When Nudging Isn't Enough

In a New York Times op-ed, George Loewenstein and Peter Ubel argue that policymakers are relying too heavily on behavioral economics, when traditional -- that is, rational choice -- economics would often serve them better.

On cursory reading, you might think this op-ed repudiates the facile use of behavioral economics to guide policy. But in fact, the authors encourage us to go further down that road. They do so by questioning the efficacy of behavioral policies while implicitly accepting behavioral welfare analysis.

Consider, for instance, their position on the “obesity epidemic.” They begin by diminishing the impact of New York’s nudge-like mandate on restaurants to post calories in restaurants, while nevertheless supporting it:

Calorie labeling is a good thing; dieters should know more about the foods they are eating. But studies of New York City’s attempt at calorie posting have found that it has had little impact on dieters’ choices.

Obesity isn’t a result of a lack of information; instead, economists argue that rising levels of obesity can be traced to falling food prices, especially for unhealthy processed foods.

Aha! So it’s just the law of demand, a prediction of traditional rational-choice models. Do Loewenstein and Ubel conclude that consumers are rationally choosing greater girth in the face of lower prices (and, I might add, superior healthcare), and therefore recommend leaving them alone? Let’s see:

To combat the epidemic effectively, then, we need to change the relative price of healthful and unhealthful food —- for example, we need to stop subsidizing corn, thereby raising the price of high fructose corn syrup used in sodas, and we also need to consider taxes on unhealthful foods.

In other words, Loewenstein and Ubel remain convinced that consumers are making poor choices that require government correction. If nudges don’t work, then shoves may be warranted.

(Removing corn-syrup subsidies could indeed make consumers better off, according to the traditional model, because doing so would eliminate the inefficiency resulting from a distorted price ratio. But for the very same reason, a tax on unhealthful foods would make consumers worse off. Notice that Loewenstein and Ubel see no important difference between removing a subsidy and imposing a tax.)

The pattern repeats through the rest of the op-ed. If gallons-per-mile laws don’t induce people to choose different vehicles, then we need higher gas taxes. If telling people how much electricity their neighbors use doesn’t cause them to turn out the lights, then we need a carbon tax. To be fair, these cases may involve genuine externalities -- which are recognized as a problem in traditional economics -- rather than the “internalities” of behavioral economics. But Loewenstein and Ubel don’t mention that distinction. The behavioral goals of policy are taken as given; only the means get scrutiny.

In our first paper on paternalist slopes, Mario Rizzo and I warned about precisely this kind of process. When a policy is enacted to achieve a specific goal and then fails to achieve it, further policies are justified on grounds of achieving the goal that “we” have already agreed upon. In Loewenstein and Ubel’s op-ed, I believe our prediction is vindicated.

[Cross-posted at ThinkMarkets.]

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New Paternalism: Odds & Ends

The Cato Unbound discussion on new paternalism has come to a close, but I want to address a few loose ends that came up during the exchange.

The Demand for Evidence

Richard Thaler has demanded empirical evidence that the new paternalism has led to slippery slopes. Given that the new paternalism is a relatively new phenomenon, I certainly don’t claim that the slope has already occurred.

I do claim that slippery slopes are real, that slopes are most likely when certain features are present, and the new paternalism has many of those dangerous features.

Historically, there can be little doubt as to the existence of slippery slopes. Examples that came up during the Cato Unbound forum included the run-up to Prohibition, the escalation of the drug war, and the gradual encroachment of smoking restrictions. I believe an honest examination of other, non-paternalist domains yields similar conclusions. For instance, after passage of the 16th Amendment, the vast majority of people paid no income tax at all, and the top marginal tax rate was only 7%. We all know how that turned out. A much more complex story could be told about early interventions in healthcare that laid the groundwork for more extensive intervention later.

For examples more closely related to the new paternalism, consider two stories David D. Friedman relates on his blog. Both involve a college whose supposedly optional contributions to certain causes (a fund for environmental projects and one of Ralph Nader’s PIRGs) became, in the process of implementation, de facto mandates. I don’t know whether the college in question is private, but since there is competition among colleges both public and private, I’m not overly concerned about things getting far out of hand. Nevertheless, the process Friedman describes is illustrative:

But the people constructing the choice architecture know what result they want to get, they believe they are doing good and so not constrained by what they themselves would consider proper principles of morality and honesty in a commercial context, so it is very easy to make the ‘wrong’ choice more and more difficult and obscure until what is optional in theory becomes mandatory in practice.

Put that process in a political context, and there’s good reason to be worried after all.

Other Goals

New paternalist techniques can be used for purposes other than helping people “by their own standards.” Thaler offers the example of organ donation: by defaulting people into donor registration, or at least forcing them to choose explicitly one way or the other, it may be possible to increase organ donations. Other examples, such as inducing lower energy usage, appear frequently in Nudge.

During the Cato Unbound discussion, I largely ignored these examples because I considered them off-topic. Paternalism is about changing your behavior for your own good, not the good of others, right? But now I see the connection. The process starts with the (possibly correct) assumption that some people already want to help some good cause, and all they need is a little nudge to do it. Ostensibly, then, the goal is still making people better off by their own standards. From there, the slide is quick and almost unnoticeable. Is the new policy’s goal to help people better satisfy their own preferences, which might happen to include supporting a good cause? Or is the goal simply to advance that cause?

In the comments to a previous post on Agoraphilia, Gil Milbauer reports that his Washington state driver’s license renewal includes “a $5 ‘donation’ to state parks that I have to deduct from the total in order to avoid paying.” I have to agree with Gil’s assessment: “This opt out gimmick was not a reasonable attempt to help people satisfy their actual preferences. It's a way to scam them out of money, and that’s how I expect most uses of these techniques to be used.”

The concern, then, is that new paternalism will provide justificatory cover for a panoply of interventions that eventually take on a life of their own, fully unmoored from the “by their own standards” goal.

A Silver Lining for Liberty?

In the wider blogosphere, some libertarians ask whether the new paternalism has the potential to improve liberty in some domains by rolling back harder paternalism. (Julian Sanchez expresses this hope more positively, Bryan Caplan more negatively.)

In Nudge, Thaler and Sunstein do, in fact, support a handful of liberty-improving proposals, and for this they should be lauded. Nevertheless, if you consider the new paternalist literature as a whole, you’ll find the balance is heavily on the side of greater intervention. Most new paternalist authors simply don’t acknowledge liberty-improving possibilities at all. Even in Nudge, Sunstein & Thaler don’t go as far as (say) pushing to repeal the prohibition of drugs or prostitution and replace it with knowing-and-voluntary waivers. Their liberty-improving proposals are more modest: privatizing marriage, allowing school choice, and (maybe) privatizing Social Security.

I think the reasons for the imbalance in libertarian paternalism are clear enough. When it comes to liberty-improving policy changes, it’s the “libertarian” that does most of the work. When it comes to liberty-diminishing policy changes, it’s the “paternalism” that does the work.

To put it another way, what self-described libertarian ever needed paternalism (or behavioral economics) to think of liberty-improving proposals? Libertarians have supported school choice and Social Security privatization for literally decades. David Boaz called for privatizing marriage at least 13 years ago (and I remember discussing the idea with him years earlier). Libertarians have long sought ways to weaken the drug war short of full-blown legalization, such as ending mandatory minimum sentences and legalizing marijuana for medical use.

