About this Issue
For a new idea, it’s got a lot of names — “new” paternalism, “soft” paternalism, even “libertarian” paternalism.
This month at Cato Unbound we’re discussing a range of policy choices that purport to bring out what individuals themselves would prefer. They propose to do it all by cleverly — and gently — nudging the presentation of choices, the default options, and the costs of noncompliance, thus taking advantage of the cognitive biases within us all, but using them to our own benefit. Soft paternalism doesn’t force anyone to do anything, the argument goes. It merely sets things up so that what we tend to do also tends to coincide with our best interests.
Does it sound too good to be true? Lead essayist Glen Whitman has some doubts. He voices them this month and challenges a select group of behavioral economists and legal scholars to consider that soft paternalism might not be all that it promises. Responding to him will be Richard Thaler of the University of Chicago, Jonathan Klick of the University of Pennsylvania, and Shane Frederick of Yale University.
The Rise of the New Paternalism
For as far back as memory reaches, people have been telling other people what’s good for them — and manipulating or forcing them to do it. But in recent years, a novel form of paternalism has emerged on the policy stage. Unlike the “old paternalism,” which sought to make people conform to religious or moralistic notions of goodness, the “new paternalism” seeks to make people better off by their own standards.
New paternalism has gone by many names, including “soft paternalism,” “libertarian paternalism,” and “asymmetric paternalism.” Whatever the name, it arose from the burgeoning field of behavioral economics, which studies the myriad ways in which real humans — unlike the agents who populate most economic models — deviate from pure rationality. Real people suffer from a variety of cognitive biases and errors, including lack of self-control, excessive optimism, status quo bias, susceptibility to framing of decisions, and so forth. To the extent such imperfections cause people to make choices inconsistent with their own best interests, paternalistic interventions promise to help them do better.
What sort of interventions? To the casual reader, the new paternalism might seem to have little to do with government at all. Cass Sunstein and Richard Thaler’s Nudge and Daniel Ariely’s Predictably Irrational, for instance, often read more like advice manuals than policy manifestos.
But if you dig deeper, you’ll find a wide-ranging policy agenda at work. In seminal journal articles by Sunstein & Thaler, Camerer et al., O’Donoghue and Rabin, and others, you’ll find a panoply of policy proposals from mild to downright intrusive. The story begins with the seemingly innocuous proposal to enroll all employees in savings plans automatically (with the ability to opt out). Then it progresses to new default rules in contracts, such as a presumption of “for cause” rather than “at will” employment, again with an opt-out. And then? Default rules that can be waived only through a cumbersome legal procedure. Then default rules with some options ruled out entirely — such as maximum hours that cannot be waived for less than time-and-a-half pay. Then cooling-off periods for high-cost purchases. Then sin taxes for fatty or sodium-rich foods. Then outright bans on ingredients like trans fats.
Not every new paternalist supports every one of these policies, and they don’t advocate them all with the same confidence. But they’re all on the list, and all justified by an appeal to behavioral economics.
The Claim to Moderation vs. The Slippery Slope
New paternalists often present their position as striking a reasonable middle ground between rigid anti-paternalism on the one hand and intrusive “hard” paternalism on the other. But as the list of policies above suggests, this claim to moderation is difficult to sustain.
My claim (along with my frequent coauthor, Mario Rizzo) is that the new paternalism carries a serious risk of expansion. Following its policy recommendations places us on a slippery slope from soft paternalism to hard. This would be true even if policymakers — including legislators, judges, bureaucrats, and voters — were completely rational. But the danger is especially great if policymakers exhibit the same cognitive biases attributed to the people they’re trying to help.
The slippery slope is not, of course, the only argument against new paternalism. The slippery slope is not intended as a solo knock-out argument against any and all new-paternalist policies. In some cases, their benefits might be high enough to justify their costs. The key point is that the slippery slope risk must be counted among the relevant costs.
Unfortunately, the very manner in which the new paternalism paradigm has been advanced makes it likely that risk will be ignored.
The Paternalism-Generating Framework
If behavioral economics has taught us anything, it’s that humans are vulnerable to framing effects. In other words, how people make choices turns on seemingly irrelevant aspects of the situation, such as the order in which options are presented, the other (unchosen) options presented at the same time, which option is designated as the “default,” and so on.
The new paternalists, having learned this lesson well, frame the public policy debate in a way that encourages paternalistic interventions. They have done so in at least three ways.
First, it is well-established that people exhibit extremeness aversion: a tendency to avoid positions that are presented as extremes. When choosing between a low-end camera and a medium-quality camera, for instance, potential buyers split about equally between the two — but when these two options are presented alongside a high-end camera, the medium-quality camera attracts substantially more buyers. The mere presence of an extreme option makes the middle option seem better. The new paternalists, intentionally or not, have exploited this same tendency by presenting their position as a middle-ground between laissez-faire and heavy-handed paternalism.
This would be no great concern, were it not for the tendency of the middle ground to shift over time. A newly adopted middle-ground quickly becomes the status quo. Then a more intrusive option takes center stage, and what used to be the middle-ground becomes one of the bookends. To take just one example, legally mandated enrollment in savings plans (with exit option) seems like the middle ground right now. But once it becomes standard, it will occupy the laissez-faire position. Then a “Save More Tomorrow” policy (with exit option) becomes the new middle-ground. And once that has been adopted, it too becomes the low-end, while automatic enrollment with freedom to choose your investments but without the option to exit entirely becomes the middle. By this route, a series of minor steps can eventually make even mandatory enrollment with specified minimums, highly restricted investments, and no opt-out seem like the “reasonable middle.”
Sound paranoid? Anti-smoking regulations followed a similar path. Once upon a time, banning smoking on airplanes seemed like the reasonable middle ground. Now that’s the (relatively) laissez-faire position, smoking bans in bars and restaurants are the middle, and full-blown smoking bans have come to pass in some cities.
Second, as Daniel Kahneman has argued, “The basic principle of framing is the passive acceptance of the formulation given.” People tend to take the description of a situation as fixed, without reformulating it in different ways. And this tendency, too, is exploited by the new paternalists, who regularly present paternalism as inevitable. 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.” Their basic argument is that choice situations often require some default, so why not choose the best one?
But alternative framings are available. Instead of positing paternalism as the default standard for selecting default rules, they could have said respecting customary expectations is the default standard for selecting default rules. Or they could have emphasized that in many domains of potential regulation, defaults are not required – and therefore paternalism is not inevitable in these areas. For instance, it is not inevitable for some contract options (like working overtime for regular pay) to be ruled out entirely.
Nevertheless, the new paternalists have framed the debate as being not whether there should be paternalism, but how much. Policymakers who adopt this frame of mind will naturally be led to introduce all manner of paternalistic interventions. “Since paternalism is inevitable,” they might think, “of course it’s my job to tinker with the terms of contracts, the conditions of employment, the ingredients of food, the content of exercise regimes,” ad infinitum.
Third, the new paternalists regularly present their policy agenda as existing on a continuum. Both Sunstein and Thaler and Camerer, et al., structure their proposals in an order much like the list I provided above: from the mild to the heavy-handed. More importantly, Sunstein and Thaler define the continuum in a way that elides crucial distinctions — such as the difference between private and public and between voluntary and coercive.
Sunstein and Thaler define their “libertarian paternalist” spectrum in terms of the cost of choice: “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.” Even outright bans, such as motorcycle helmet laws, lie on the spectrum because “[t]hose who are required to wear motorcycle helmets can decide to risk the relevant penalty, and to pay it if need be.” This framing ignores the question of who imposes the cost and how. To see why this is bizarre, notice that a 10-cent tax on Twinkies is relatively low-cost, while having to drive 20 miles to the nearest 7-11 is relatively high-cost. In Sunstein and Thaler’s rubric, the state-imposed tax is more “libertarian” than the self-imposed cost of living far from civilization.
In addition, many specific paternalist policies exist on a continuum. Sin taxes can range from tiny to exorbitant. Legal hurdles for opting-out of defaults can range from minimal (signing a waiver) to prohibitive (hiring a lawyer and attending hours of seminars).
Why does this matter? Because slippery slopes, as implied by the name, are more likely to occur in the presence of a continuum. As Eugene Volokh has observed, people display small-change tolerance, that is, a willingness to tolerate changes perceived as relatively small movements from the status quo. The tendency probably has both a rational basis (it’s costly to invest time and effort on changes whose effects are probably small) and an irrational one (it’s easy to miss the big picture when focusing on the problem at hand).
Small-change tolerance makes it relatively easy to move, by a series of small changes, a long way down the road to hard paternalism. Fat taxes may start small, but they won’t necessarily stay that way. Likewise for the impediments to opting out of state-chosen contractual defaults. And in the bigger picture, paternalist interventions can spread from one area to another — say, from labor contracts to product contracts, or from fat taxes to exercise subsidies, or from savings choices to spending choices. The overall effect? A gradual expansion of paternalistic interventions that started small.
Choosing Among Preferences
What does “irrationality” look like? How can you prove someone is irrational, rather than simply having preferences you don’t share? After all, there is nothing per se irrational about strongly valuing the present relative to the future, or enjoying food more than you enjoy good health.
To demonstrate irrationality, behavioral economists frequently point to inconsistent behaviors that suggest inconsistent underlying preferences. For instance, people make long-term plans for saving or dieting but then, when the time comes, reverse those plans and succumb to the desire for short-term gratification. They also make different choices in different emotional states — such as saying they would never sleep with an obese person, then reversing that preference when sufficiently aroused. (Yes, an experiment by Dan Ariely has actually shown that.)
