[Cass Sunstein, guest-blogging, April 18, 2008 at 10:13am] Trackbacks
A Real Third Way, Plus Some Responses

For a long time, the nation has been split between two types: old-style Democrats, favoring mandates and bans, and new(ish)-style Republicans, insisting that markets and free choice should be respected. Richard Thaler and I think that there is a way to avoid mandates and bans, and to respect free choice, while also helping people to make better decisions.

In short, we hope that libertarian paternalism might provide a real third way, one that recognizes the best in Hayek and Friedman while also noticing the work of Simon, Kahneman, and Tversky (and Thaler), which shows that human beings often choose poorly. Thus, for example, libertarian paternalism offers fresh ways of thinking about the mortgage crisis, credit card reform, savings for retirement, prescription drugs, health care, environmental law, and even marriage. In all these contexts, a few nudges could help a lot.

I'm most grateful for the many excellent comments and objections here; I've read them all with care. By way of conclusion, let me try to respond to just a few of the most prominent, with the hope of a continuing discussion.

1. Objection (made on the Becker-Posner blog as well): Libertarian paternalism is an oxymoron.

Answer: It is not. The approach is libertarian in the sense that it preserves freedom of choice. It is paternalistic in the sense that it tries to produce good outcomes for choosers. See, e.g., Save More Tomorrow.

2. Objection: Libertarian paternalism is paternalism is lamb's clothing.

Answer: Because libertarian paternalism preserves freedom of choice, it is different from standard paternalistic approaches. We favor "one-click paternalism," in the form of easy, simple opt-outs.

3. Objection: Libertarian paternalism is a tool of the left; it is the left's newest thing.

Answer: The tool (or tools) can be used by many different types. Many of our own proposals will be more popular with the right, eg school choice and medical malpractice waivers.

4. Objection: Who decides what choices are best?

Answer: The choice architect (private or public). Because choice architecture is inevitable, the "who decides" question is not a good one, at least for our purposes. Cafeterias have to be designed. Default rules have to be developed. Starting points are inevitable.

5. Objection: What about the public choice problem? Aren't public officials subject to the same heuristics and biases as everyone else, and pushed around by interest groups too?

Answer: Agreed, entirely. That's one reason this form of paternalism respects freedom. Wherever a program is in place, or inevitable, libertarian paternalism provides an appealing approach. Recall too that choice architecture, even by government, cannot easily be avoided, in the form of property law, contract law, and tort law. Existing law governing environmental protection, credit markets, labor law, and the family could be improved with a few nudges. Sure, government should privatize in some domains, and libertarian paternalists sometimes call for privatization, to increase freedom.

6. Objection: Libertarian paternalism starts us on a very slippery slope.

Answer: Not if the libertarian condition (easy opt-out) is respected. That should reduce the slipperiness by a lot.

7. Objection: In some domains, we need bans and coercion.

Answer: Sure, at least if third-party effects are serious. And we don't want to repeal the criminal law involving (say) murder and assault. But in most domains, freedom of choice should be the rule (in part for reasons that Hayek developed so powerfully).

8. Objection: Libertarian paternalism is an ugly and confusing term. Ugh!

Answer: Maybe. Probably. Originally we wanted to call the book Libertarian Paternalism, and no one wanted to publish that book. So we called it Nudge.

Thaler and I regard this as a continuing project, in some ways in its early stages, and we're aware of legitimate questions and of room for much more work on these topics. Many thanks to Eugene Volokh for hosting me and to all of you for your terrific comments and emails. We'll keep pondering these issues.

Ken Arromdee:
You missed one.

Objection: Even if Libertarian paternalism is libertarian for the consumer, who is making the choice, but it's non-libertarian for the business, who can be inspected for "choice presentation compliance", fined by some bureaucrat who thinks it put the "no 401K" option in letters that are too large, etc.

Also, you're dismissing the slippery slope argument too easily--your response is basically "if we don't go down the slippery slope, then it won't be a problem". Read Eugene's paper about slippery slopes to see how slippery slopes may work.
4.18.2008 10:26am
New World Dan (www):
7. Objection: In some domains, we need bans and coercion.