The motivation behind such proposals has, in general, been to assuage the fears of those who think a sudden leap to laissez-faire would result in a hard, painful landing. People unaccustomed to a certain kind of liberty may lack the personal and social tools to cope with it (a result of the “unlearning” effect that is one argument against paternalist laws), so some hand-holding may be required. Now behavioral economists are offering us a new set of tools that may help us better craft these intermediate policies.

That’s great. But unfortunately, their liberty-improving suggestions have been offered up as a package deal. That package includes an awful lot of unnecessary, and I think damaging, baggage. When the rubber of new paternalism hits the road of real politics -- where numerous processes support expanding intervention while few support rollback -- I predict the balance liberty-diminishing to liberty-improving policies will become increasingly lopsided.

(Cross-posted at ThinkMarkets.)

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Rejoinders at Cato Unbound

At Cato Unbound, I've replied to Richard Thaler here, and to Jonathan Klick here. My reply to Shane Frederick should go up tomorrow.

UPDATE: My reply to Frederick is here.

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Klick and Frederick Responses

Jonathan Klick and Shane Frederick have now posted their responses. I am now at liberty to respond to all three responses, which I plan to do by today or early tomorrow.

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Thaler's Response

New paternalist Richard Thaler has posted his response to my essay on Cato Unbound. I won't be posting a reply until after all three respondents have had their say.

UPDATE, 4/8/10: Argh. Waiting is so hard.

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Self-Promotion: Me in Cato Unbound

I wrote the lead essay in this month's Cato Unbound. The subject is "Slippery Slopes and the New Paternalism." A familiar topic to readers of this blog -- but this time I was forced to stay under a word limit, so maybe it will be more accessible. Response essays from Richard Thaler, Jonathan Klick, and Shane Frederick will arrive later this week, so stay tuned.

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The Knowledge Problem of New Paternalism

Mario Rizzo and I have recently published another article on the new paternalism, titled "The Knowledge Problem of New Paternalism," in BYU Law Review. The article lacks an abstract, but here's a lightly edited portion of the introduction:

The “new paternalism” spawned by behavioral economics faces a severe knowledge problem akin to the knowledge problem that Friedrich Hayek argued afflicts centrally-planned economies. If well-meaning policymakers possess all the relevant information about individuals’ true preferences, their cognitive biases, and the choice contexts in which they manifest themselves, then policymakers could potentially implement paternalist policies that improve the welfare of individuals by their own standards. But lacking such information, we cannot conclude that actual paternalism will make their decisions better; under a wide range of circumstances, it will even make them worse. New paternalists have not taken the knowledge problems that are evident from the underlying behavioral and economic research seriously enough.

This article should be taken as a companion to our previous article, "Little Brother Is Watching You: New Paternalism on the Slippery Slopes" -- which I've promoted with a series of excerpts on this website. The two papers draw on many of the same aspects (and flaws) of the new paternalist literature, but with different critiques. "Little Brother" emphasizes the vulnerability of new paternalist laws to expansion, while "Knowledge Problem" emphasizes the high level of knowledge required for such laws to achieve their ostensible goals.

There is another important link between the two articles: the knowledge problem can exacerbate the slippery slope problem. Recall that the goal of new paternalism is to make targeted people better off by their own standards or according to their own preferences. But when government planners go about crafting policy, they will lack the necessary knowledge of targeted people's preferences. As a result, they will tend to rely instead on their own preferences, or those of other interested parties, instead. That is the beginning of a slippery slope toward implementing their own preferences in other ways as well.

Cross-posted at ThinkMarkets.

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New Paternalism on the Slippery Slopes, Part 11: Avoiding Paternalist Slopes

This will be the final installment in my series of excerpts from Mario’s and my article on the slippery-slope potential of new paternalism. The comments on the posts have been minimal, so I’m uncertain how helpful this series has been. Since I’m considering doing the same with a closely related article Mario and I have just published, please let us know what you think.

In the final section of the paper, we offer a few suggestions about how to resist the slippery-slope tendencies of new paternalism (p. 737-739):

How, then, might we protect ourselves against paternalist slopes? We have three recommendations, addressed both to the new paternalists themselves and to those who might be persuaded by them. These recommendations are intended to lower the probability of adopting new paternalist policies to begin with, but also to help resist more intrusive policies after initial policies have been adopted.

1. Have Reasonable Expectations of Decisionmakers

One lesson of behavioral economics is that we cannot reasonably expect decisionmakers to carefully consider the full ramifications of their choices in light of the best available evidence. Instead, they economize on information by using choice heuristics, and they sometimes myopically focus on present and concrete problems while ignoring more distant and abstract ones. This is no less true of public decisionmakers (including voters, politicians, judges, bureaucrats, experts, and rent-seekers) than it is of private citizens. Indeed, the problem is likely worse for public decisionmakers, because they lack the incentives to discover and control their own cognitive limitations. Private decisionmakers at least face the costs and benefits of their own mistakes, and thus have an incentive to correct them.

It is therefore insufficient to ask policymakers to carefully weigh the costs and benefits of each new paternalist proposal. The “careful, cautious, and disciplined approach” advocated by Camerer and coauthors is rather unlikely to guide real-world policy. We should not expect policymakers to weigh all the economic, scientific, and psychological evidence objectively, to stand on nuanced distinctions, and to adopt policies that carefully target just those people who need help most. We should expect policies to be blunt instruments.

2. Reject the Paternalism-generating Framework

The new paternalists say that the framing of problems can affect decisions by emphasizing certain aspects of a situation and downplaying others. As we have argued earlier (see especially Section V.C), the new paternalists themselves have framed the public-policy debate in a manner that emphasizes opportunities for intervention while downplaying or ignoring private alternatives. Adopting that framework increases our vulnerability to slippery slopes.

In contrast to this paternalism-generating framework, we recommend a slope-resisting framework—one that emphasizes the limitations of public policy and the potential for private solutions. In this alternative framework, both private and public decisionmakers are understood as having essentially the same cognitive defects; they also have various tools for self-correction. For private decisionmakers, the tools include resolutions and commitments, conscious construction of their environment, and voluntary submission to social controls from third parties. For public decisionmakers, the tools include procedural, substantive, and attitudinal limitations on the scope and extent of government action.

3. Maintain Important Distinctions

Slippery slopes, including paternalist ones, can sometimes be resisted by standing on easily enforceable bright-line rules. One such bright-line rule is the distinction between public and private decision-making. Another is the distinction between coercive and non-coercive intervention. John Stuart Mill enunciated these distinctions in terms of the Harm Principle, which says that restriction of individual choice is justified only on grounds of harm to others. He argued:

[The individual] cannot rightfully be compelled to do or forbear . . . because, in the opinions of others, to do so would be wise, or even right. These are good reasons for remonstrating with him, or reasoning with him, or persuading him, or entreating him, but not for compelling him, or visiting him with any evil in case he do otherwise.

Of course, Mill understood, and we agree, that if a person harms himself and in so doing violates his legal responsibilities to others, he ought to face the relevant legal penalties. But the State has no legitimate interest that can be advanced through coercion strictly in the prevention of harm to oneself. To the extent that policy adheres to this principle, the paternalist slope will obviously never get started.