There is some dispute as to whether all such behavioral inconsistencies reveal irrationality. But let’s say they do. Even so, that fact does not license a third party to choose among competing preferences. If a person is more patient when thinking about trade-offs in the distant future, but less patient when thinking about trade-offs near the present, which level of patience is “correct”? If you would sleep with a given person when you’re in a “hot” state but not in a “cool” state, which sexual preference is “correct”? Neither theory nor evidence provides a basis for answering these questions. As some new paternalists admit, behavioral inconsistencies may indicate that “true” preferences simply don’t exist.
Nevertheless, new paternalists have not hesitated to pick and choose the “right” preferences. O’Donoghue and Rabin, for instance, define “optimal sin taxes” in terms of a person’s most patient rate of time preference. Similarly, the new paternalists favor the preferences we display in a cool state (calm and sober reflection) over those we have in a hot state (fear, anxiety, arousal, etc.), even though arguably the “hot” preferences might do a better job of revealing our true desires.
So how are the paternalists choosing, if not on the basis of hard science? It’s not hard to see: they are favoring their own preferences, which also happen to be the socially approved ones.
In short, either the new paternalist scholars have made a subtle error in reasoning, or they’ve simplified their analysis for mass consumption. But if the scholars cannot resist favoring some preferences over others, can we expect policymakers to do any better? On the contrary, many already would like to do so — and with the new paternalists’ help, they can indulge that impulse under the cover of seemingly objective science.
And that is where the slope threat arises. If it’s okay to impose our own preferences, why do so only when convincing evidence shows an internal contradiction? That’s an academic distinction, easily lost on your average voter, bureaucrat, or congressman. The simple takeaway conclusion is that “science” shows that some preferences are irrational per se. And from this conclusion, any number of policy proposals arise. The top of the slope is gentle nudges to save more and eat less. The bottom of the slope is forceful shoves to eat right, drink right, exercise right, sleep right, have sex right, choose our professions right, and pick our lifestyles right.
Policy Temptations and Political Myopia
Policymakers have short time horizons for various reasons. The policies they consider can produce costs and benefits in the distant future, when they may no longer hold office. Besides, voters have short memories, and it’s hard to discern which policy choices in the past have generated lousy results in the present. Given these factors, it can be quite rational for policymakers to ignore the long-term effects of their choices.
But if behavioral economists are right, it’s worse than that. Like the rest of us, policymakers have problems with self-control and difficulty working through complex chains of cause and effect. As a result, they tend to focus myopically on the problem-of-the-moment. And just as regular people can succumb to present temptations like desserts and cigarettes, policymakers can succumb to policy temptations that promise short-term political gains.
Sadly, we all know how this plays out with respect to the federal budget and entitlement programs. But what about slippery slopes? By definition, slippery slopes happen over time. A proposed policy seems like a good idea now, but critics warn that it will open the door to worse policies in the future. Proponents respond, “Pshaw! We’ll do the right thing now, and then resist doing the wrong thing later.” But that promise is suspect if policymakers have the same cognitive biases as everyone else.
Nevertheless, Sunstein and Thaler (in Nudge) respond to the slippery-slope argument by saying we should “make progress on those [initial proposals], and do whatever it takes to pour sand on the slope.” Saying we should go forward with the initial interventions is akin to saying we should do something because it promises present benefits, while downplaying potential future costs. This is exactly the kind of error in private choice that new paternalists think demands correction. The slope risk must be counted among the costs of the initial intervention.
New paternalists, like many well-meaning advocates of expanded government, imagine conscientious policymakers carefully evaluating all the evidence, considering alternatives, consulting unbiased experts, and acting only when the benefits clearly outweigh the costs. That’s the idealized picture that comes to mind when Camerer, et al., call their perspective “a careful, cautious, and disciplined approach” to paternalism.
In political reality, legislators and bureaucrats face a constant stream of policy temptations, including both new policies and expansions of old ones. Rather than considering each new law on its merits, policymakers do what normal people do — they use simple heuristics and rules of thumb. They display what behavioral economists call extension neglect: the tendency to focus on “prototypes” instead of measuring the true degree and extent of a problem. In the paternalist context, the prototype citizens are chain-smokers and junk-food junkies. And the new paternalists have made sure the prototype policies are gentle nudges like reordering the food selections in cafeteria lines. These prototypes are, unfortunately, more likely to guide policy than studious consideration of behavioral economic research.
To make matters worse, policymakers will be influenced not only by supposedly neutral experts, but by special interests as well. Some will support policies for financial reasons — like milk producers who favor ever-greater restrictions on the availability of soft drinks, or financial services firms that favor ever-larger requirements for people to save and invest. Others will have a moral or ideological agenda, as in the case of temperance organizations (like Mothers Against Drunk Driving) or personal health advocates (like the Center for Science in the Public Interest). These groups may not share the new paternalists’ stated concern for the subjective preferences of targeted people.
As Bruce Yandle points out, both Baptists and bootleggers had reason to support Prohibition. Behavioral economists are in serious danger of playing the Baptist when it comes to paternalism.
Real people are susceptible to cognitive biases that can lead to poor decisions. It’s only natural to want to help them make better choices.
But no one is immune to bias. Not social scientists, and certainly not policymakers. In translating behavioral science into policy, we may be led astray by the very same cognitive defects we wish to correct. New paternalist policies, and indeed the intellectual framework of new paternalism itself, create a serious risk of slippery slopes toward ever more intrusive paternalism.
Instead of a paternalism-generating framework, I recommend a slope-resisting framework — one that stresses private options and opportunities for self-correction, and that emphasizes important distinctions such as public vs. private and coercive vs. voluntary. That doesn’t mean we will never adopt any new paternalist policies. But if we do, we will hopefully stand a better chance of not slipping down the slope.
Dan Ariely, Predictably Irrational, HarperCollins, 2009.
Colin Camerer, et al., “Regulation for Conservatives: Behavioral Economics and the Case for ‘Asymmetric Paternalism,’” 151 University of Pennsylvania Law Review, 2003.
Daniel Kahneman, “Maps of Bounded Rationality: Psychology for Behavioral Economics,” 93 American Economic Review, 2003.
Ted O’Donogue and Matthew Rabin, “Optimal Sin Taxes,” 90 Journal of Public Economics, 2006.
Mario J. Rizzo and Douglas Glen Whitman, “The Camel’s Nose Is in the Tent: Rules, Theories, and Slippery Slopes,” 51(2) UCLA Law Review, 2003.
Mario J. Rizzo and Douglas Glen Whitman, “Little Brother Is Watching You: New Paternalism on the Slippery Slopes,” 51 Arizona Law Review, 2009.
Cass R. Sunstein and Richard H. Thaler, “Libertarian Paternalism Is Not an Oxymoron,” 70 University of Chicago Law Review, 2003.
Richard H. Thaler and Cass R. Sunstein, Nudge: Improving Decisions About Health, Wealth, and Happiness, Yale University Press, 2008.
Douglas Glen Whitman and Mario J. Rizzo, “The Knowledge Problem of New Paternalism,” 4 BYU Law Review, 2009.
Douglas Glen Whitman and Mario J. Rizzo, “Paternalist Slopes,” 2 NYU Journal of Law & Liberty, 2007.
Glen Whitman, “Against the New Paternalism: Internalities and the Economics of Self-Control,” Cato Policy Analysis No. 563, 2006.
Eugene Volokh, “The Mechanisms of the Slippery Slope,” 116 Harvard Law Review, 2003.
Fear of Falling
There are a lot of things out there to be afraid of, and there seem to be phobias named for each one. For example, you may not be familiar with bathmophobia, which is an abnormal and persistent fear of stairs or steep slopes, or a fear of falling. Less well known is “nudgephobia,” also known as the Whitman-Rizzo syndrome, which is the fear of being gently nudged down a slope while standing on a completely flat surface. This phobia is sometimes associated with other disorders such as the fear of being given helpful directions when lost; the fear of obtaining reliable medical advice when sick; and, in rare cases, some have even suffered from a fear of having someone recommend a book or movie that you will really like.
It is presumably bathmophobia that has led Professor Whitman (and his co-author Mario Rizzo) to be so afraid that the policies that Cass Sunstein and I call libertarian paternalism will eventually lead to society falling down a steep cliff. I attribute this critique to an irrational phobia because I cannot make any other sense of it.
First, let’s be clear about what Sunstein and I mean by libertarian paternalism. We use the word libertarian (small “l”) as an adjective to modify paternalism, and it implies that we advocate policies that maintain people’s freedom to choose at as low a cost as possible. As for paternalism, we say on page five of our book, and repeat ad nauseam, that we call a policy paternalistic “if it tries to influence choices in a way that makes choosers better off, as judged by themselves.” (The emphasis is in the original.) Nonetheless, Whitman accuses us (and some of our fellow behavioral economics travelers) of wanting to push people in the directions that we ourselves prefer. I am not sure how we could have been any clearer that this is precisely not our intent, and I am not sure how we would have decided what to push for since Sunstein and I do not agree ourselves. I am a lover of fine wines; Cass prefers Diet Coke. With fundamental philosophical differences such as these, we wouldn’t get very far in pushing in the directions we prefer! This applies to the rest of our gang as well. Matthew Rabin prefers to dress in tie-dyed T-shirts, but I have never known him to lobby for a subsidy for this article of clothing.
Whitman accuses us of playing a devious rhetorical trick (using our knowledge of “extremeness aversion”) in describing the policies we prefer as moderate. However, I am not sure in what world Glen lives. Consider a continuum with anarchy at one pole and totalitarianism at the other. The Libertarian Ideal would be a couple notches away from anarchy, and most Western societies would be somewhere in the middle. It is in this middle territory that libertarian paternalism sits.