Question: How do you apply "Libertarian Paternalism" to the war on drugs or to prostitution? I don't see a mechanism there.
4.18.2008 10:47am
KenB (mail):
Whether or not the approach is perfect (what is?), I find it appealing. But then my political orientation tends toward libertarianism, so the approach is pretty close to where I am politically anyway. I question whether it would be acceptable to someone who believes the government needs to regulate more. I know a lot of such people, and I don't see them buying it.
4.18.2008 11:08am
Zacharias (mail):
Objection: Libertarian Paternalism amounts to government establishment of religion. A mere list of the government-established opt-out defaults will amount to a religion.

As it is, I have to punch GOD out of my paper bills and gravely deface my driver's license to make sure the government religion doesn't get my soul or my organs.

I have to choose my residence in one of two states (WI and NH) to avoid compulsory auto insurance.

I have to scream out loud to assert my non-participation in "moments of silence."

I have to sit down during patriotic sing-alongs at football games.

I have had to object vociferously at public prayers offered at public dances in a senior center in Austin, Texas.

I have had great difficulty in simply throwing out the city-provided recycling bin. Do you know how hard it is to throw out a garbage can or recycling bin?

How much of this opt-out screaming will I have to do before I take Jefferson at his word and bring on the 20-year revolution with high explosives?
4.18.2008 11:14am
Sean M:
Thank you for blogging this week, Prof. Sunstein. If I didn't have these lousy exams, I might even read the book...
4.18.2008 11:14am
another anonVCfan:
I don't think you've answered the public-choice critique. Since the premise of "libertarian" paternalism is that people are rational cognitive misers who use the "yeah, whatever" heuristic, you're banking on government to set default options that will leave most people better off than they would be without the default. But if the public-choice critique is correct, producers and employers will influence the adoption of default rules that benefit themselves (or harm their competitors) and are likely to leave consumers and employees marginally worse off.

It's not enough to say that these public-choice problems don't matter because "libertarian" paternalism respects the freedom to opt out. You can't on the one hand say that people are simply too (rationally) ignorant to make good choices among complex options, and then on the other hand say that people will intelligently exercise the power to opt out if the default is lousy.
4.18.2008 11:21am
Derek Moore (mail):
Prof Sunstein:

I find your approach very interesting and compelling. My major objection regards the behavioral economics research that underlies many of the "poor" choices people need to be nudged out of making. I think behavioral economists do absolutely fascinating work that can have important real-world applications. However, I think law professors jump the gun on advocating for policy changes based on that research. The recent American Economic Review papers by Plott &Zeiler suggest that the entrenched endowment effect conclusions (the willing-to-accept willing-to-pay gap) may have been a product of experimental design. Shouldn't we wait on policy prescriptions until this research is on firmer ground? Many libertarians are skeptical of regulation because of the potential for unintended consequences (in addition to public choice and moral reasons). I fear that your nudges - based on cutting edge research that may turn out to be wrong - might have many such unintended consequences.
4.18.2008 11:24am

new(ish)-style Republicans, insisting that markets and free choice should be respected

That describes a vanishingly small number of Republicans.
4.18.2008 11:34am
Zacharias (mail):
The more I think about it, the more I favor Social Darwinism over Libertarian Paternalism.

As it is now, folks too far in the shallow end of the gene pool to defer taxes though 401Ks (like Obama), pull their kids out of public schools, throw their newspapers and bottles right in the trash, cancel their contributions to paedophilic churches, and actively avoid all forms of insurance have a chance to see their genetic strain terminated through their own stupidity and the stupidity they pass on to their progeny.

They do not deserve to have the government nudging their genes into survival!
4.18.2008 11:37am
p. rich (mail) (www):
human beings often choose poorly

Well, yes we do. Isn't an inherent consequence of freedom the inalienable right to make a mistake, or to fail? And isn't that a good thing?

And failure isn't through lack of information. Plenty is available today from many sources. Most people just don't bother, else why do they, for example, regularly purchase cars that have abysmal reliability records?

At the dark heart of the nanny state (in any of its various guises), inevitably, is the requirement for someone who gets to decide what is "good", or what is in the individual's/group's/nation's best interests. And of course that someone is always portrayed as wise and benevolent. You know, like Mao.