We do not contend that a single violation of Mill’s Harm Principle will send us hurtling toward heavy-handed paternalism in all areas of life; if that were true, we would already be doomed. We do contend that increasing numbers of such interventions, passed under the guise of helping people do better by their own preferences, and without any recognition of the lines being crossed, will tend to create momentum toward further interventions. Keeping the Harm Principle clearly in mind—and recognizing any given restriction on autonomy (however small) for what it is—will, we hope, retard movement down the slope.

To some extent—especially in Sunstein and Thaler’s book Nudge and Daniel Ariely’s book Predictably Irrational—the new paternalists have presented their position as self-help advice. That is, they offer behavioral economic insights into achieving better self-control and personal management. Under the Harm Principle, such efforts are perfectly unobjectionable. They fall in Mill’s category of remonstration, reasoning, persuasion, and entreaty.

The problem, as we have argued, is that the new paternalists do not clearly distinguish private, voluntary efforts from public, mandatory ones. Instead, they deliberately construct a continuum from soft to hard paternalism (see, especially, Section III.B). They define freedom of choice in terms of the cost of exercising a given option, without regard to whether the costs are imposed coercively or by the voluntary choice of resource owners. In this way, they effectively erase a reasonably bright-line rule—the distinction between private action and state coercion—and purposely replace it with a gradient. They also regularly present public and private, and coercive and non-coercive, paternalistic activities alongside each other, without recognizing any important distinction between them, and often simply ignoring the coercive aspects of their policies (e.g., the way in which allegedly pro-employee policies limit the freedom of the employer).

We suspect the new paternalists resist bright-line rules and encourage gradients because of an unavoidable feature of rules: they nearly always err by both over- and under-inclusion. A rule that allows private paternalism but not public paternalism would admit some varieties of paternalism that new paternalists might oppose, such as Walmart’s restrictions on what sort of movies it will stock; and it would disallow some varieties of paternalism they favor, such as mandatory terms in employment contracts. That is, however, the price of having rules. The compensating advantage of rules (or at least one advantage) is providing a bulwark against the problems of vagueness, including the threat of slippery slopes.

Bernard Williams’s distinction between logical and effective distinctions is frustrating, because it means we cannot always rely on the normative distinctions that make most sense to us. But it is also enabling, because it reveals that some distinctions may be useful—that is, effective—without being strictly logical. Thus, even if the new paternalists do not think the public–private and coercive–non-coercive distinctions track their ideal notions of right and wrong, such distinctions might nevertheless be practical as guides for law and policy.

(As usual, full citations are available in the full paper. Cross-posted at ThinkMarkets.)

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New Paternalism on the Slippery Slopes, Part 10: Rejoinder to Objections

Some new paternalists have recognized the slippery-slope objections to their approach, and they have made some effort to respond. But we find the responses insufficient (p. 735-737):

In their book Nudge, Sunstein and Thaler recognize the slippery-slope objections to their policies, and offer three responses. We reply to their responses here.

Sunstein and Thaler’s first response is that the slippery-slope argument “ducks the question of whether our proposals have merit in and of themselves.” They say if the initial interventions are worthwhile, then we should “make progress on those, and do whatever it takes to pour sand on the slope.”

Our claim is not that slippery slopes are the only objection to the new paternalism. Various other objections have also been made (and referenced in the introduction to this Article). The slippery slope is an additional argument against the new paternalism.

The idea that we should “make progress” on the initial interventions, and then do what we can to “pour sand” on the slope, is a variant of the usual (and, we think, hackneyed) response to all slippery-slope arguments: that we can simply “do the right thing now, and resist doing the wrong thing later.” But if the slope argument is correct, there is a causal (albeit probabilistic) connection between initial interventions and later ones. Saying we should move forward on those initial interventions is akin to saying we should do something because it promises present benefits, while ignoring the potential costs in the future. Ironically, it is just this sort of error in private decision-making that most new paternalists think cries out for correction. The slope risk must be counted among the costs of the initial intervention.

Furthermore, how should we “pour sand” on the slope? Aside from invoking the term “libertarian,” Sunstein and Thaler offer no suggestions. We do, in the remainder of this Article. Our suggestions involve, among other things, rejecting their paternalism-generating framework.

Sunstein and Thaler’s second response is that their “libertarian condition” limits the steepness of the slope. They say their proposals are “emphatically designed to retain freedom of choice.” In short, they are relying on the “libertarian” part of libertarian paternalism to do the work of resisting paternalist slopes. But as we have seen (see especially Section III.B), their redefinition of “libertarian” actually encourages the slope. They recognize no sharp line between libertarian and non-libertarian policies, just a smooth gradient. And also as we have seen, their proposals do not, in fact, preserve freedom of choice in all cases. They have proposed or supported numerous policies (such as mandatory time-and-a-half overtime pay and cooling-off periods) that rule out certain options altogether, all under the rubric of libertarian paternalism.

It is also simply implausible to think the mere word “libertarian” will create a bulwark against further interventions. Even if Sunstein and Thaler themselves genuinely care about freedom of choice, they cannot control the application and transformation of their own ideas. They will not be in charge of all future legislation. As we have emphasized throughout this Article (see especially Sections II and IV), the creation of policy is a social process that involves multiple decisionmakers, who may not share their alleged concern with freedom of choice.

Sunstein and Thaler’s third response is to insist that in many situations, “some kind of nudge is inevitable,” because there will always be default rules and contexts that frame choices in certain ways.

It is one thing to have defaults, quite another to choose them with paternalist goals in mind. Traditional contract law chooses defaults in line with the customary expectations of the parties in question. Thus the new paternalists advocate overruling customary expectations so as to privilege what they (the experts) believe are better decisions. They would purposely shift transaction costs to those who wish to deviate from the experts’ preferred outcomes.

If new paternalism were truly inevitable, it would hardly be necessary to argue for it. Clearly, Sunstein and Thaler believe they are offering something beyond the inevitable. Moreover, they present their position in a manner designed to ease the transition from the inevitable to the more intrusive. They explicitly reject any sharp line between changing defaults and raising costs in other ways. Again, their very own next step, in discussing default rules, is to suggest raising the cost of exercising exit options, and then to endorse eliminating some options altogether.

To these points, I would add that even if you agree that paternalist selection of default rules is needed, the new paternalist approach advocates much, much more. The new paternalists must defend their whole position, not just the most defensible part.

(As usual, full citations are available in the full paper. Cross-posted at ThinkMarkets.)

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New Paternalism on the Slippery Slopes, Part 9: Framing in Public Policy

And after another long interruption, I’m finally going to finish my series of excerpts from Mario Rizzo’s and my article, “Little Brother Is Watching You: New Paternalism on the Slippery Slopes.” There are three more posts, including this one.

As discussed in an earlier post, the new paternalists use the notion of framing -- that is, the idea that people’s choices respond to seemingly irrelevant differences in how the choice situation is presented -- to justify a variety of policy interventions. But what happens when we apply the notion of framing to the choices of the policymakers themselves? There is a natural human tendency to frame decisions narrowly “because immediate and concrete effects are more psychologically accessible than remote and abstract ones” (p. 726), and this tendency has worrisome implications for public policy. Specifically, paternalist policy-makers will tend to ignore the indirect and longer-term and implications of their policy choices (p. 726-727):

Narrow framing leads decisionmakers to consider choice-options simply as they arise, framed by present circumstances, the crisis of the moment, and perhaps the activities of rent-seekers. Their actions will often be ad hoc solutions to particular problems, and the narrow framing produces a tendency not to see important interrelationships. In Kahneman’s words again, “[t]he decision of whether or not to accept a gamble is normally considered as a response to a single opportunity, not as an occasion to apply a general policy.” For example, the interaction of biases may be ignored. This means the problem is not simply one of discounting long-term effects, but also of discounting effects that occur through longer and more complex chains of causality.