Consider the current interest in the rising obesity rate in the United States. The anarchist would allow anyone to sell and eat everything. No food or restaurant inspections and no penalties even for those who knowingly sell food that makes people sick. The totalitarian would tell everyone what to eat and where to eat it. Nudge-type policies would include things like displaying the fruit more prominently in cafeterias, posting calories in fast food restaurants (where the costs of doing so are low) or making ingredient labeling in grocery stores more prominent and user friendly. Others, soft paternalists such as O’Donoghue and Rabin, might advocate a sin tax on fat or sugar. Camerer et al favor cooling off periods for big ticket purchases, a policy that might have helped mitigate some of the sub-prime mortgage crisis had it applied in that domain. Whatever you think of such policies they are certainly moderate compared to bans and mandates on one side, and eliminating health inspections on the other.
Another basic point that Whitman does not recognize is that paternalism of some sort is inevitable. Consider the following common problem. Most firms have an open enrollment period in November when employees can elect their benefit package for the following year. At my employer, the University of Chicago, you have a few weeks to log on to the appropriate web site and make your selections. The question is, what should the employer do for those employees who forget to log on? (Professors’ reputations for absent-mindedness are well deserved.) For each of the choices the employee has, the employer needs to select a default option for those who do not log on, and normally the default is either “same choice as last year” or “back to zero” (meaning, decline this option). At Chicago the default option for the health insurance plan is the same as last year.
Of course it is possible to criticize this choice of the default option, but it is essential to understand that the employer must choose something. Some employers use “back to zero,” which minimizes the costs to the employer; somewhat less drastic would be to default employees into the plan that is cheapest for the employer; one could even choose a default plan at random (don’t laugh — this is the strategy used for some participants in the Medicare Part D prescription drug coverage implemented by the Bush administration); or the employer could somehow force employees to make a choice. The Nudge philosophy here is that the person who designs the plan, whom we call the choice architect, should choose the default that she thinks, all things considered, will make the participants best off. Does Professor Whitman have a better suggestion?
Finally, let’s turn to the problem of bathmophobia. Whitman argues that if we are thinking about some policy such as automatically enrolling employees into the retirement plan, and letting them opt out, we need to consciously add into our calculation the risks that this will lead to something else, presumably something bad. Whitman keeps repeating, in italics, that the slope risk must be counted among the costs of the initial intervention. But where is the evidence for this slope risk?
Presumably, if libertarian paternalism creates a slope risk then real paternalism must generate a “cliff” risk. But have we seen this in history? In America we started as Puritans but moved away from it. When Prohibition was passed into law it did not lead to a slew of other paternalistic interventions. On the contrary, once society got to see prohibition in action, the law was eventually repealed. Is there any evidence of a paternalistic slide? The only example Whitman gives is smoking, where there certainly has been a progression of increasingly intrusive laws passed. But there are several problems with this example. First, most of the anti-smoking laws are based on externalities, not paternalism. People do not want to fly, eat, or work in smoke-filled environments. Indeed, many smokers favor such laws. Note that while smoking bans are not nudges, they are shoves, even these shoves do not seem to have led to a batch of similar crackdowns in other domains. I have not seen any municipality institute a ban on loud talking in restaurants, for example, though come to think of it… .
In short, the risk of the slippery slope appears to be a figment of Professor Whitman’s imagination, and clear evidence of his bathmophobia. To be fair to him, this phobia is hardly unique to him and Professor Rizzo. Slope-mongering is a well-worn political tool used by all sides in the political debate to debunk any idea they oppose. For example, when the proposal was made to replace the draft with an all-volunteer army, the opponents said this would inevitably lead to all kinds of disastrous consequences because we were turning our military into a band of mercenaries. The argument is perfectly versatile. If we allow (blacks, women, gays… .) into the military then (fill in the awful but inevitable consequence here). If we allow free speech then we will give voice to the next Hitler. “Allowing a partial privatization of Social Security will destroy the moral fabric of our society.” Never mind that Sweden did it a decade ago. You get the idea.
Instead of slope-mongering we should evaluate proposals on their merits. (We devote a chapter of Nudge to an evaluation of the choice architecture used in Sweden’s social security experience.) Helping people make better choices, as judged by themselves, is really not a controversial goal, is it?
The Dangers of Letting Someone Else Decide
I don’t think I suffer from any phobias (heck, I’m not even afraid of clowns, though some would argue that suggests a lack of prudence on my part). I’m not sure Professors Whitman and Rizzo do either, despite Professor Thaler’s gentle ribbing. While Whitman can surely defend himself, I can’t resist pointing out that Thaler’s example of Prohibition is illustrative of Whitman’s point.
Early temperance movement leaders in the United States originally focused on trying to convince individuals to voluntarily take “the Pledge” not to drink spirits, eventually adding beer and wine to the list of proscribed indulgences. While some of the temperance movement’s allegedly scientifically proven effects of alcohol consumption now seem to be supported by modern science, others do not (e.g., alcohol consumption causing epilepsy), and none were based on evidence that, in retrospect, passes the causal inference sniff test. Not satisfied with the rate of voluntary adoption, the movement formed more aggressive organizations like the Anti-Saloon League, which pressured politicians to enact local and then state bans, culminating in federal Prohibition.
Perhaps this movement from a voluntary campaign to federal Prohibition doesn’t represent a slide down the slippery slope. Perhaps it was simply a natural progression toward widespread support (Thaler’s “recommend[ing] a book or movie that you really like”), but this is belied by the fact that President Wilson (presumably representing the national median voter’s interests) vetoed the Volstead Act. It’s also belied by the amendment’s supporters’ need to resort to nationalistic fear-mongering (since many of the nation’s breweries were owned by German Americans). Anyway, as Thaler says, no harm, no foul since, even if Prohibition was the result of a slippery slope, the United States had the sense to repeal it a mere 14 years later.
But, as I said, Whitman can defend himself.
Taking Thaler’s descriptions of his views at face value, I suppose I don’t have particularly strong objections to the “choice architecture” view of the new paternalism. If adopted voluntarily, who could object? If people really do want to eat more healthful foods, it’s only sensible to move them to where people will notice them. This raises the question of why we even need to nudge firms in this direction, but Thaler and his crew have fancy explanations for this (though I’m much younger than Thaler, I tend to cling to the old-fashioned economics that says we should infer people’s preferences from their actions as opposed to what they say their preferences are, but the behavioral economics crowd has plausible critiques of this position).
My fear (phobia?) arises when the distinction between private and public (voluntary and mandatory) becomes lost. While Thaler is home drinking his fine wines, his buddy, the Diet Coke swilling Sunstein, is in DC, in one of the most important regulatory positions in the country. Perhaps Sunstein too really embraces the “libertarian” part of libertarian paternalism and, so, will resist the temptation to use his powers to nudge/shove/trick/force people into doing what they really want to do anyway, if they simply understood their preferences well enough. But others pushing different flavors of the new paternalism feel no such restraint. A few years ago, the FTC had a bunch of us (including many of the figures Thaler refers to) come to Washington to debate the merits of the FTC and other federal bodies exploiting the insights of behavioral economics so people can better understand what’s good for them. Who could object to that? I’m sure no agency will use behavioral economics insights to exploit people for the sake of broader policy goals as opposed to simply liberating people from their biases.
Even in the public sphere, however, perhaps a libertarian/soft paternalism is possible. If choice is preserved, on what grounds do guys like Whitman and me object? Well, Whitman and Rizzo have written that it is likely that the soft paternalists will not (cannot) generally have sufficient information to pick the right defaults, choice architecture, and so forth. While I might be willing to trust Thaler, Sunstein, Rabin, and other experts to have the judgment (despite Rabin’s penchant for tie-dye) and the prudence to take their limitations and caveats seriously, only acting when they are likely to do more good than harm, these aren’t the folks who will be making the relevant decisions. It’s going to be bureaucrats and legislative staffers, fueled by the counsel of lobbyists as to how to do the nudging (and, remember, if you’re OK with that because you like who is currently at the helm, you presumably wouldn’t have wanted the previous guy to have had the power and vice versa).
Further, the government is not generally known for leaving people free to opt out of the rules it deems to be the best. It prefers one-size-fits-all in many situations. For example, the Consumer Financial Protection Agency Act of 2009, which uses behavioral economics as its road map, proposed to make opt-outs very difficult when it allowed them at all, presumably because its proponents have little faith in the judgment of individuals even after they are nudged in the right direction. Even if economists purport to be pure subjectivists when it comes to judging preferences, policymakers view such a perspective as crazy talk.
Beyond this fear, I do have another overarching concern with paternalism (old, new, future, classic, and others). While Greg Mitchell and I claimed the idea as ours, in a sense it actually goes back to Locke. The more we protect individuals from making decisions (good or bad), the less willing they will be to invest in decisionmaking capacities. A few years ago, I was bemused when I spoke at an orientation session for new law students, finding that a third of the room was filled with their parents. This feeling eventually turned to despair when I discovered this is a fairly ubiquitous phenomenon. By coddling their children (setting up default rules in such a way to protect them from their failure to make a good decision, so to speak), it seems, today’s helicopter parents have actually stunted their children’s development. You may think I am exaggerating the costs of this (and that I may be a little bitter that the parents, year after year, assumed I was the A/V guy, reacting with shock when they found out I was the professor they had come to hear speak), but there is at least some evidence of this coddling leading to negative long term consequences. Apparently a number of firms report that entry-level candidates are now bringing their parents to job interviews and letting mom negotiate their benefits for them.
But, as Thaler suggests, if this turn has proved to be a bad one, we can simply reverse course to fix things in 20 years or so.
