in a Cato essay, Glenn Whitman argues that "New Paternalism" is situated on a slippery slope from soft paternalism to hard, all the more so since the "policymakers exhibit the same cognitive biases attributed to the people they’re trying to help". He argues that once the slippery slope risk is counted among the relevant costs, the apparent benefits of "new paternalism" disappears. He also feels that slippery slopes are more likely to occur in the presence of a continuum of choices like that posited by libertarian paternalists on various public policy issues.

He points to Eugene Volokh who claims that people display "small-change tolerance" or a willingness to tolerate changes perceived as relatively small movements from the status quo. Small-change tolerance makes it relatively easy to move, by a series of small changes, a long way down the road to hard paternalism.

Richard Thaler, in his reponse to Glen Whitman, makes the important point that his definition of paternalism is only "if it tries to influence choices in a way that makes choosers better off, as judged by themselves" and not as pre-judged some third party. He also writes that the continuum argument that supposedly inclines the slippery slope towards intrusive paternalism is a sleight of hand since any choice has to be situated somewhere along the continuum. Further, paternalism of some sort is inevitable in many cases. His conclusion is more pertinent, "Slope-mongering is a well-worn political tool used by all sides in the political debate to debunk any idea they oppose."

See also Scott Sumner's support for libertarian paternalism.

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