Narrow framing will enhance every variety of slope we have discussed so far, because all slopes occur in part from a failure to take a global perspective on policy. Altered incentives slopes, for instance, occur because policymakers tend to focus on one issue at a time—in this case, a single cognitive or behavioral bias, or a single means of correcting a bias. Simplification and distortion slopes occur because policymakers enact policies to address a specific problem, while failing to see how the new policy could empower experts and rent-seekers to advance less desirable policies in the future. To the extent that narrow framing inhibits policymakers’ awareness of such possibilities, it exacerbates the slippery-slope risk.

Furthermore, we argue that the new paternalist framework itself frames policy choices in a manner that encourages ever greater intervention (p. 727-728):

As presented in the behavioral literature, framing does not result from the deliberate choices of the decisionmaker; instead, it is an aspect of decision-making that is passively accepted. It is the result of unconscious processes whereby the conscious mind sees options or events with particular features accentuated; framing alters “the relative salience of different aspects of the problem.” Here we suggest that the particular way in which the new paternalists (most notably Camerer and coauthors and Sunstein and Thaler) have framed the issue of paternalism gives rise to an inherently expansionist dynamic. If irrational or boundedly rational policymakers accept the new paternalists’ approach, they will have accepted a paternalism-generating framework. Thus future policymakers, or the same policymakers in future situations, will tend to see more opportunities for paternalistic intervention than they otherwise would.

The decisions of targets are not intrinsically different from those of the policymakers. Framing is thus important in the policy context as well. The public-policy framework produced by the new paternalists directs policymakers’ attention to intrapersonal preference conflicts, that is, conflicts between operative preferences (choosing the sugary dessert) and deeper or more important preferences (maintaining good health). The framework then labels as paternalism any plan that alters the decision problem with the intent of improving welfare.

Therefore, if there is to be any solution to the target’s problem, paternalism is inevitable. Thus, the decision problem is framed not as “whether or not paternalism is desirable,” but as “what form of paternalism shall we have?” Sunstein and Thaler, for example, urge us to “abandon the less interesting question of whether to be paternalistic or not, and turn to the more constructive question of how to choose among the possible choice-influencing options.”

To summarize (p. 729):

Therefore, the Sunstein and Thaler approach is expansive not only in the sense that adoption of specific policies today will make the adoption of further, even more interventionist, policies more likely in the future, but also because their basic framework of analysis frames the overall issue as one in which some form of paternalism is “inevitable.” Sunstein and Thaler adopt a paternalism-generating public-policy framework. If policymakers accept this framework, they will be led by the framing to produce more and more paternalistic policies.

(As usual, full citations are available in the full paper. Cross-posted at ThinkMarkets.)

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New Paternalism on the Slippery Slopes, Part 8: Hyperbolic Discounting in Public Policy

As discussed in a previous post in this series, the new paternalists often use the concept of hyperbolic discounting (roughly, excessive impatience) to show that people make systematic errors that could, in principle, be corrected by government intervention. But what if policymakers, too, are prone to hyperbolic discounting? That is the question raised in the next section of the paper (p. 724-725):

Policymakers can have short time horizons for various reasons. They might no longer hold office when future costs and benefits of their policies occur. Insofar as voters have imperfect memories, they might fail to fault policymakers for the ill effects (or credit them with the good effects) of policies they supported. Both of these effects give fully rational policymakers an incentive to discount future consequences.

If policymakers are hyperbolic discounters, there is yet another reason they will tend to discount the future: because they apply especially high rates of discount when some costs or benefits are in the present (or near future).

If so, then just as regular people may succumb to temptations like desserts and cigarettes that promise short-term pleasures, we should expect policymakers to succumb to “policy temptations” that generate short-term political gains. For instance, they might be tempted in election years to adopt policies, such as fiscal stimulus bills and trade restrictions, that will improve their electoral chances while pushing costs into the future.

How does this worsen slippery-slope risks? Slippery-slope events are necessarily sequences that play out over time: policy A’s adoption now leads to policy B’s adoption later, leading to policy C’s adoption yet further in the future. Hyperbolic discounting implies that when policymakers are faced with a policy proposal that is appealing in the present, but which creates a danger of bad policies being adopted further down the line, they will be inclined to focus on the former at the expense of the latter. In short, they will be less cognizant of slippery-slope risks.

For instance, policymakers might be tempted to create a small fat tax on grounds that it will induce marginally “better” eating decisions. Opponents might argue that adopting a small fat tax will create a danger of a larger fat tax in the future, as future policymakers—having already incurred the costs of creating a tax collection mechanism—see the opportunity to increase their tax revenues and fund special-interest constituencies. If they are hyperbolic discounters, the policymakers will not take this risk seriously enough, even if they recognize it as real.

Like hyperbolic discounters in the private sector, policymakers should be expected to exhibit time inconsistency: the tendency to make commitments and promises and then break them when the moment of choice arrives. They might, for instance, repeatedly express a willingness to take measures to fight budget deficits in the future, while nevertheless passing bloated budgets and incurring large debts in the present. Note that critics of slippery-slope arguments will sometimes claim to be able to resist the urge to adopt bad policies in the future. The idea is that we can do the right thing today and resist doing the wrong thing tomorrow. They might, for instance, promise to keep fat taxes relatively low (and linked to scientific evidence about the extent of present-bias). The existence of time inconsistency bears directly on the plausibility of promises to do the right thing in the future even in the face of temptation.

So how can the ill effects of hyperbolic discounting in government be resisted? (p. 725-726):

We have also argued that people afflicted by excessive impatience have various self-debiasing mechanisms at their disposal, such as imposing internal rewards and punishments, structuring their external environment, and enlisting the help of third parties (like families and support groups). Policymakers may have access to similar devices. We suggest that the analogous devices in the policy arena usually take the form of institutional constraints, such as judicial review and constitutional limitations on what areas can be regulated by government. The greater need for external restraints follows from the fact that bad self-governance by a single person primarily affects that person, whereas bad governance by policymakers affects all of those governed. Thus, the individual has a rational incentive to rein in his own irrational impulses, whereas a policymaker’s incentive to do so is attenuated. In other words, policymakers are more likely to exhibit “rational irrationality” about matters of personal choice than are the private citizens who make those choices.

In short, if the new paternalists take the problem of hyperbolic discounting seriously, we ought to hear them arguing for stronger limits on the power of government. Thus far, I haven’t heard them doing so.

(As usual, full citations are available in the full paper. Cross-posted at ThinkMarkets.)

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New Paternalism on the Slippery Slopes, Part 7: The Inevitable Misinterpretation of New Paternalist Arguments

Happy new year! After a holiday-induced hiatus, I’m now resuming the series of excerpts from Mario Rizzo’s and my recently published article, “Little Brother Is Watching You: New Paternalism on the Slippery Slopes.”