Of Frogs and Men
Long ago, a scenic river with strong currents was opened to the public. Since then, many have enjoyed swimming there, but seventeen people have drowned. A large sign has recently been erected near the river, but it is currently blank. You’ve been authorized to create the sign that will stand there. Go.
Below are ten possibilities, and the policies they entail.
- No Swimming.
- No Swimming without a life jacket.
- Extremely Dangerous Currents! Swim at your peril.
- Danger. 0.000017% of park visitors have drowned here.
- Danger. The seventeen drowning victims shown below all died swimming here.
- Please consider drowning risks alongside the benefits of swimming.
- Please consider benefits of swimming alongside the risks of drowning.
- Please use caution when swimming.
- Please refrain from swimming 1 hour before and after eating.
- Please refrain from eating 1 hour before and after swimming.
I’d suggest that the proper wording depends on many facts that the signs’ creator ought to investigate: What fraction of park visitors go swimming? Were any of the drowning victims wearing life jackets? How many people currently own lifejackets? What is the cost of providing them? How much does wearing one diminish the enjoyment of swimming? Do people generally overestimate their swimming abilities? Is the current deceptively strong at this location? Is there any truth to the claim that swimming on a full stomach is dangerous? If not, should the sign suggest that anyway, since it will discourage overeating, which carries its own risks?
If pressed to paint the sign in question, few of us would choose to leave it blank, and any chosen wording will likely influence swimming decisions. If you don’t choose to construct the sign that you think is best for people overall, what is left? A libertarian might contend that any sign with an explicit prohibition (#1 and #2 in the example above) should be ruled out without feeling compelled to present a quantitative analysis comparing the benefits of additional swimming with the costs of additional drowning. I don’t find this position entirely objectionable, but I doubt many hold it. Would you object to requiring lifejackets if exceptionally comfortable ones could be provided on site at minimal cost?
Moreover, even if #1 and #2 are ruled out on principle, a large set of options remain across which swimming rates (and drowning rates) will vary widely. Indeed, displaying images of the corpses of past drowning victims may be a more effective deterrent than an explicit prohibition. What criterion will be applied to evaluate the alternatives when deciding how strongly to word the sign? To me, the most coherent alternative to paternalism is sadism.
The thrust of Whitman’s essay appears to be that however this sign is worded, it ought to contain a footnote that the chosen wording reflects only the attitudes which currently prevail and which pertain to this specific spot. That footnote would warn that nudges to avoid swimming (or, for that matter, nudges to swim) might gradually metamorphose into ever more intrusive infringements, potentially spilling over into other policy arenas. For example, suppose after deliberation, you selected sign #8. When the sign later needed to be repainted, and you revisited the decision, Whitman predicts that you would choose sign #3 (which you now compare to sign #8 rather than to no sign), and that this process would continue inexorably, until sign #1 was in place. Moreover, once the public had no easy option to cool down on a hot summer’s day, they’d be more favorably inclined to other interventions (e.g., taxes on French fries), until one day in the distant future, we’d exercise our lone remaining option and plug ourselves into the Matrix.
Slippery slopes and other metaphors are evocative and sometimes instructive. But they don’t always provide the best description of the world. We’ve all heard (and many believe) that if you place a frog in a pot of water that is gradually heated, it will cook without ever attempting to get out. The putative logic is that the frog displays small-change tolerance, which makes it relatively easy, through a series of small thermal increments, to induce the unsuspecting frog to remain passive until it succumbs to the heat.
That is a good story. And it is false. Dr. Victor Hutchison summarized experiments testing this claim thusly: “As the temperature of the water is gradually increased, the frog will become more and more active in attempts to escape…If the container size and opening allow the frog to jump out, it will do so.”
Perhaps, though, frogs’ thermo-regulatory behavior is more developed than humans’ regulatory-regulatory behavior. But I see no reason to assume so. Returning to the riverbank sign, I see no reason why someone who selected sign #8 would later favor stronger wording. Indeed, the feedback loop I imagine is not positive, but negative — once the sign induces sufficient caution to reduce drowning, the absence of recent drowning deaths would embolden more people to swim, and to regard additional restrictions as more unreasonable.
As a rhetorical parry to an anticipated accusation of paranoia, Whitman cites the historical path of anti-smoking regulations. At first, smoking was banned on airplanes, then later in restaurants and even bars. No doubt this is an example of expanding regulations. Here is another. 1962, the sedative Thalidomide was banned because thousands of children whose mothers took it were born without limbs. In 1972, DDT was added to the list of regulated chemicals because it proved to be highly toxic to birds and fish. Soon thereafter, manufacturers of paint were prohibited from including lead because chronic exposure was found to reduce fine motor skills and lower IQ, and more recently, they’ve banned it from gasoline as well. What will they ban next!? – trichloroethylene?
Whitman poses the challenge of defining (ir)rationality and adjudicating among preferences that conflict within or across time. He challenges those who advocate good health over good food, or patience over impatience, to provide an argument for why such preferences are better. Such questions are not novel, but I agree that they’ve not yet been adequately addressed.
I once had salmonella poisoning (regrettably, regulatory hands had not yet been laid on casino buffets). As I lay at home writhing from stabbing stomach pains, I considered how many days of comparable pain I could endure in lieu of committing suicide immediately. I decided that number was 40. Later, when the pain subsided, I revised the number markedly upward. Was the later number more or less correct? Was my accounting of the pain biased in the “cold” state or in the “hot” state? I’ve reflected on this often but still don’t feel intellectually prepared to answer it. A similar analysis can be applied to decisions regarding food or sex. If a one-time global decision about future opportunities for caloric foods or dalliances was made from a cold state, we might well end up with a life that is too ascetic. As James Branch Cabell memorably quipped “There is no memory with less satisfaction than the memory of some temptation we resisted.”
But an inability to say something conclusive about some choices does not invalidate one’s opinion about others. If model airplane glue briefly excites but then permanently destroys the pleasure centers of the brain, would anyone hesitate to describe another’s decision to huff it as “bad”? If those who say they want to lose weight also report being happier when thin, ought their friends not try to help? If common sense about marginal utility dictates that people save more for old age, and people, in fact, choose to save more under some plans, ought those plans not be available?
I see nothing pernicious about recommending options that appear to be better, nor with favoring one’s own preferences when doing so. If my friend has eaten two dishes at a restaurant and prefers the salmon over the tuna, I hope he has the good manners to recommend it to me. If he’s wrong, I’ll choose the tuna next time.
 It is interesting to consider what a welfare minimizing sign would look like. I propose this: Though leeches and wood ticks are each present at this site, try not to think about these parasites, since both of them can smell fear.
My Fears Affirmed
I want to thank the Cato Institute — specifically, Will Wilkinson and Jason Kuznicki — for arranging this exchange. I also want to thank my three respondents for their comments.
I have a lot to say in reply, so I’ll respond to each in a separate post. Here, I reply to Richard Thaler.
In response to my slippery slope fears, Thaler diagnoses me with bathmophobia. But to paraphrase the old saying, “Just because you’re bathmophobic doesn’t mean they’re not out to slip you.”
Prof. Thaler’s response does little to allay my fears — and much to reaffirm them. His generally dismissive tone only underscores the main point of my initial essay: that the new paternalists simply don’t take the slippery slope risk seriously. That, I think, is ample reason for the rest of us to be afraid.
Before replying to Thaler’s specific responses, I’d like to draw attention to all the points from my initial essay that he simply overlooks.
1. He does not address the wide-ranging policy agenda of new paternalism. Instead, he continues to rely on innocuous (private, non-coercive) examples like the placement of food in cafeteria lines. But the new paternalist agenda goes very much further.
2. He does not respond to my charge that the “libertarian paternalist continuum” (constructed by himself and Cass Sunstein) disregards the crucial distinctions between private and public and between voluntary and coercive.
3. He does not address the problem of small-change tolerance, which eases the transition between soft and hard paternalism, especially in the presence of continuum like the one he constructs. (Shane Frederick does address this point; I will reply to his essay separately.)
4. He does not mention the myopia of policymakers, which can lead them to ignore the longer-term potential costs of their policies, including the slippery-slope risk.
5. He does not consider the tendency of policymakers to use oversimplified heuristics and rules of thumb, rather than engaging in careful policymaking based on behavioral economic research.
6. He does not discuss the influence of special interests that will continually push for marginal extensions of certain paternalist laws, such as fat taxes.
Now on to the points Thaler does make.
First, Thaler reiterates his own personal commitment to “maintain[ing] people’s freedom to choose at as low a cost as possible” and to “mak[ing] choosers better off, as judged by themselves.” I’m glad to hear it. The problem is, the intellectual framework that he helped create goes much further and justifies much more. Consider this passage from his Chicago Law Review article with Cass Sunstein:
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.) [emphasis in original]
So even if Thaler himself is committed to the libertarian end of the spectrum, there is nothing in his approach that rules out substantially more intrusive policies. I wonder if perhaps Thaler is the libertarian paternalist, Sunstein the libertarian paternalist. In any case, those italics are supposed to do quite a lot of work.
Second, in response to my point about choosing among preferences, Thaler misinterprets my argument. I’m not saying that he and Cass Sunstein and Matthew Rabin all share the same preferences about everything from soft drinks to clothing design. I’m saying that when confronted with an inconsistency of choice, the new paternalists have often — with no grounding in theory or evidence — chosen among competing preferences. And when they have done so, they have unerringly chosen those preferences which are most “socially approved.” Thus, when choosing between more and less patient rates of time discounting, they have always favored greater patience. When choosing between “hot” and “cold” preferences related to purchases, they have always favored the “cold” ones. What gives them license to do this?
