Libertarian Paternalism
Citation: Richard H. Thaler; Cass R. Sunstein (2003) Libertarian Paternalism. American Economic Review (RSS)
Internet Archive Scholar (search for fulltext): Libertarian Paternalism
Download: http://www.jstor.org/stable/3132220
Tagged: Economics
(RSS) paternalism; behavioral economics; policy intervention; rational decision-making (RSS)
Summary
The authors argue that the anti-paternalistic fervor expressed by many economists is based on a combination of a false assumption and at least two misperceptions.
False assumption 1: People do a good job of making choices, or they do a better job than third parties could do
Research in psychology and economics have demonstrated that people do not always exhibit rational expectations, that people often exhibit dynamic inconsistency, and that people often fail to make forecasts that are consistent with Bayes’s rule.
Misconception 1: There are viable alternatives to paternalism
In many situations, both private and public actors must make a choice that will affect the choices of some other people. For example, a cafeteria owner must decide whether she (1) makes choices that she thinks would make the customers best off, (2) make choices randomly, or (3) make malicious choices that make the customers as obese as possible. Option (1) is apparently paternalistic but nobody would advocate options (2) or (3).
Misconception 2: Paternalism always involves coercion
Using the cafeteria owner example above, if the owner place fruits before dessert in the line and customers are free to choose whether they want to have fruits or dessert or both, then choosing option (1) is paternalistic but does not involve coercion.
After laying out the false assumption and misperceptions, the authors go on to argue that a more interesting question to ask is: How to choose among paternalistic options? They also propose a toolbox for this purpose:
- Select the approach that the majority would choose if explicit choices were required and revealed;
- Select the approach that would force people to make their choices explicit; and/or
- Select the approach that minimizes the number of options.
Theoretical and Practical Relevance
The authors clarify the idea of libertarian paternalism by highlighting the false assumption and misconception underlying the critics of libertarian paternalism.