A number of our claims in the paper rely on the new paternalists’ arguments (which are largely based in behavioral economics) being misconstrued or misrepresented by other parties such as politicians, bureaucrats, and rent-seekers. We claim such people will often employ simplified, unsophisticated versions of the new paternalists’ arguments when crafting policy. Is this a fair line of criticism? We believe it is (p. 723):

Experts, and more broadly intellectuals like the readers of scientific and law journals, naturally respond to sophisticated argumentation. The complex interaction of multiple justifications is their favored milieu, the drawing of distinctions their stock in trade. Some of the claims of this Part might, therefore, seem anti-intellectual or unfair, because we are discussing the misinterpretation of the new paternalists’ arguments, rather than the new paternalists’ actual arguments. Why can’t the experts simply reject the simplification, distortion, and expansion of their justifications for policy?

The answer is twofold. First, intellectuals cannot always control the development of their own ideas. Many regular people, whose job is not the careful parsing of sophisticated arguments, nevertheless affect the policy process. These regular people include voters, of course, but in varying degrees other public decisionmakers, such as politicians, bureaucrats, and some judges. The point is not that such people are stupid, but that they are rationally ignorant. They act based on simplified versions of arguments because they do not have the time, energy, or motivation to explore the sophisticated versions. In short, simple is easy; complex is hard.

Second, decision-making takes place in a social context. The fact that some people will recognize certain distinctions as relevant does not mean that others will. The decisionmakers who create a policy are not necessarily the people who enforce it, or who interpret it, or who consider extensions of it. We therefore need to keep in mind Bernard Williams’s distinction between “reasonable distinctions” and “effective distinctions.” The former are distinctions for which a reasoned argument can be made, whereas the latter are distinctions that can be defended “as a matter of social or psychological fact.” The social and psychological facts, in a world of rational ignorance, often point toward simplification and even distortion of both theory and fact.

The core of the new paternalists’ position is, put simply, that people make mistakes. If they are right (and surely they are), then they cannot deny or ignore the mistakes that will inevitably be made in the process of translating their policy prescriptions into political reality.

(As usual, full citations are available in the full paper. Cross-posted at ThinkMarkets.)

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New Paternalism on the Slippery Slopes, Part 6: Rent Seekers

As discussed in the previous post, the “experts” in charge of implementing new paternalist policies will have a tendency to simplify their own theories to make them useful for crafting policy. That alone creates slippery-slope potential. But that potential is magnified by the existence of rent-seekers – that is, interest groups whose agenda is to change policy for their own interests. Such interests can be ideological, monetary, or simply personal. In the paper, we illustrate the power of rent-seekers to distort the facts and confuse the debate with two issues: environmental tobacco-smoke (ETS) and obesity. With respect to ETS, however, we have to run off a potential objection: that ETS is not really a paternalist cause at all, because smoke harms non-smokers (p. 714):

We should note that although policies addressing exposure to secondhand smoke (“environmental tobacco smoke” or ETS) are not strictly paternalistic, inasmuch as secondhand smoke can potentially harm bystanders, paternalist arguments have played an important supporting role. Most importantly, many actual and proposed anti-smoking regulations limit the ability of individuals who may not be bothered by smoke to expose themselves voluntarily to secondhand smoke as customers or employees of restaurants and bars. Furthermore, by creating a hostile environment for smokers, the ETS argument easily slides into the paternalistic. Thus, even some ETS arguments must be regarded as partially paternalistic either in intention or merely in effect.

After considering the ways in which ETS claims have been exaggerated, we draw some more general conclusions (p. 715):

The rent-seekers’ motivation for simplifying and distorting is not hard to see. The exaggeration of risks has the direct effect of creating greater public support for the policies they regard as best. It also has the indirect effect of making the cultural environment less hospitable to opposing groups, such as those who wish to smoke. This puts further pressure on individuals to stop smoking because they will find themselves uncomfortable in more and more public spaces. Thus the paternalist net can widen by increasing the number of those who, for self-interested or moralistic reasons, will support more inclusive bans.

And after presenting the similar case of obesity, where the distortion of facts by special interests is also apparent, we observe that rent-seekers can have a variety of motivations (p. 716-717):

As the secondhand smoke and obesity examples [just presented] suggest, rent-seekers with an interest in distorting and simplifying information come in at least two varieties. The first variety is old-style paternalists who believe they know best and do not necessarily care about the underlying preferences of the targets. Traditional temperance and health advocates fall within this category. They sacrifice the preferences of the targets to their own moralistic goals. The second variety is people who stand to benefit economically from the promotion or cessation of some activity. Examples include mutual fund companies that provide savings instruments, weight-loss clinics and programs, and manufacturers of smoking-cessation drugs. Public officials and agencies with an interest in preserving and expanding their domains also fall within this category, as do some individuals in their role as consumers and workers (e.g., non-smoking bar customers who would prefer to have more establishments cater to their tastes).

The larger point is that new paternalists cannot constrain the use of their own arguments in the public-policy debate. Once new paternalists premises are admitted, there is every reason to believe they’ll be used and abused by rent-seekers for purposes the new paternalists themselves would not approve of.

(As usual, full citations are available in the full paper. Cross-posted at ThinkMarkets.)

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New Paternalism on the Slippery Slopes, Part 5: Deference to Authority

Another problem with the new paternalism is that it necessarily involves greater deference to the authority of experts. Here is the basic logic (p. 710):

Substantial deference to authority is inherent in the application of new paternalist ideas to public policy. This is because the complexities, vagueness, and indeterminism of their analysis (previously discussed) raise the costs of decision-making on the part of voters, politicians, and bureaucrats. The locus of effective decision-making will then quite reasonably shift to experts (“authorities”) or to simplifiers of technical ideas who may have agendas of their own. As Eugene Volokh puts it, “The more complicated a question seems, the more likely it is that voters will assume that they can’t figure it out themselves and should therefore defer to the expert judgment of authoritative institutions . . . .” There will thus be a tendency for policy to slide away from the values of the targeted agents themselves toward those of outsiders regarded as authorities. This happens in at least two ways. First, experts simplify their own theories to make them applicable in a policy context. Second, people seeking to advance their own interests will further simplify the theory and distort the facts to suit their purposes.

Of course, some people think deference to experts is only right and proper. But there are specific reasons to resist that conclusion when it comes to paternalist policymaking (p. 711):

Although it may seem as if the shift of effective decision-making to experts is the right thing to do in difficult cases, this is not always true. It is especially unlikely to be true in the case of new paternalist policies. This is because, as we have argued earlier, the underlying standards and information needed to apply those standards and implement policy are fundamentally vague and indeterminate. The experts themselves have, at best, only a tenuous grip on the values of the targeted agents, which limits the direct applicability of their paternalistic theories to policy. Thus, there will be a tendency for the experts to reify their own values, and to simplify their own theories, in order to make more definite policy recommendations.

How have the new paternalists simplified their own theories? Here is one example (p. 712):

The new paternalists claim to have found policy interventions that will make targeted agents better off according to the target agents’ own preferences. What they have in fact found is evidence of internal conflict in the target agents’ preferences, and then they have resolved the conflict in favor of the experts’ preferences. The error in reasoning is subtle enough that the experts themselves have simplified the argument substantially—either because they do not fully understand the argument themselves, or because they do understand the argument but have simplified it for mass consumption.