There is a serious contradiction here, and it goes to the heart of the new paternalist paradigm. On the one hand, the new paternalists want to say they’re making people better off according to their own true preferences. On the other, they say inconsistencies of choice reveal that people don’t actually have true preferences. They can’t have it both ways! In many of their policy proposals, the new paternalists are in fact picking and choosing whichever preferences they think best.
And therein lies the slippery slope risk: by choosing among preferences, the behavioral economists give the notion that some preferences are better and more rational than others the stamp of “Science.” That attitude, if it takes hold, can generate all manner of paternalistic policies. Thaler might not agree with those additional policies, but they will be the result of an attitude he helped to create.
Third, Thaler defends his claim that new paternalism is moderate because it lies on a continuum “with anarchy at one pole and totalitarianism at the other.” That’s a pretty wide range. Short of totalitarianism, there are still a lot of bad things governments can do to people. Furthermore, Thaler doesn’t recognize my point that the middle ground shifts over time, so that what appears to be middle ground now comes to represent one of the poles later. This process, grounded in behavioral economics, encourages gradual movement down a slope.
Fourth, Thaler says I neglected the fact that some paternalism is inevitable because default rules must be chosen somehow. I actually did address this point, so I’ll just quote myself: “Instead of positing paternalism as the default standard for selecting default rules, they could have said respecting customary expectations is the default standard for selecting default rules. Or they could have emphasized that in many domains of potential regulation, defaults are not required — and therefore paternalism is not inevitable in these areas.”
Whenever they are challenged, the new paternalists place heavy emphasis on the inevitability argument. Don’t fall for it! It is not inevitable that the state must alter longstanding rules of contract law to reflect political judgments about what people “really” want. It is not inevitable that some opt-outs will be subject to onerous conditions. It is not inevitable that certain kinds of contractual terms will be outlawed entirely. It is not inevitable that the state will impose cooling-off periods on certain purchases, or sin taxes on tempting goods. Again, every one of these proposals appears in Thaler’s own work.
Fifth, Thaler wonders when paternalist slopes have happened before — and to support the idea that they don’t, he offers the bizarre example of Prohibition. Of course, outright prohibition of consumer goods is already the bottom of slope, so I’m not sure what this is meant to prove. As Jonathan Klick points out in his reply, Prohibition was the culmination of many years of paternalistic legislation and activism, so it actually supports my view. Furthermore, many of the first laws against marijuana and narcotics were also passed during that era; those laws and their statutory progeny remain on the books. And if you’re looking for an example of slippery slopes in action, you couldn’t do better than the history of the drug war. Who could have predicted the exigencies of the drug war would lead to the gutting of Fourth Amendment privacy protections, the widespread use of no-knock warrants, the use of civil assets forfeiture to seize property without proof of guilt, the jailing of doctors for prescribing pain medication, ad infinitum?
Thaler says my example of smoking bans doesn’t work because smoking regulations have been driven mainly by externality arguments: “People do not want to fly, eat, or work in smoke-filled environments.” Now, strictly speaking, externalities are not really involved here. The relationship between a bar owner, his employees, and his customers is a voluntary transaction on private property. If a bar owner allows smoking, that is part of the environment I consent to by visiting his bar; if I don’t like it, I can go elsewhere. By intervening, the state prohibits employees and customers from voluntarily accepting certain kinds of working conditions.
But let that pass. The purpose of the smoking example was to support the idea that slippery slopes do happen, and that they may occur via the shifting-middle-ground dynamic I described earlier. So Thaler’s response is simply off target.
Thaler concludes by casting aspersions on slippery slope arguments in general. He seemingly regards the slippery slope as nothing more than a sly debater’s trick: pick any X and Y, announce “X leads to Y,” and presto, you have a slippery slope argument. Yet an extensive academic literature on slippery slopes has documented the various mechanisms by which they occur. If Prof. Thaler is unwilling to trust the conclusions of bathmophobics like myself and Mario Rizzo, then he should consider the work of Eugene Volokh, Frederick Schauer, Douglas Walton, and others (citations below). And based on the examples of smoking bans, alcohol prohibition, drug prohibition, etc., I’d say history offers ample support for the existence of slopes.
In my initial essay, I drew attention to several processes by which slippery slopes could occur in the specific realm of new paternalism. Unfortunately, those are largely the arguments to which Thaler didn’t reply.
One more thing. Thaler wants us to get on with evaluating new paternalism “on the merits.” If adopting policy A increases the likelihood of adopting bad policies B and C later, I think that’s pretty obviously one of the demerits of policy A. But even if you don’t buy the slippery slope argument, plenty of other criticisms have been made, by myself and others. In order to keep this forum on-topic, I’ve resisted going into them. But they certainly exist, and I’m sure more will come up before we’re finished here.
Frederick Schauer, “Slippery Slopes,” 99 Harvard Law Review, 1985.
Eugene Volokh, “The Mechanisms of the Slippery Slope,” 116 Harvard Law Review, 2003.
Douglas N. Walton (1992). Slippery Slope Arguments. Oxford: Oxford University Press.
Why Context Matters
I’m in agreement with most everything in Jonathan Klick’s reply. But I wish to emphasize a couple of his best points.
First, Klick revisits the public/private distinction. This is important because the new paternalists rely extensively on private non-coercive examples, from alarm clocks to ergonomically designed iPods to calorie-controlled food portions, to build support for their position. But to my knowledge, no libertarian has ever opposed these types of private “choice architecture” (although they might be inclined to call them “good product design” or “giving consumers what they want” instead of “paternalism”). The same goes for non-profit private options, such as joining Alcoholics Anonymous, advertising your diet to friends, and so forth.
But the situation changes once the state is involved. In the private sector, you have other options. You can adopt many bias-correcting measures, or some, or none at all. You can refuse to patronize establishments that adopt choice architecture you don’t like. You can search for employers who adopt human resources policies you appreciate. But most people realistically have only one government to choose from; if you don’t like the state’s debiasing methods, too bad. They might allow you to opt out of some measures… or they might not, as a careful reading of the new paternalist literature makes clear.
More importantly, keeping paternalism strictly private creates better incentives. If you fail to correct your own biases sufficiently, you bear the consequences. This at least gives you an incentive to get it right (though not everyone will). State actors, on the other hand, do not bear the consequences of getting it right or wrong. They lack both the information and incentives to pick appropriately.
Second, Klick draws attention to another adverse effect of paternalism: encouraging dependency. The more people believe that the state or some other avuncular party will protect them and guide their choices, the less reason they have to invest in good self-management skills. As a result, paternalism can ironically lead to more of the behaviors it was supposed to correct. This, too, can generate a slippery slope: the worse self-management skills become, the more areas of life seem to invite corrective intervention.
Note lastly that when Klick sanguinely observes that if new paternalism turns out to be a bad idea “we can simply reverse course to fix things in 20 years or so,” he is being facetious. (I wasn’t sure at first, so I asked.) State intervention is notoriously difficult to reverse. Prohibition was the happy exception, not the rule.
Take Me to the River
Shane Frederick begins his reply with an extended example about a river in which many people like to swim — and in which a few have drowned. His first question is, “What should the warning sign say?” My first question is, “Who owns this place?”
Frederick doesn’t specify the answer in his set-up. (The river is “open to the public,” but lots of private places satisfy that criterion.) But the answer matters. If this were my private property, I might consider banning swimming there entirely because I don’t want the bloated carcasses washing up on my shore. And that would be perfectly libertarian. I can do what I want with my property.
But assuming I allowed people to swim there at all, what sign would I post? I suppose I’d go with something like option #3 (“Extremely Dangerous Currents! Swim at Your Peril”) or #4 (“Danger. 0.000017% of park visitors have drowned here”). And how did I make that decision? Did I just engage in a small bit of paternalism? Only if you classify “honesty” as a form of paternalism, which seems a bit of a stretch to me. We didn’t need behavioral economics to tell us that people generally benefit from accurate information; the rational actor model told us that much.
How would I choose between options #3 and #4? Well, here’s where behavioral economics does tell us something interesting. It turns out different phrasings of the same basic information can induce different choices. And here’s where the new paternalists think they have a “gotcha,” because we have to choose something. They want to choose based on what makes people “better off.”
But better off according to what? Maximizing their lifespans? Bzzt! That would mean banning swimming entirely, regardless of how much people enjoy it. Maximizing satisfaction of their own preferences? Bzzt! That doesn’t work either, because the inconsistency of choice (the fact that some people choose differently depending on the framing) means we cannot identify their “true” preferences.
So it turns out the new paternalism doesn’t really offer a clearer answer to Frederick’s question than what we already had without it. My alternative standard of “providing accurate information” gave me just as much guidance.
But what if the swimming hole is public property? What should the sign say then? If I were allowed to choose, it would say “For Sale.” I’d privatize the land, and then let private providers of swimming areas compete for customers. If for some reason privatization is off the table, then the state is forced to act as a property manager. In that case, I’d like it to make decisions in much the same way a private owner should — in this case, by trying to provide accurate information. There should also be some additional constraints (like applying rules uniformly across citizens).
In any case, this example strikes me as a distraction, much like the cafeteria example so often deployed by Sunstein & Thaler. Is this really all the new paternalism is about? No, it’s about much more. Frankly, I’m perturbed that the new paternalists are so unwilling to defend in public the proposals they’ve made in journal articles. But perhaps Frederick isn’t really one of them (I confess I’ve read less of his work), and putting warning signs in front of rivers is as far as he would go.
