Tuesday, May 29, 2007

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.


Anonymous said...

In the case of a cigarette tax, the state is simply acting as a pass-along mechanism for the market demands of the citizenry. Namely, cigarette smoking is hardly of the "no negative externality" kind of behavior that we libertarians will allow peeps to have at it. Rather, it imposes real costs to those who do not participate in it. So as a nonsmoker, I'm willing to allow for smokers to continue in their filthy, polluting ways that negatively impact my lungs, so long as I know they're disproportionately subsidizing a public good.

After all, they're disproportionately mucking up a public good.

Glen Whitman said...

Anittah -- Two points. First, you're making an externality argument, which is about protecting others from your behavior. That is analytically distinct from the paternalistic argument, which is about protecting *you* from your behavior. The new paternalists (some of them, anyway) are justifying *additional* cigarette taxes on paternalist grounds. That's what I'm arguing against in this (and related) posts.

Second, are you sure those negative externalities from cigarette smoke are really externalities? When you walk into a bar or club that allows smoking, you are voluntarily accepting the second-hand smoke as part of the experience -- just as you accept the possibility of hearing damage when you attend a rock concert. You can make a decent case that outdoor cigarette smoking creates a negative externality, but there I seriously doubt its magnitude. No studies have ever shown second-smoke smoke to cause health problems in non-enclosed environments.

chimoose said...

My guess is that Annah was not referring to second-hand smoke as much as he was the incredible cost (primarily financial) smokers impose on our taxpayer-underwritten healthcare system.

Glen Whitman said...

ChiMoose -- Since Annitah referred to activities "that negatively affect my lungs," I think she was indeed referring to second-hand smoke.

But your point about public health costs is still worth consideration. My first response (as with Annitah's argument) is that you're making a kind of externality argument, not a paternalist argument. So in that sense, it's a separate debate.

My second response is to question your facts. Do smokers actually impose disproportionate health costs on the public? It seems obvious, but it's not. Smokers tend to die a good bit earlier than non-smokers, and thus impose fewer years of healthcare expenditure. They do have high end-of-life expenditures, but most people do, and the smokers have fewer years of health costs in the meantime.

And third, I think the argument you make is a nice demonstration of the danger associated with socialized health costs. As soon as the taxpayer is on the hook, personal lifestyle choices suddenly become everybody's business. (Smoking is hardly the only lifestyle choice that affects health; consider sexual behavior.) Thus, one form of government intervention paves the way for another. This is dangerous for liberty. I would sooner turn the argument around, and say the value of personal lifestyle choice should lead us to reduce the involvement of government in healthcare.

Patrick Sullivan said...

Cigarette smoking-related disease statistics, tax issues, etc. all help to sell healthcare in general, vis a vis solutions thereof. Healthcare is a format for presumption of necessity of services, thus making itself necessary by providing such format. Remove healthcare from the political equation, and you may have a chance at some kind of better debate in terms of libertarianism or any other -ism.

AdamB said...

Isn't the location of the cigarette store determined through externalities?

If your neighbors wanted to keep you from smoking, they could sign a contract whereby each pledges to boycott any store selling cigarettes within one mile of your house.

Allowing taxes as another option for them to exercise their preferences for paternalism seems less costly, and perhaps welfare enhancing.

They could also collectively refuse to employ you or otherwise trade with you, but instead pay you a small lump sum each year which is reduced by $0.10 for each pack you smoke. Is that less coercive than taxation?

What if, once you get to the store, the store clerk (perhaps realizing that you are unhappily addicted) refuses to sell you cigarettes?

The choices available to us are nearly always a function of the choices of others, and sometimes others freely choose to limit our choices out of paternalism.

Perhaps you might define the difference as being in the implied threat of violence. I'd say that depends on the definition of "violence"-- the refusal of everyone else to trade with us would be an effective death sentence for nearly anyone in the 1st world, so imprisonment seems much less violent.

But then what do you do about smokers who would like to quit but are stuck at a bad equilibrium? Stickk.com is a relatively recent development. I wouldn't be surprised if some non-trivial portion of smokers themselves vote for increased taxes on cigarettes.

For addictive substances whose users invariably regret starting, it seems plausible that taxation is one crude form of commitment device in the absence of complete markets. After all, Odysseus didn't tie himself to the mast.