For examples of how they have done this, see the posts on hyperbolic discounting and context dependence. Continuing:

What creates the slippery-slope potential here is the veneer of scientific objectivity. It is the simplified argument, not the original and more sophisticated one, that becomes reified in policy. Yet, the simplified form of the argument can justify far more than the initial intervention, especially if the experts are appointed to agencies and commissions tasked with implementing it. If simple observations—that people weigh more than they used to, that they don’t save as much as we think they should—are taken as ipso facto evidence of suboptimal choices, then further intervention will surely follow.

The paper offers evidence, from the obesity debate, to show that the new paternalists do in fact take simple facts as evidence of suboptimal choices – even though their own theory indicates that more evidence is required.

(As usual, full citations are available in the full paper. Cross-posted at ThinkMarkets.)

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New Paternalism on the Slippery Slopes, Part 4: Context Dependence

New paternalists have also relied on the notion of context dependence to justify their policies. But as with hyperbolic discounting, they unjustifiably assume the existence of an inconsistency of preferences gives the policymaker license to choose among the inconsistent preferences. That assumption is the paper’s next target (pp. 703-704):

For a variety of decisions, people are subject to what behavioral economists call context-dependence. This means that how they choose among two or more options depends on seemingly irrelevant aspects of how the situation is described. For example, medical patients are more likely to assent to a treatment with a 90% survival rate than one with a 10% death rate, even though these are the same. In this case, people seem to favor “positive” over “negative” framing. People also seem to prefer options framed as the existing or a baseline position; this may be called status-quo bias. Another example of the power of framing is the persistent difference between willingness-to-pay (WTP) and willingness-to-accept (WTA), meaning that people will demand more money to part with an item than they will pay to acquire it, even when the item’s value is a trivial portion of their wealth or income.

The phenomenon of context-dependence underlies various new paternalist proposals. All of Sunstein and Thaler’s proposals for new contractual defaults, for example, rely on the difference between WTP and WTA. Although such defaults leave all contractual options open (at least for the most modest proposals), employees may be less willing to part with a given term (such as guaranteed paid vacation) than to bargain for its inclusion. If there were no difference between WTP and WTA, and if transaction costs were zero, then the realized terms of contract would be the same regardless of the default.

The problem with context-dependence is similar to that of hyperbolic discounting: the new paternalist argument relies on an internal inconsistency to justify intervention. There is no theoretical basis for choosing which behavior represents the individual’s “true” best interest as he sees it. Which better represents a person’s real preferences: what he is willing to pay for something or what he is willing to accept to part with it? There is no theoretically correct answer to this question, as Sunstein and Thaler admit: “If the arrangement of the alternatives has a significant effect on the selections the customers make, then their true ‘preferences’ do not formally exist.”

In the absence of a true underlying preference as the correct standard, what standard should be used? Sunstein and Thaler decline to answer that question: “We are not attempting to say anything controversial about welfare, or to take sides in reasonable disputes about how to understand that term.”

In short, there is no standard provided by behavioral economic theory. The answer to the “what standard” question will depend on policymakers’ own particular notions of welfare and well-being, as well as the weight they attach to autonomy. Notably, behavioral economics does not necessarily place any weight on autonomy, despite Sunstein and Thaler’s obeisance to the value of individual choice. Policymakers who adopt the new paternalists’ approach need not share their belief in choice. The new paternalist paradigm places them on a gradient from policies that only mildly restrict choice to policies that restrict or abolish it.

Additionally, we should realize that the supposedly beneficial default rules that S&T favor, such as a presumption of paid vacation, are not necessarily costless. Wages will adjust to account for the value of additional benefits. Thus, a new default rule does not simply give workers something they lacked before; it gives them something in exchange for losing something else.

(As usual, full citations are available in the full paper. Cross-posted at ThinkMarkets.)

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New Paternalism on the Slippery Slopes, Part 3: Hyperbolic Discounting

New paternalists often rely on the phenomenon of “hyperbolic discounting” to justify their policies. Hyperbolic discounting is difficult to define in a non-mathematical way. It is sometimes summarized as excessive impatience, but that’s an over-simplification. A person with a high-but-consistent rate of time discounting would not be a hyperbolic discounter. What hyperbolic discounting really means is having inconsistent rates of time-discounting. One consequence is that a hyperbolic discounter may exhibit “time inconsistency,” a tendency to make choices and then reverse them. After explaining hyperbolic discounting (in more technical terms that I have here), Mario and I explain how paternalists have made unjustified leaps in their use of the concept (pp. 699-700):

In short, hyperbolic discounting means that people at first make long-term plans for saving or dieting but then, when the time comes to implement these plans, they succumb to the desire for short-term gratification. For the new paternalists, this type of behavior suggests an opening for paternalist intervention or correction. Examples include the previously mentioned proposal to automatically enroll people in savings plans, and to impose a sin tax (on unhealthy foods, cigarettes, and so forth) to provide additional incentive for impatient people to resist their temptations.

New paternalists claim that they are evaluating the observed behavior of the individual in terms of his own normative standard. This appears attractive until we realize that the individual has no unambiguous standard for the appropriate level of time discounting. The analytical “opening” for paternalist policy is created by the existence of an internal inconsistency of choice. But although an inconsistency does create a quandary for traditional rational-choice theory—which assumes that people have internally consistent preferences—it does not provide any grounds for choosing between the inconsistent preferences. The inconsistency of a hyperbolic discounter could be “fixed” by making him uniformly more patient ..., but it could also be “fixed” by making him uniformly less patient...

To craft new paternalist policies, it is necessary to decide the appropriate normative rate of time discounting. This matters because policies must specify the amount of money an individual is automatically signed up to save, the magnitude of a fat tax, etc. Which rate of discount is the correct one? Theory provides no answer, but the new paternalists have not hesitated to side with the more patient one. O’Donoghue and Rabin define “optimal behavior” as “that [which] maximizes long-run well-being,” where long-run well-being is associated with the more patient rate of discount. Gruber and Köszegi “take the agent’s long-run preferences as those relevant for social welfare maximization.”

To put the point slightly differently: the existence of an inconsistency does not give the new paternalists license to resolve that inconsistency however they please.

Hyperbolic discounting is difficult to work with mathematically. For that reason, behavioral economists have often used quasi-hyperbolic discounting instead. While hyperbolic discounting means a person has many (perhaps infinitely many) different rates of time discounting, quasi-hyperbolic discounting means a person has only two: one that applies when comparing any two periods in the future, and one that applies when comparing a present and future period. Once we recognize that real people tend to have a range of time discount rates, the slippery-slope potential becomes clear (p. 702):

Quasi-hyperbolic discounting makes it deceptively simple to choose the “correct” rate of discount, since there appear to be only two options. If real people actually engage in hyperbolic discounting, this implies a gradient or continuum of discount rates over time. If we assume, notwithstanding our earlier objections, that the immediate discount rate is impulsive or ill-considered, which of the longer-term rates is normatively preferable? There is nothing in the logic of new paternalism or behavioral economics that can provide an answer. We are faced with a continuum of normative possibilities. These arguments impel us to the conclusion that among the discount rates revealed in choice or planning behavior, none has a clear claim to normative superiority. Thus, the new paternalist is in a conceptual fog because his underlying standard of evaluation is unspecified. The notion of “excessive impatience” is both theoretically and empirically vague, and that means we have a gradient of possibilities. There is no clear line to resist the gradual creep of higher savings requirements, higher fat taxes, and the like.