The new paternalists would assuredly go further. Christine Jolls and Cass Sunstein, for instance, say that consumers should be exposed to “risk narratives” that go beyond mere provision of accurate information: “Specifically, the law could require firms — on pain of administrative penalties or tort liability — to provide a truthful account of consequences that resulted from a particular harm-producing use of the product, rather than simply providing a generalized warning or statement …” This is fairly close to Frederick’s option (which I don’t think he favors) of showing swimmers the corpses of drowning victims. And this is where the slippery slope potential kicks in. If the government imposes legal liability on firms for failing to tell customers scary stories, how scary is scary enough? There is no way to draw that line, and hence nothing to prevent the gradual growth of liability judgments under “insufficient narrative” tort claims.
Moving on to Frederick’s other points. He illustrates the idea of small-change tolerance with the old boiling-frog analogy — which he quickly points out is factually wrong. Good thing I didn’t use that analogy! Would it help if I introduced the analogy of men whose haircuts evolve into comb-overs? The larger point, which I think stands, is that people are inclined to ignore small changes. This is actually rational because small changes usually make small differences; nevertheless, the cumulative effect can be significant.
Frederick says there might be a feedback mechanism, so that we (like the frog) will eventually jump out of the boiling water. I hope he’s right. But when it comes to the political process, I fear he’s not. Medicare and Social Security head closer to insolvency every year that we fail to reform them, but that doesn’t seem to make much difference. Political feedback mechanisms are notoriously weak, for reasons public choice economists have made clear. And if people are as myopic as the behavioral economists claim, there is every reason to think policymakers will fail to act on problems until they are upon us.
I appreciate Frederick’s straightforwardness in admitting that behavioral economists do not have a means of “adjudicating among preferences that conflict within or across time.” So I will just reiterate that this is a major piece of the new paternalist framework. Whenever new paternalists propose to set a new default rule, thereby using status quo bias or anchoring or the endowment effect for the express purpose of changing behavior, they are effectively adjudicating among conflicting preferences.
Nevertheless, Frederick concludes by saying, “I see nothing pernicious about recommending options that appear to be better, nor with favoring one’s own preferences when doing so.” I applaud his candor in saying it’s his own preferences that he’s advancing. The new paternalists are implicitly doing the same thing, notwithstanding their lip-service to making people better off “by their own standards.”
What remains unclear, however, is whether Frederick’s recommendations would cross the line from voluntary to coercive and from private to public. I, too, see nothing wrong with telling my friends which dishes at a restaurant I’ve enjoyed the most. And if they requested my help in losing weight, I’d be happy to help out however I could. And if I ever start a business, I might well offer my employees a “Save More Tomorrow” option. Nobody I know, libertarian or otherwise, opposes any of these things.
But if that’s all new paternalism is about, then I’ve been snookered by a series of articles that have advocated much, much more. New paternalists want the state to get involved, and therein lies the danger. First come the genial recommendations; then come the rising hurdles to opting out; then come the taxes and legal penalties for disregarding the state’s friendly advice; and if all else fails, why not ban some choices altogether? That’s a serious slope, and new paternalism is the toboggan.
Christine Jolls & Cass R. Sunstein, Debiasing Through Law, 35 Journal of Legal Studies 199 (2006).
The Argument Clinic
I must say that I find Professor Whitman’s debating style reminds me quite a bit of arguing with John Cleese in the famous Monty Python argument clinic sketch. Whitman employs two strategies. 1. Mis-stating the arguments and goals of the other side. 2. Repeating unsubstantiated claims. This is tiresome and unconvincing. Let me recapitulate.
First, Whitman says that I do not take the slippery slope arguments seriously. That is correct, and for good reason. He has never presented a shred of empirical evidence to suggest that this risk is real. Firms have been using Save More Tomorrow and automatic enrollment for over a decade. Some countries have adopted similar provisions in state-sponsored savings plans. Where is the evidence that this has led to requirements that everyone become marathon runners or vegans? In the absence of such empirical evidence, the claim is just fear mongering, and, as I stressed in my earlier essay, no different from the unsubstantiated claim that privatizing some sector of the economy will inevitably lead to some catastrophic outcome. Why is the paternalistic part of libertarian paternalism so much riskier than the libertarian part? Put another way, what is the evidence that small change tolerance is asymmetric? If the frog example were true, would frogs be less likely to jump if we were gradually cooling the water instead of warming it?
As anyone who has read Nudge knows, the book is very much pro–freedom of choice and pro-market. We are eagerly looking for ways of using nudges instead of bans and mandates, a point stressed in libertarian David Henderson’s review of the book in the Cato magazine Regulation. Many libertarians and conservatives, including the Tories in the UK, have embraced the ideas precisely because they make the world more libertarian, not less.
I am also gratified that the discussion thread over at the Volokh Conspiracy is quite smart and balanced even though Ilya Somin gets the discussion off to a unhelpful start by claiming (a) that we consider regulators to be perfectly rational, when again we repeatedly say in the book that regulators are human just like everyone else and (b) that “regulators have no reliable way of estimating the benefits and costs that consumers derive from potentially risky products.” If he means “perfectly reliable” then fine, but that is not a sensible standard. Suppose that a crib is found to strangle babies that sleep in it, as happened to the child of friends of mine. I think it is pretty easy to guess that parents would not want to buy a crib that has strangled a dozen kids. Don’t you? And saying that companies that make cribs that kill babies will eventually be driven out of business is cold comfort to the parents of the kids that died. Yet we do not want to ban cribs. And if we do have regulators, don’t we want them to use some kind of cost benefit analysis? (My proposal in this domain, by the way, would be to require, yes mandate, that crib manufacturers attach a permanent identifying label to cribs to make it easier to identify and take out of service cribs that have been discovered to be dangerous. The crib that killed my friends son had been recalled but no one knew that at the day care center where it was being used.)
Second, nowhere do Cass Sunstein and I (or any other behavioral economists that I know of) ever state that the choice architect should choose default options or any other bit of choice architecture based on what we prefer. In fact, as I noted, we say just the opposite, in italics, on page 6 of Nudge, and then repeat it often throughout the book. I don’t know how we could possibly have been any clearer on that. Whitman replies that he is happy to hear that this is my view and then suggests Sunstein thinks otherwise by quoting an admittedly tortuous passage from an article we had written several years before the book. The fact that the passage was hard to parse has something to do with the fact that it did not make it into the book, and the fact that some libertarians had been confused on this point was one of the reasons we went out of our way to be so explicit and repetitive about it in Nudge. So, for the last time, we believe that choice architects, in either the public or private sector should choose defaults to make people better off as judged by themselves. If Whitman can find a single passage in Nudge where we say anything else please let me know so I can correct it in future printings. If not, please stop suggesting otherwise. The claim is simply false and misleading.
Third, since the word paternalism is what seems to give Whitman fits, let’s re-label our policy “Best Guess”. “Best Guess” is the policy of choosing the choice architecture that is your best guess of what the participants would choose for themselves if they had the time and expertise to make an informed choice. This is very similar to what a doctor would do for patients. In his original essay Whitman suggests instead that the default be set according to “customary expectations.” Why is this obviously reactionary policy either better or easier to implement? In Shane Frederick’s excellent swimming example, suppose there has never been a sign by the river, does that mean that there should never be one? Is that true regardless of the swimming fatality rate or the introduction of some hazardous waste upstream? If the old sign says “ye olde swimming hole” should we stick with that? Best Guess says the choice architect should select a sign that, on balance, maximizes the utility of the visitors to that river. Of course, implementing Best Guess can be hard in some cases, but as I also keep repeating and Whitman keeps ignoring, you must choose something, including not having a sign. This is what we mean by inevitability. You cannot avoid choice architecture, so why not try to use good choice architecture? And, since as Whitman acknowledges, the wording of the sign matters, any effort to “just stick to the facts” leaves an infinite number possibilities remaining. Whitman does not seem to appreciate that 0.000017% and pictures of corpses are both “accurate descriptions.”
More importantly, we can often improve on customary expectations. I was gratified to read that Whitman says he might offer Save More Tomorrow to his employees if he had a firm. Presumably he would do that not because it is customary (although it is becoming so) but because he thinks that the workers might like it, and it is voluntary. Hint: that is what we mean by libertarian paternalism (now libertarian Best Guess). Perhaps he might also use automatic enrollment with a very low-cost opt out, just as we recommend.
In many domains we can drastically improve on what is customary. Consider organ donations. In most states in the United States, to make your donation available you have to take some action such as sign the back of your driver’s license and get two witnesses to sign it. In some countries such as Spain they have switched to an “opt out” system called presumed consent. In Nudge we endorse a third approach, in this domain called “mandated choice.” It also happens to be used in my home state of Illinois.
Under this plan, when you go in to get your drivers license picture retaken every few years, you are asked whether you want to be a donor or not. You must say yes or no to get a license. About two thirds of drivers are saying yes, and lots of lives will be prolonged as a result. This is a great example of libertarian Best Guess in action. Although a large majority of people say in polls that they would want their organs harvested, many never get around to opting in, and a vocal minority in the United States object strenuously to the idea of presumed consent. So it is worthwhile to find a policy that gets many of the benefits of presumed consent without while honoring the preferences of those who object to having to opt out. Mandated choice has some other advantages in this context, namely that families are less likely to overrule the choices of the donor if that choice has been made actively rather than passively.
One might wonder whether you can always use mandated choice, or what David Laibson and his colleagues call “active decision making,” but as those authors acknowledge, that method is more attractive in simple yes-no situations than in one such as 401(k) pension plan design where many participants have no idea what is a good investment strategy and would prefer to have an expert suggest a sensible default, one that they can reject if they want.
