Wednesday, May 05, 2010

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.)


Josh said...


Sorry, I'd email this, but I don't see that contact info on the page.

Anyway, I wrote an article I think you guys might be interested in. It's about Dodd's new financial regulation bill.



David Friedman said...

The college I mentioned is private.