Note the connection here to our earlier point, that gradients increase the slippery-slope risk. (As usual, full citations are available in the paper.)

Cross-posted at ThinkMarkets.

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New Paternalism on the Slippery Slopes, Part 2: How New Paternalism Creates Gradients

A key conclusion of the literature on slippery slopes is that they are especially likely in the presence of gradients -- meaning situations in which there is a relatively smooth continuum from one policy to another, and in which it is difficult to draw sharp distinctions. Gradients don’t guarantee slippery slope events, but they increase their probability in the presence of other slope processes.

In “Little Brother,” Mario and I review the literature on gradients and slippery slopes, and then we consider how the new paternalists deliberately frame policy choice in terms of gradients (pp. 693-694):

The new paternalist paradigm, as presented by its leading advocates, relies on discarding sharp distinctions in favor of gradients. Specifically, they reject standard distinctions between choice and coercion and between public and private action. Cass Sunstein and Richard Thaler minimize the importance of the distinction between paternalism in the private and in the public sectors. In explaining their concept of “libertarian paternalism,” they say that the distinction between libertarian and non-libertarian paternalism “is not simple and rigid.” Moreover, they explicitly state that libertarian and non-libertarian paternalism lie on a continuum: “The libertarian paternalist insists on preserving choice, whereas the non-libertarian paternalist is willing to foreclose choice. But in all cases, a real question is the cost of exercising choice, and here there is a continuum rather than a sharp dichotomy . . . .”

Sunstein and Thaler thus present us with a gradient on which choice is characterized by low costs of escaping the prescribed course of action, while coercion corresponds to higher costs of escape. Who imposes the costs of escape and how these costs are imposed are regarded as unimportant questions.

In the pages that follow, we summarize the many and sundry policies that S & T regard as falling on the libertarian paternalist spectrum. Many of these are policies they never mention in their public defenses of libertarian paternalism. But they do appear in their academic work, and reading the list makes it apparent just how un-libertarian libertarian paternalism can be. We conclude (pp. 697-698):

At the far end of the continuum lies an outright ban on certain activities. Sunstein and Thaler embrace this conclusion: “Almost all of the time, even the non-libertarian paternalist will allow choosers, at some cost, to reject the proposed course of action. Those who are required to wear motorcycle helmets can decide to risk the relevant penalty, and to pay it if need be.”

Notice that the same argument would place outright prohibition of alcohol, drugs, or anything else on the same spectrum. You are free to use any drug you want, says the argument, if you are willing to incur the cost of potential imprisonment. At this end of the continuum, we find, lies genuine hard paternalism. In Sunstein and Thaler’s words:

A libertarian paternalist who is especially enthusiastic about free choice would be inclined to make it relatively costless for people to obtain their preferred outcomes. (Call this a libertarian paternalist.) By contrast, a libertarian paternalist who is especially confident of his welfare judgments would be willing to impose real costs on workers and consumers who seek to do what, in the paternalist’s view, would not be in their best interests. (Call this a libertarian paternalist.)

Movement along a paternalist continuum should come as no surprise when the two ends of the continuum depend on which word is italicized, as well as on the subjective confidence of the policymaker in his welfare judgments.

It bears emphasis that the sequence of steps we have outlined—from nudging (changing the order of cafeteria items) to pushing (imposing costs on those who deviate from the state’s preferred terms of contract) to shoving (ruling out some terms entirely) to controlling (banning some activities altogether)—is not our creation. Sunstein and Thaler present the same proposals in approximately the same order, to demonstrate the existence of a continuum.

A bit later (pp. 698-699) we respond to a natural objection: that the new paternalism is not to blame for the existence of a gradient that already exists.

Some may object that the existence of a gradient from soft to hard paternalism is just a fact, and that the new paternalists cannot be faulted for pointing it out. But the gradient in fact results from the conceptual framework that the new paternalists have adopted and urge the rest of us to adopt. The main problem with the framework, in our view, is that it defines freedom of choice (and libertarianism) in terms of costs of exit, without any attention to who imposes the costs and how. An alternative framework, one that is more consistent with the typical usage of words like coercion and choice, would focus on whether rights of person and property are abridged by a given policy. On this approach, a restaurateur’s decision about dessert placement and a government’s decision about whether to allow helmetless motorcycle riding simply would not be on the same continuum. The former is private and non-coercive, the latter public and coercive. This is the sort of framework that the new paternalists encourage us to reject in favor of theirs.

To put it another way, the new paternalists often say that people are subject to “framing effects” that alter their choices. Indeed, they say that such framing effects are evidence of irrationality. Yet they are exploiting a framing effect in their advocacy of new paternalism. They encourage us to adopt a conceptual frame that relies on gradients, rather than a conceptual frame that highlights important distinctions. We will revisit this point later. (As usual, footnotes have been omitted, but are available in the full paper.)

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New Paternalism on the Slippery Slopes, Part 1

Mario Rizzo and I have just published a new article, "Little Brother Is Watching You: New Paternalism on the Slippery Slopes," in Arizona Law Review. You can find the full text here.

Regular readers (if I still have any) will know I've written a great deal about the new paternalism. Just click on the subject tag "paternalism" on this post for a sampling. Mario and I also published a prior article about how new paternalist policies are vulnerable to slippery slopes; the present article is a more comprehensive treatment of the issue.

The article is quite long. As a result, I expect few people will read the whole thing. I've therefore decided to excerpt the article in a series of blog posts. I won't be covering all of our arguments in the paper, but I'll be pulling out some passages I particularly like -- and that might otherwise be missed.


Since Mario has already posted the abstract on his blog, I'll start by posting parts of the longer summary in the introduction. Here are the opening paragraphs, which explain the idea of the "new paternalism" (pp. 687-688).

Paternalist arguments advocate forcing or manipulating individuals to change their behavior for their own good, as distinct from the good of others. Paternalism has been with us for millennia. Recently, however, a seemingly new form has arisen that we call “the new paternalism.” Unlike the old paternalism, which sought to make individuals behave consistently with the (often moralistic or religious) preferences of policymakers, the new paternalism seeks to help individuals maximize their own welfare as they see it themselves. ...

The new paternalism is supported by a growing body of research in behavioral economics showing that individuals are not fully “rational,” as economists understand that term, but instead are subject to a variety of cognitive errors and biases. The list of such deviations from strict rationality includes—but is not limited to—status quo bias, optimism bias, susceptibility to framing effects, and lack of willpower or self-control. Thus individuals are viewed as “pawns in a game whose forces [they] largely fail to comprehend.” To the extent that these cognitive problems cause individuals to make systematic and predictable choices that are inconsistent with their own well-considered preferences, there is potential for paternalistic interventions that will help them do better. In fact, these interventions have been described as “free lunches . . . that would help people achieve more of what they truly want.”