The slippery slope is not some future hypothetical problem with any pateralistic model. Once the focus of the debate is allowed to shift from paternalistic to opt-out, the downward slide has already begun. Failure to opt-out is just another kind of mistake, and how would the "paternal libertarians" propose to solve that glaring flaw? My guess: They don't want to, as leaving the participant "in" through inaction would be, in their view, "good". And eventually certain options quietly disappear because it's become obvious that they aren't really necessary to serve the common good. No thanks.
4.18.2008 11:44am
While I haven't posted on any of the Nudge threads until now, this is by far the most interesting series by a guest-blogger that I can recall in my year or so around these parts.

Now I need to nudge a recalcitrant acquiror up to where it needs to be...
4.18.2008 11:47am
Thoughtful (mail):
Prof. Sunstein: Very interesting posts this week, but I still think you leave unanswered the question: "Why, if default option X is better than default option Y [e.g., contributing or not to 401Ks], market competition among producers to find and retain the best workers won't lead them to choose the preferred default option. Companies currently spend much time and effort--have people working full time--on developing benefit packages that best woo the best workers. Marketing how their benefits are better than competitors should lead to rapid adoption of the preferred plan.

By many that is. Not by all. Not without a government mandate on preferred default options. I assume that is your actual goal, which certainly justifies the term "paternalism", though not "libertarian".
4.18.2008 11:51am
jvarisco (www):
I'm not sure that choice is really the issue here, except for the small minority of libertarians. Liberals want people to be better off; whether by bans, taxes, or anything else. They often get stuff like this wrong, but the impulse has little to do with choice (except insofar that people are fundamentally stupid and do harmful things they will regret later - but you share their concern there). On the other side, many Republicans simply disagree with the liberals on substance, not on choice. Banning abortion, gay marriage, going after terrorism, etc. - basically all the legislation that has become the focus of the Republican party - fits much better into your liberal framework.

It seems that what you are doing (and I think it is a good idea, at least in theory) is taking mainstream non-libertarian politics and making it palatable to libertarians. Sort of like in the Matrix (everyone is given a "choice" at birth to enter the matrix or not, which balances the equation). But I think the real question is not about nudging, which I think most people would support, but as to what is nudged.

People oppose bans on abortion/gay marriage/smoking/discrimination/etc. not because they oppose bans in general, but because they don't think the behavior is question is harmful. Many Republicans oppose emissions taxes because they think global warming is made up, not because they have some problem with regulating harmful behavior. So we will still be left with the same problem we have now: deciding what behavior is bad and should be discouraged, and what behavior is not.

As an implementation question, it sounds like a great idea. But that's not the problem we need to solve.
4.18.2008 11:55am
ClosetLibertarian (mail):
I've missed some of the posts so sorry if I repeat.

I fully agree that an opt out is much better than not having one. This could work well for things like public school and social security but perhaps the state level is better than the federal level. The federal government should opt out of most of its education role (some role for standardized testing perhaps).

Realisticially, those who opt out will still get some benefits. People starving or without medical care would cause a public outcry even if they deserve it.

Same for criminal law. This should be at state level.

Enforcing the pre-new-deal type of government might do as well as your system.

You can't opt out of all taxation, so any unnecessary gov spending is just paternalism. National defense, public roads, etc are still quite expensive and more gets done than probably should because of public choice problems.

One solution to government spending is to eliminate all "mandatory" programs. Currently a certain level of benefit is given to all who qualify regardless of cost. Better but not perfect would be to fund a fixed dollar amount that would be divided among the beneficiaries. Thus perhaps free education is provided for everyone but only to the grade that the money allows or everyone gets basic medical care but no elective surgery. Anitibiotics but not Viagra. May not work but the status quo is untenable.

In support of your overall points I would like to give the example of a company 401k plan. About half of the participants stay with whatever is the default option. True whether the default is non participation, 1 percent, 5 percent, all gov bonds, all company stock, etc..
4.18.2008 1:39pm
Jim at FSU (mail):
This just seems like the same old progressive incrementalism but with smaller increments and a new coat of paint. I guess it's encouraging that the usual villains perceive a need for such an approach. Is progressivism perceived to have hit a brick wall in terms of gaining converts? That's a very encouraging development if it is true.

