Jonathan Klick (Penn) is next up in the Cato Unbound forum on libertarian paternalism featuring entries from Glen Whitman and Richard Thaler (and one from Shane Frederick coming). My initial reaction to Thaler’s response to Whitman was that it was far too dismissive, defensive, and a bit out of tone for my own liking, but completely ignored what I take to be the core issue of the public/private distinction. Thaler writes as if the notion that government actors might have different incentives than private ones is silly.
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.
Oh, well, gee, I’m sorry then Professor Thaler, I guess there is nothing to see here. Eh. Of course, there is something to the distinction and there are, in fact, real threats that behavioral economics will be used as the intellectual cover for regulation judges by the preferences of the regulators and not the people. There is another fear that if the regulators are so sure that folks liberated from their biases would decide X instead of Y, but they keep choosing Y when nudged, eventually, the regulator figures he needs to shove harder and raise the cost of choosing Y until the individual finally chooses X. Ah, liberation at last.
Anyway, Klick rightly gets the debate back on track and focused on the right issues :
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.