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Kip's Law Sighting: Nudge and the Fallacy of "Soft Paternalism"

Far too much cyber-ink is being spilled regarding a new book by a noted legal scholar, Cass Sunstein, and an equally noted economist, Richard Thaler, called Nudge.

An excerpt from the book’s introduction:

Many of the policies we recommend can and have been implemented by the private sector (with or without a nudge from the government). Employers, for example, are important choice architects in many of the examples we discuss in this book. In areas involving health care and retirement plans, we think that employers can give employees some helpful nudges. Private companies that want to make money, and to do good, can even benefit from environmental nudges, helping to reduce air pollution (and the emission of greenhouse gases). But as we shall show, the same points that justify libertarian paternalism on the part of private institutions apply to government as well.

The premise of Nudge, usually referred to as “soft paternalism” (or, outrageously, “libertarian paternalism”) can be summed up with great ease:

You’re stupid.

If “stupid” seems too harsh a word, then substitute “irrational.”

You’re irrational, for example, because you don’t max out or even contribute at all to your 401(k) plan, even if your employer matches your contributions. You’re irrational because you don’t sign your organ donor card. You’re irrational because you make all kinds of choices that are “wrong.”

What (supposedly) makes Sunstein and Thaler different from any other two-bit hubris-drenched central planner wannabe is that they claim to define “wrong” not by their own subjective tastes and preferences, but by objective standards. To ignore a costless opportunity to get free money is, they submit, objectively irrational. To deny some innocent person access to your organs after you’re dead is, they submit, objectively irrational. And so on.

What also (supposedly) makes Sunstein and Thaler different is that they claim not to want to coerce anybody to behave rationally. They do not want to force you to enroll in your 401(k) plan. They do not want to seize your body after you die. All they want is to rejigger the rules a bit so that you do not have to “choose to be rational” (e.g., by having to opt in to a 401(k) plan) but rather that you would have to “choose to be irrational” (e.g., by having to opt out of your 401(k) plan). Yes, they’re going to be paternalistic toward you, but not at the point of a gun.

All they want to do is “nudge” you.

What of course does not make Sunstein and Thaler different, meanwhile, is that they want to be ones doing the nudging. Kip’s Law prevails yet again.

Two things amaze me about the excessive hype over Nudge. First, it seems to me that the book’s thesis is, at the end of the day, its own worst enemy. A complex, dual-disciplined (i.e., law and economics) theory that, when put to the test, can only generate a handful of de minimis policy recommendations — default opt-in to 401(k) plans, a presumption of consent in organ donation, etc. — can hardly be described as revolutionary — or, for that matter, useful. To the extent that the soft paternalists truthfully say, “this far, no further” (i.e., to the extent they are eager to assure us that their proposals are “no big deal”), then they only win by losing. If the debate is simply whether the entry for “soft paternalism” should read, “harmless” or “mostly harmless,”* then the soft paternalists have lost that debate before they’ve even started.

Second, and far more relevant in the context of Kip’s Law, is that the debate is definitely not between “harmless” and “mostly harmless.” No activist legislator, nanny-stater or other anti-freedom malcontent is going to take a theory like “soft paternalism” and invoke it only in the context of 401(k) plans and organ donation. Even if all you promise to do is “nudge,” then suddenly you’re going to start seeing lots of things that need “nudging.”

The tax code is one giant nudge: nudging us into home ownership, child rearing, charitable donating, etc. Apologists for Social Security insist that it is merely a “nudge” into saving for retirement (indeed, Thaler was a leading advisor to President Bush on Social Security reform). Hillary Clinton insists that she is not a health care socialist — she just wants to “nudge” us into (compulsory) insurance programs (which, somehow, does not constitute “socialized medicine” — but that’s a whole other blogpost).

Practically any incursion into personal autonomy can be repackaged as a “nudge” — from seat belt laws to the war on drugs. Some anti-liberty laws are “nudgier” than others, to be sure. But all derive from a belief that the government is legitimately authorized not just to protect us from each other, but also to protect us from ourselves — to “nudge” us.

Mario Rizzo, a noted free-market economist at NYU, puts this in terms of “slippery slopes” —

The new paternalism claims that careful policy interventions can help people make better decisions in terms of their own welfare, with only mild or nonexistent infringement of personal autonomy and choice. This claim to moderation is not sustainable. Applying the insights of the modern literature on slippery slopes to new paternalist policies suggests that such policies are particularly vulnerable to expansion. This is true even if policymakers are fully rational. More importantly, the slippery-slope potential is especially great if policymakers are not fully rational, but instead share the behavioral and cognitive biases attributed to the people their policies are supposed to help. Accepting the new paternalist approach creates a risk of accepting, in the long run, greater restrictions on individual autonomy than have been heretofore acknowledged.

Or you can just “opt out” of Rizzo and “opt in” to Lewis Black: Government is human beings.

More thoughts from Will Wilkinson.

Kip’s Law: Every advocate of central planning always — always — envisions himself as the central planner.

(*Explanation, for the uninitiated, here.)

One Response to “Kip's Law Sighting: Nudge and the Fallacy of "Soft Paternalism"”

  1. Yeah, put me down as not getting what's so revolutionary about any their ideas, either.

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