I think the main problem with this whole theory is that there is no "better outcome" that can be known independently by an expert. Assuming the existence of ideal or better behaviors and choices to which the people may be lead by some wise expert is the core flaw that all of the various nanny states, utopianisms and socialisms have in common.

Ideal choices are different for each individual depending on their circumstances and their individual tastes. Taking billions of these individual balancing acts and putting them into the hands of a few supposed experts results in a one-size-fits-all society with all of the inefficiency and discomfort that this implies.

Softening the authority of the experts doesn't really fix this problem. Either the experts are going to be powerless to impose their will on others beyond persuasion (at which point they might as well become journalists) or they are going to have some sort of meaningful power, in which case we're back to the old paternalistic games again and arguing over how much force they can use to promote our welfare.
4.18.2008 3:30pm
ginsocal (mail):
Interesting. Would the "nudging" include the ballot box, as well? After all, it's painfully clear that the people of Massachusetts and New York (among others) have made very poor choices for their senators, no?

At the heart of it, I don't believe it is the job of the government, at any level, to "help" people make choices. They are to defend the country, enforce the law and repair the streets. Otherwise, butt out.
4.18.2008 3:54pm
liberty (mail) (www):
You haven't conquered the slippery slope issue, or the moral/economic concern that what you propose isn't libertarian at all. Choice in the sense of vouchers is actually a step forward, but it is still redistribution (and hence not libertarian); while choice in the sense of opting out is great if it could ever work.

However, as others have pointed out, it can't. And there is the crux of the slippery slope problem. You've conceded too much. By saying "OK, people make bad choices; government needs to step in and help; we'll provide the program but you also can opt out" you have conceded the major points.

Then, when someone who has opted out needs the program and asks for it, you can't say no-- they've made a bad choice - people make bad choices, remember? Government needs to help! You too said that government needs to help when people make bad choices!

Hence you have no defense against the slippery of the slope. You've already forfeited your terms.
4.18.2008 3:56pm
JohnMc (mail):
Hmmm. Isn't a libertarian viewpoint that in order to truly have choice, the choice to fail must be one of them? Which would tend to counter the concept of paternalism. And where does the paternalism stop? Would paternalism bar stock margin selling short as the downside is infinite and hence a bad choice?
4.18.2008 8:33pm
Michael B (mail):
Isn't this far more aptly thought of as our late-modern variant of "liberalism" - something decidedly different than classical liberalism - rather than libertarianism, albeit with some hopes for some better and more finely attuned distribution mechanisms?

Taking a view of things "from the ground up," one first has to recognize that taxation itself - even within a scope that virtually everyone acknowledges as necessity, e.g. national defense and basic infrastructures - is an issue that insinuates itself upon the question of liberty. Without consciously thinking in this "from the ground up" mode, those more basic principles that bear upon both the idea of and the practical considerations that impinge upon liberty tend to be given short shrift, or even elided altogether. More succinctly put, first principles, first.

Ergo, this is in fact but a hoped for better or new-and-improved form of our late-modern "liberalism" and the note above concerning paternal libertarianism as an oxymoron possesses more than merely marginal validity.
4.18.2008 8:44pm
The pre-buttal to the observation that "libertarian paternalism" is hilariously unpersuasive.

Run along back to the ivory tower, Professor Sunstein, and dream up a better way to garb authoritarianism in the trappings of libertarianism.
4.18.2008 9:20pm
That should be: "The pre-buttal to the observation that 'libertarian paternalism' is an oxymoron is hilariously unpersuasive."
4.18.2008 9:20pm
Cornellian (mail):
I want to make choices and I want a government that facilities my ability to do so.

I want to eat healthy good and so I don't object to product labeling laws. That doesn't force people to eat celery instead of doritos, it just enables people to make an informed choice about what they want to eat. Same thing with requiring mileage information on cars, "plain language" requirements for financing agreements and that sort of thing. Don't make people pick A or B, but make sure that it's possible for people to tell the difference between A and B so they can choose one or the other and know what they're getting.

