Linkfest: Go Nudge Yourself
To review: There was a flash in the blogospheric pan a few months ago over a controversial book called Nudge, the authors of which (a law professor and an economics professor, both of some renown) insisted that “libertarian paternalism” is not an axiomatic oxymoron. I, along with almost every other libertarian commentator, was skeptical.
Through sheer coincidence, two entirely unrelated stories hit my aggregator on the same day, neither of which will be good news for fans of Nudge or of the notion of “libertarian paternalism.”
ITEM: The flagship anecdote in Nudge is automatic enrollment of employees in an employer’s 401(k) plan (i.e., requiring a reluctant employee to actively opt out of enrollment rather than requiring her to actively opt in). This proposal is of course not really “libertarian paternalism” in that it is not truly a “libertarian” issue one way or the other — an employer should be able to structure its compensation arrangements as it sees fit, and employees should be free to accept them or seek work elsewhere. Only government-imposed automatic enrollment would raise libertarian concerns, “paternalistic” or otherwise.
In any case, how’s opt-in working out?
People who previously did not pay much attention to those automatic 401(k) investments may now take notice when they see the losses. … According to the Wall Street Journal, target funds for people expected to retire in 2010 varied from a loss of 32% to a loss of 14% through Oct. 30th.
…
Worse, people who did pay attention and made deliberate choices to tailor their 401(k) to their liking did not necessarily succeed in that goal. Employers can move all participants’ savings into the default fund, on the ground that the investments were not appropriately diversified. Again, employees can opt out, but they don’t always notice and take action.
The whole “libertarian paternalism” house of cards is built on the foundational premise that the paternalist actually knows what he’s doing. How realistic is that premise turning out to be?
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ITEM: Another key anecdote in Nudge is the concept of “presumed consent” in organ donation: the notion that most people are in fact perfectly willing to donate their organs, but for whatever reason don’t bother to opt-in to such programs. So, libertarian paternalism apparently tells us, why not require people to opt out instead of opt in?
Maybe because people don’t like the idea of their bodies being “presumed” to belong to the government?
Gordon Brown favours a change in the existing law which would see everyone in the UK considered a donor unless they ask to be removed from the donor register.
But the UK Organ Donation Taskforce, set up by the Government, opposes the move because it says there is no evidence the change would significantly increase the number of organs available.
Actually, the Taskforce says much more than that (PDF – 40 pages):
Running as a leitmotif throughout the Taskforce’s discussions has been the issue of trust: in government, in the NHS and, to a lesser extent, in doctors and other clinical staff. The public have become less trusting and more questioning of authority over recent years. … Trust, however, is key to the success of the organ donation system in the UK. If public trust is shaken, organ donor numbers are likely to fall rapidly and could take many years to recover. The need to maintain the confidence of the public has been a key consideration in the Taskforce’s deliberations.
Both these anecdotes reflect the same problem with “libertarian paternalism.” Whatever flaws and foibles one ascribes to the public generally must also be applied to the paternalists: Are they really better at managing our retirement decisions or at ensuring that our wishes after death are actually respected? What does history tell us? (Previous post on the U.K. presumed consent proposal here.)
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As a sidebar regarding organ donation: True libertarians (as opposed to “libertarian paternalists) recognize that the best way to eliminate organ shortages is to end the absurd, and lethal, proscription on open markets for organs. On that front, a major development has arisen, in the form of Singapore crafting a pilot program allowing for the payment of compensation (but apparently not profit) to donors of kidneys and eggs. This is huge and welcome news that will, hopefully, spread to other jurisdictions. Stay tuned. (Via Marginal Revolution.) One of several previous posts on organ markets here.
Filed under: Freedom of Contract, Kip's Law, Libertarianism, Updates