I do not know where Whitman gets the idea that our implementation of “Best Guess” is to favor what is “socially approved.” Again, no one who has read Nudge could be left with that impression. We apply our tools to many domains that are not politically popular. (Start with chapters 13 to 15 for examples.) Nor do we always favor the more puritan alternatives. If we talk more about nudges for things like savings, smoking, and weight loss, that is because the evidence there is strongest that people want such nudges (and pay for them in the market). I have never heard of anyone signing up for a plan to commit himself to smoking more cigarettes next year, or eating more fast food. Have you?
I likewise do not understand the big distinction Whitman makes between government vs. private use of libertarian Best Guess. If he would use Save More Tomorrow in his company, why shouldn’t the government offer it to its employees, or utilize the concept in a partial privatization of Social Security? If one favors school choice, then wouldn’t you want to help parents make better choices for their children, and especially encourage more parents of disadvantaged children to make good use of the choices being offered to them? These are the kinds of policies for government that we propose in Nudge. Whitman’s biggest gripes are with the policies that he only imagines that we favor, ones that involve coercion. What part of the term libertarian doesn’t he get?
One of the examples we discuss in Nudge is an innovation by the city of Chicago on a dangerous curve on Lake Shore Drive. The city painted horizontal lines across the road that get closer and closer together as the driver approaches the apex of the curve. As we recently posted on our blog, this innovation has reduced accidents by 36%. Does Whitman think this is bad because it was implemented by the government? Should only private toll roads be allowed to think creatively? And notice that the “customary” signage in this location, which included a reduction in the speed limit to 20 mph, was less effective than the nudge.
It is true, of course, that others may favor policies that are either more libertarian or more paternalistic. Some behavioral economists have written favorably about sin taxes and cooling off periods. Whatever one thinks about the costs and benefits of such proposals, they are surely less intrusive than bans. And, as Matthew Rabin often points out, all taxes create some distortions. One might prefer a smaller government, but until that objective is achieved, we have to fund the current one, so the debate should be about whether a tax on sugar or alcohol is better than one on wages or interest. And, wouldn’t most libertarians prefer to legalize and tax marijuana as opposed to our current policy?
And lastly, small clarification. In my discussion of smoking regulation, I said that externalities were part of the argument for pushing those policies. I was not as clear as I should have been so let me elaborate a bit. I think that the political justification for the bans on smoking in public places like bars and restaurants has largely been driven by the risks and discomfort caused by third-hand smoke. I did not mean to suggest that such arguments are necessarily compelling. My only point, a minor one at that, is that I don’t sense that the increasingly strong regulations against public smoking can be used to say that there is a growing trend toward paternalism. In fact, over roughly the same time period, marijuana laws appear to be getting less intrusive, both in the U. S. and elsewhere. Indeed, in Amsterdam, it is legal to smoke a joint in a coffee shop, but not a cigarette!
In conclusion, sometimes judging the slope can be as hard as reading a green in golf. In life, as well as in golf, one can take comfort in the fact that on average, the slope is zero. If you live in fear of downhill putts you will leave a lot of putts short. When in doubt, aim for the cup.
 Gabriel D. Carroll, James J. Choi, David Laibson, Brigitte Madrian and Andrew Metrick, 2005. “Optimal Defaults and Active Decisions,” NBER Working Papers 11074.
Revealing Revealed Preferences
I wish I had as much money as Thaler. Presumably, among the reasons I don’t are because I neither save enough nor work hard enough. I take my boys to Phillies games, costing money and time, among other diversions that thwart my stated goal of being rich. Would I be better off if someone nudged me to save more money and to spend more time working by making it more difficult to watch these sporting events, such as the Phillies kindly did for most of my adult life or the 76ers’ current attempts to make me more productive?
Thaler and the other libertarian paternalists repeatedly emphasize that they want to make people better off as judged by themselves. If I say I want to be rich, but then fail to do things that are likely to lead to that outcome, does that mean that I need to be nudged or does it mean that my stated goal was a highly conditional statement (shorthand for “I want to be rich as long as it means I don’t have to work very hard or give up any consumption in the short term, otherwise I would rather continue doing what I’m doing perhaps while wearing a monocle and a top hat”)? Whether a nudge makes someone better off as judged by himself depends crucially on whether we think actions or words better reflect the person’s subjective judgment.
That question — should we believe actions or words? — is not one that admits an easy answer using the tools of an economist, unless that economist is willing to abandon the subjective valuation perspective and simply impose some kind of external judgment (of course people want to save more, get more education, be thinner, procrastinate less …). The libertarian paternalists might respond by saying that they are not only relying on people’s words but also on the fact that people do freely enter into pre-commitment devices to better align their actions with their stated goals. Great, then what’s the problem? The market then is already satisfying these demands for those who want them. If Thaler and the others think they can improve the market, cash in on that insight.
Why do libertarian libertarians privilege the revealed preferences of actions over stated preferences? For many it comes down to the fact that people bear the costs of their actions, something that doesn’t happen for preferences that are merely stated. Yes, we should internalize externalities if necessary through public policy, but many of the new paternalists (though not necessarily Thaler) are too quick to define well internalized effects as externalities to justify their interventions, whether it be a nudge or a shove. The fact that paternalists use externality arguments to justify smoking bans in restaurants, cases where the owner already has every incentive to internalize the negative consequences of smoking in his establishment, suggest that many of them are not above keeping their motives oblique. Or, if necessary, just invent internalities as a way to justify substituting your own favored outcomes for those that naturally arise.
Thaler does deserve credit, as he points out, for using Nudge to advocate a softening of paternalistic public policies such as re-designing the way fuel efficiency information is imparted to car buyers, as opposed to simply mandating higher fuel standards. Such an approach has the benefit of educating consumers about what is in their own best interest without restricting choice. This approach is so sensible that one wonders why car manufacturers themselves have never figured out the value of advertising fuel efficiency in such a salient way.
In some ways, Thaler’s critics are probably projecting the sins of the paternalist paternalists onto him. Thaler’s nudges are generally premised on the assumption that opt-out costs will be trivial. If we have to have a default rule anyway, why not pick the one that makes people best off, and for those with different preferences, they can simply opt out? Under that premise, Thaler is completely reasonable in suggesting that we should not fear when nudges move from private choices to public policies.
As a practical matter, however, most paternalism is not accompanied with these costless opt out provisions in real world public policy. When it is, and large numbers of people do actually opt out, undercutting the policy goals of the paternalists, a common impulse is to foreclose the possibility of opting out. In my previous comment, I painted national Prohibition as following exactly this pattern. Similar stories can be offered regarding more recent smoking bans and a host of other paternalistic interventions. Beyond simply asserting that their suggestions are default rules, leaving people free to make different decisions, perhaps the libertarian paternalists can spend some time discussing how the opt-outs can be preserved in the face of these tendencies.
 I didn’t know we could use footnotes in this forum, but Shane did it, and I am the law professor here. Economists have an unfortunate tendency of assuming that you can simply implement a policy with all of the important academic nuances intact without worrying about how the policy will interact with other legal and political forces. For example, it’s common to hear in economics workshops that a solution to problem X would involve “contracting for a bond with various penalty clauses to align incentives blah blah blah.” When I was just an economist, I thought such claims were completely sensible. However, after spending some time in law school, I started replying to the other economists, “OK, and how exactly would you do that given contract law issue Y and tax consequence Z, etc.” Anyway, I think the libertarian paternalists who have moved beyond academic musings to influence real policy have a responsibility to address practical questions like this.
To Tell the Truth
If arguing with me is like walking into Monty Python’s “Argument Clinic,” arguing with Richard Thaler is like playing the 1950s game show “To Tell the Truth.” Will the real Richard Thaler please stand up?
One Richard Thaler is heavily represented in the book Nudge, as well as in this debate. This Thaler has lots of helpful advice for product designers, human resource managers, and life coaches. All he wants is better designed cafeteria layouts, easier to fill out forms, better stovetop arrangements, and so forth. When it comes to government, his emphasis is on liberty-improving proposals like privatizing marriage and allowing school choice (for which I applaud him). When he advocates more government, it’s usually in form of modest warning-labeling requirements. He focuses on default rules with very low costs of opting out. He says my biggest complaints are with policies that I only imagine that he favors: “ones that involve coercion.”
And then there is the other Richard Thaler — the one who co-wrote the article “Libertarian Paternalism Is Not an Oxymoron,” published in Chicago Law Review. This Thaler is far more ambitious about the prospects for paternalism to improve our lives, not just in the private sector, but in the public sphere as well. Rather than repeating myself, because Thaler finds this irritating, I will again encourage readers to check out pp. 1174–1177 and pp. 1184–1190 of that article (and pp. 693–699 of Rizzo’s and my article on the subject). Suffice to say that this Thaler goes far beyond defaults with low costs of opting out. He specifically says that planners — including government planners — could engage in a “more aggressive form of paternalism” by imposing higher procedural burdens on opting out, or impose “substantive constraints” that rule out some opt-outs entirely, or even “reject freedom of choice on the ground that those who reject the default plan will err all or almost all the time” (see pp. 1189–1190). All of these meet with Thaler’s (or should I say this Thaler’s) seeming approval.
To tell the truth, if I had only read Nudge, I would never have gotten exercised about this topic; I would never have written journal articles on the subject; and this debate would probably not be happening. But now we have a two-Thalers problem, and the earlier Thaler’s articles are still out there influencing people.
Is it possible Thaler has changed his mind? It sounds like it. In response to my quoting a passage in his article about libertarian paternalism versus libertarian paternalism, Thaler says that passage was “admittedly tortuous” and that’s why it was left out of his book. Actually, I didn’t find it tortuous; I found it disagreeable but admirably clear. And the same sentiment — that libertarian paternalism encompasses a wide range of policies, some of which are substantially more intrusive — appears repeatedly in the article, so it doesn’t seem like a mistake. How about this passage?