I suppose you could call that libertarian paternalism, and if that's what it is, then sign me up.
4.18.2008 10:40pm
Jim at FSU (mail):
I have no problem with forcing companies to honestly label and represent their products. I don't think that is what is pissing off the libertarians. I think most people in this country perceive deceitful product labeling to be the hallmark of a bad actor and this notion is pretty solidly entrenched in warranty and contract law. It raises, without any countervailing benefit, the cost of transacting in the marketplace when you have to sift through reams of false information to make a good decision.

I think the real objection is to two things, one of which I pointed out above:

1) The tendency to nudge people in one direction or another fails to account for diversity in personal preference and it tends to overestimate the number of areas where people are acting against their own self interest through ignorance. This whole thing reeks of marxist "false consciousness" thinking to me- the idea that the masses have been brainwashed into acting against their own interests. Eventually you are deciding that most people aren't capable of exercising free choice at all and that you will do it on their behalf. Ruh roh, that's not libertarian at all.

Also, if the ability to opt out is hidden well enough, it might as well not exist. For an example, how many gun owners are aware that machine guns and silencers are perfectly legal if you jump through the right hoops? It is very easy for this notion of libertarian paternalism to morph into libertarianism for people who have mastered the legal system and paternalism for 95 percent of the populace.

2) Interfering with the risk-taking calculus that springs from free choice. Upon further reflection, I've come to realize this is the big one. One man's insurance is another man's manacle. This is a serious problem that many left-leaning legal scholars don't seem to appreciate beyond expressing horror at the downsides of risk taking.

One of the great truisms you take away from patent law is that the great inventions and progresses of the future are rarely obvious and often harshly disparaged before they succeed. Allowing people to fail horribly is a necessary side effect of the phenomenon that allows us to have scientific, business and artistic geniuses. But it requires that we not leave these decisions up to regulators who will strangle these advances in the crib. Nudging is just the notion that smothering the baby with a pillow is less harmful than dashing its head upon the ground.
4.19.2008 7:46am
K Parker (mail):
The federal government should opt out of most of its education role
Well, since its legitimate, constutitional role is zero, and that's now what it's doing right now, you could already argue that it has opted out.
4.19.2008 1:28pm
K Parker (mail):
Oy veh. My 12:28pm was clearly supposed to say, "That's not what it's doing right now..."
4.19.2008 5:47pm
Charlie (Colorado) (mail):
Frankly, the counter-arguments to the notion that "libertarian paternalism is an oxymoron" are specious, and grow from the unstated axiom that government ought to be making choices for people. You provide two choices:

First, government can force people to do "the right thing" or "make the right choice." This is clearly coercive, and inherently not libertarian as not conducive to liberty, which is most usefully defined as "freedom from coercion."

Or, as an alternative, you offer the notion that government could provide people with a set of "approved" choices from which they may choose, or if they really insist on not agreeing with the "approved" choices, they may — perhaps — opt out. In general, your argument appears to include the notion that these "approved" choices should be made "easier" and the unapproved choices should be made "harder." The problem is that this is still coercive.

Imagine, for example, a state park which is, by statue, free to all members of the public. Now, put a policeman at the gate. Each car that enters is waved over, and the policeman tells the driver "we're collecting funds for the state parks. Would you like to pay me $5 for today, or $20 for the full season?"

You may say that the driver is free —- knowing the statutes —- to say "no thank you" and drive on, but the authority of the policeman seems to stand in the way, and frankly my experience with police over 50-odd years would make me very suspicious that I would quickly discover that there was some proximate cause for my drivers license to be examined, my insurance papers to be examined, and very possibly my car to be searched.

The point is that by presenting only the "desirable" choices, you are coercing someone basically by fraud, and by presenting them under the color of governmental authority you are even more clearly coercing people by an implied threat of the force of the state.

Most important of all, intellectually, is that your argument begs the question by simply presuming that the government ought to be coercively directing people to certain choices over others, without considering the actual libertarian position that people could just be left to make their own decisions.

Congratulations on your publication. Sadly, it appears that under it all is either an attempt to delude yourselves, or an attempt to delude others.
4.20.2008 8:34pm