And then our central claim in the article (pp. 687-688):

New paternalists distinguish their views from hard paternalism by emphasizing the moderate character of their proposals. Christine Jolls and Cass Sunstein frequently refer to their proposals for debiasing behavior through law as a “middle ground” between laissez-faire and more heavy-handed paternalism, one that is a “less intrusive, more direct, and more democratic response to the problem of bounded rationality.” Colin Camerer, et al., present their model of “asymmetric paternalism” as “a careful, cautious, and disciplined approach” to evaluating paternalistic policies. Cass Sunstein and Richard Thaler characterize their “libertarian paternalist” approach as a “relatively weak and nonintrusive type of paternalism” that in its “most cautious forms . . . imposes trivial costs on those who seek to depart from the planner’s preferred option.” In short, the new paternalists claim we can attain significant improvements in individual welfare with relatively small interventions that do not substantially restrict liberty or autonomy.

Our thesis is that the new paternalism’s claim to moderation is not sustainable. A recent body of literature, to which we have contributed, has rehabilitated slippery-slope reasoning by examining the specific processes by which slippery slopes occur, as well as the circumstances under which slippage is most likely. The insights of the slippery-slope literature suggest that new paternalist policies are particularly subject to expansion. We argue that this is true even if policymakers are rational. But perhaps more importantly, we argue that the slippery-slope threat is especially great if policymakers are not fully rational, but instead share the behavioral and cognitive biases attributed to the people their policies are supposed to help. Consequently, accepting new paternalist policies creates a risk of accepting, in the long run, greater restrictions on individual autonomy than have heretofore been acknowledged. Inasmuch as new paternalists claim to be interested in preserving autonomy, this surely must be taken into account as an unrecognized or unacknowledged cost to be balanced against any possible gains from their policies.

I've omitted citations, but they can be found in the full article. Next up: how the new paternalism blurs important distinctions.

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How "Libertarian Paternalism" Greases the Slope

In my last post, I drew attention to the many policies that Cass Sunstein and Richard Thaler have said are consistent with “libertarian paternalism,” despite the fact that they are clearly not libertarian. We might reasonably ask, how did this happen? How did S&T get from private, voluntary policies (like automatic enrollment in savings plans) to public, mandatory policies (like non-waivable cooling-off periods) without ever dropping the word “libertarian”?

The answer, as Mario Rizzo suggested in last week’s debate with Thaler, lies in S&T’s unorthodox definition of “libertarian.” In their article “Libertarian Paternalism Is Not an Oxymoron,” they define libertarian as a continuous variable relating to the cost of exercising choice:

It should now be clear that the difference between libertarian and non-libertarian paternalism is not simple and rigid. The libertarian paternalist insists on preserving choice, whereas the non-libertarian paternalist is willing to foreclose choice. But in all cases, a real question is the cost of exercising choice, and here there is a continuum rather than a sharp dichotomy. ... [A] libertarian paternalist who is especially confident of his welfare judgments would be willing to impose real costs on workers and consumers who seek to do what, in the paternalist’s view, would not be in their best interests.” (1185-86; emphasis added)

Later, S&T say that clearly coercive policies occupy one end of the cost-of-exercising-choice continuum::

Almost all of the time, even the non-libertarian paternalist will allow choosers, at some cost, to reject the proposed course of action. Those who are required to wear motorcycle helmets can decide to risk the relevant penalty, and to pay it if need be. Employers and employees might agree to sub-minimum wage work and risk the penalties if they are caught. In this particular sense, penalties are always prices. (1189-90)

In his debate with Mario, Thaler claimed that his kind of paternalism creates no risk of a slippery slope. Why not? “In our case, by insisting, as we do, on only libertarian paternalism, the slope runs into a brick wall before it even gets started.” So the libertarian aspect of libertarian paternalism is supposed to provide a bulwark against slippage. But as the passages above illustrate, the leading advocates of libertarian paternalism don’t think libertarianism is anything close to a brick wall. It’s a gentle gradient that leads from private-and-voluntary to public-and-mandatory. At one end are privately default savings plans. At the other end, we may infer, is drug prohibition; after all, you can do all the drugs you want if you’re willing to pay the price of possible imprisonment!

And if you need evidence that slippage will occur in this rubric, you need only look at S&T’s leading paper on the subject. By the end of the paper, they have already slid a far piece down the slope, to the plainly coercive policies identified in my prior post. Of course, this is a slope of arguments, not actual policies. But if the chief architects of libertarian paternalism can't resist the slope, there's no reason to think actual policymakers can.

So how do actual libertarians resist the slope? By defining libertarian in a way that, while perhaps fuzzy in certain respects, does not rely on a gradient. As Mario said in the debate, the real issue for libertarians is not the cost of exercising choice, but who imposes the cost. If it’s costly for me to smoke cigarettes because I have to walk a mile to the nearest store, that’s neither coercive nor non-libertarian; it’s just a fact of reality that results, in part, from the store owner’s and my free choices about where to locate. On the other hand, if I have to pay a $0.10 tax per pack, that is both coercive and non-libertarian; it’s a result of a third party – the state – interfering with our choices. This is the standard understanding among actual libertarians, but it is not S&T’s.

If we employ S&T’s analytical approach in making policy, rest assured that the slope is well greased.

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Stop Hating on Hate Crimes?

In the past, I’ve found “hate crimes” legislation troubling because any differential in punishment – such as the punishment for killing because of hatred minus the punishment for killing for some other reason – seems to constitute a punishment of mere thoughts. But perhaps not. I find Eric Zorn’s argument here fairly persuasive:

The simplest answer to this is that when hatred for a particular group or class or race is the obvious motive for an attack, that attack becomes, in effect, two crimes. The first is the offense itself. The second is the implicit threat that offense makes to other members of that group, class or race.

That second crime has new victims.

Consider an incident in which someone uses spray paint to deface the garage of a house into which a gay family has just moved.

The crime is vandalism, no matter what. But to argue against the idea of hate crimes is to argue that it shouldn't matter at all to the law whether the graffiti is a smiley face or some hostile, anti-gay slur.

The smiley face is a petty annoyance. The hateful slogan is, in effect, a threat to other gay people in the area -- they might be next.

In essence, the hate-crime punishment is not for having bad thoughts, but for issuing a threat of future violence – something we generally find acceptable to punish, even on libertarian grounds.

Compare David Friedman’s argument for punitive damages in the case of “strategic torts,” that is, torts intended to send a threatening message to other potential victims. If the threat is successful, no future torts will need to be performed. As a result, the tortfeasor gets the benefit of committing many torts – by altering other people’s behavior – while only getting punished for one tort. Similarly, in the case of a hate crime, the hater can get punished for just one or a few crimes, possibly minor crimes, while getting the benefit of affecting many people in the threatened group.

My main concern with this position is that I think most people will tend to perceive hate crime laws as simply protecting the feelings or sensibilities of the protected groups, just as I did before I thought about it Zorn’s way. Indeed, that is often how the laws are justified even by their proponents. When they speak of harms to the protected groups, they often describe the harm in terms of “dignity” rather than threatened rights of person and property. Furthering this perception is the fact that hate crimes laws can be applied even in cases where the motive is not obvious – and thus could not plausibly constitute a viable threat to others.

And the perception matters, since laws like these can set precedents that pave the way for more laws based on (what are perceived to be) similar justifications. There is a slippery slope risk here.

UPDATE: Constant has a reaction over at Distributed Republic, with some good back-and-forth in the comments section (where I've chimed in).

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