As we have said, there is a thin line between non-libertarian paternalists and libertarian paternalists who impose high costs, procedural and substantive, on those who reject the plan. 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. (pp. 1189–1190)
If Thaler is ready to repudiate all or most of the more intrusive policies discussed in his pre-Nudge days, I’m ready to hear it. Until then, I can only assume he still stands behind them.
But at the end of the day, this isn’t about what Richard Thaler really believes. Why not?
First, because Thaler is just one part of a broader movement. Libertarian paternalism is only one flavor of the new paternalism. Colin Camerer, et al., in their article “Regulation for Conservatives,” advocate a wide range of similar policies, and you won’t find the word ‘liberty’ or ‘libertarian’ anywhere in the article. Meanwhile, people like Matthew Rabin and Ted O’Donoghue, and Jonathan Gruber and Botond Koszegi are pushing both new sin taxes (on fat and other unhealthy foods) and large increases in old ones (cigarettes, booze) — again, with little or no regard for the liberty question.
Second, no matter what the academic paternalists may believe, their ideas will inevitably be transformed by the political process. No matter how much Thaler stresses that he really only wants to make people better off “by their own standards,” he cannot control the evolution of his ideas. The slippery slope argument fundamentally addresses how ideas and policies evolve over time, often far beyond the intentions of initial policymakers. Politicians, voters, bureaucrats, judges, and special interests will all have their chance to misunderstand, misrepresent, misapply, and overextend Thaler’s (and others’) ideas. Of course, this is to some extent unavoidable; as a libertarian, I am all too aware of how libertarian ideas can be misstated and misused by wrongheaded politicians. My claim, however, is that the new paternalism by its very construction is particularly vulnerable to slippage — and that its architects ought to be cognizant of that risk.
I have many other reactions to Thaler’s most recent post, as well as reactions to comments from elsewhere in the blogosphere. But there’s plenty of time left in the month.
Peace at Last
I am pleased to say that we finally seem to be making some progress. If Professor Whitman has no qualms with what is written in Nudge then I am pleased indeed. And Whitman needn’t fear that there are two Thalers out there. Most would agree that one is more than enough.
Frankly, I do not see much difference between what we wrote in 2003 and what later appeared in Nudge, but of course five years of work does help one think clearly about an idea and learn how to express your thoughts in ways that lead to less confusion.
I do not understand what Whitman finds objectionable about the long passage from our 2003 article that he quotes in his latest installment. We are merely stating the obvious, that all policies have costs and that there is no bright line between libertarian paternalism and what might be called “almost libertarian” paternalism. In Nudge we use the expression “one-click” paternalism to make it clear what our ideal policy would be. The idea is that if you can opt out with one mouse-click then no one should really object to any costs imposed on those who prefer something other than the default. But of course that is not always possible. Some people do not use the web. So other policies might impose higher opt-out costs. It is also the case that at the other extreme, even outright bans impose few costs if they are not enforced.
The other passages from the old article that Whitman points us to should also raise no red flags. We never advocate the policies he seems to object to. We only discuss a range of policies that vary in the degree to which they would qualify as “libertarian paternalism” by our definition. And, I think the book makes out views quite clear about where we think lines should be drawn.
Finally, it is of course true that I cannot control how my ideas are used, either by those who advocate similar but more intrusive policies, nor by those like Whitman who criticize them by mischaracterizing them. When we say that we only want to help people make better choices as judged by themselves, we mean it. Really. And it is frustrating to constantly have to respond to those who criticize something we do not say or believe.
I have little to quarrel with Jon Klick’s last entry except that he seems to fall into exactly the trap that he rightly points out many of the other critics trip on, namely “projecting the sins of the paternalist paternalists onto” me. The point of libertarian paternalism is precisely to devise policies that help but don’t intrude. I don’t like most pure paternalism either. But I really feel that the best way to fend off pure paternalism is by utilizing nudges instead of shoves, and by insisting that we keep the nudges as gentle as possible. Can any true libertarian really disagree?
I truly believe that libertarian paternalism offers an approach to public policy that libertarians can embrace and, in so doing, avoid being mischaracterized themselves. Libertarians are not lunatics, though by taking extreme views they open themselves to caricature as in the cartoon that appears in this week’s New Yorker. A man is standing in front of his blazing home holding a bucket of water and turning down the help of the fire department with the explanation that “I am a libertarian.”
Intentions versus Consequences
I’m gratified to hear that Richard Thaler doesn’t support all the policies that appear in his earlier work on libertarian paternalism. The inclusion of those policies sounded a lot like an endorsement to me, but I’ll take him at his word that he personally doesn’t back them.
And yet my concerns are not assuaged. As I indicated in my previous post, this discussion isn’t about the personal beliefs of Richard Thaler. It’s about a broader movement of which he is only a part. Thaler may indeed be the most libertarian of paternalists, but others are far less restrained. Policymakers, even less so.
Moreover, there is still slippery-slope potential in Thaler’s position. Keep in mind that slippery slopes are not merely about policies (i.e., policy A leads to policy B). Slippery slopes often result from intellectual frameworks, or ways of thinking. My point, from the beginning of this exchange, has been that Sunstein and Thaler (among others) have framed the debate about paternalism in an unfortunate way — one that will tend to encourage more serious intrusions down the line.
What is dangerous about their framing of the issue? I will highlight two features.
First, there is the failure to draw important distinctions between public and private, and between coercive and voluntary. Most of the new paternalists simply don’t mention these distinctions at all. Thaler and Sunstein, in their pre-Nudge articles, present all the harder paternalist policies (the ones Thaler now says he doesn’t actually support) as consistent with libertarian paternalism. So it doesn’t really matter whether Thaler himself supports those policies; he has constructed a framework that includes them. He provides no clear standard by which to draw the line between soft and hard paternalism. This feature of new paternalism makes it vulnerable to slippage.
Even in his most recent post, Thaler underscores this point: “We are merely stating the obvious, that all policies have costs and that there is no bright line between libertarian paternalism and what might be called ‘almost libertarian’ paternalism.” Why is there no bright line? Only because they have bizarrely defined ‘coercion’ in terms of the cost of exercising choice, without regard to who imposes the cost and how. Under this definition, there really is no line between (a) a fat tax imposed by the government, and (b) a self-imposed cost from storing fatty foods in a high cupboard.
Admittedly, bright lines are sometimes hard to draw. Even the brightest line may look fuzzy on close inspection. But in this case, the line is not so difficult. Self-imposed costs are not coercive. Costs that result from the laws of nature are not coercive. Costs that result from the free choices of others about how to use their property (such as a store owner’s decision not to stock Twinkies) are not coercive. But costs imposed as taxes and penalties by the government on private, voluntary transactions are indeed coercive. Unfortunately, the new paternalist framework tends to ignore, or even actively erase, this line.
(Just to be clear, I don’t think the cost of exercising choice is irrelevant. For a given policy that meets the criterion of coercion, a higher-cost version of that policy is generally more coercive. A $10 Twinkie tax is more coercive than a $1 Twinkie tax; ten years in prison for drug use is more coercive than one.)
Second, there is the matter of illegitimately choosing among preferences. I hesitate to bring this up again because this is where Thaler believes I’ve been most unfair to him. He states repeatedly that he only wants to help people “by their own standards.” The problem is that his analytical approach makes it unavoidable that someone must do the choosing — if not Thaler and his coauthors, then somebody else. The logic of their approach reveals that they are indeed choosing among preferences, whether they intend to or not.
Recall that behavioral economists have (often) demonstrated that people are irrational by means of experiments showing that people are internally inconsistent. They choose “A” under one framing of a decision, but “B” under a different (but analytically equivalent) framing of the same decision. In principle, such conflicts of preferences don’t reveal true preferences. Arguably, they reveal the absence of true preferences; this is a point that Sunstein and Thaler make repeatedly in their published work. We simply do not know whether people “really” prefer A or B, and there might not even be an answer to that question. So when the planners arbitrate by favoring the A-preference over the B-preference, they are necessary invoking some external standard. Maybe it’s their own preferences; maybe it’s socially approved preferences; maybe it’s politically correct preferences; or maybe they’re just flipping a coin.
Even if we suppose that true underlying preferences exist, we don’t know what they are. This is what Mario Rizzo and I have called “the knowledge problem of paternalism.” To successfully implement welfare-improving paternalist policies (such as optimal fat taxes or even optimal default rules), the planner must possess an insurmountably large amount of information: what people’s true preferences are, which biases prevent their achievement, the extent of those biases, how they interact with other biases, how much people have already self-corrected their biases, how much “unlearning” of self-correction will occur in response to policy, and how heterogeneous the public is on all of these dimensions.
The knowledge problem constitutes a direct argument against new paternalism; it casts doubt on whether even the wisest planners can implement it properly. But the knowledge problem also bears on the slippery slope risk. What will planners do in the absence of all that information needed to craft good paternalist policy? Friedrich Hayek, in his critique of central planning, hit upon the answer. Lacking information about their subjects’ preferences, planners end up privileging their own preferences — or, in a democratic system, those of biased voters and motivated special interests.
To summarize: Some new paternalists, like Thaler, may support only the mildest of measures. But their analytical approach will, if generally adopted, set in motion slippery-slope processes that are largely independent of their intentions. So I would like to see Prof. Thaler and other new paternalists do more than repudiate specific policies; I would like to see them remedy the objectionable features of their intellectual framework.