GMU law professor Joshua Wright takes sides in the Posner-Becker dialogue over libertarian paternalism.
It is not enough to justify paternalistic intervention (soft, hard, libertarian, or otherwise) simply to show that consumers make mistakes. The burden of proof is to demonstrate that the government can make better choices for the individual than can the individual. In accounting for the long run costs of paternalism, we must also be mindful of dynamic effects that are likely to follow from paternalistic decision-making before intervening.
University of Chicago law profesor Cass Sunstein blogs in defense of libertarian paternalism:
Becker and Posner make some nice points against those who like government bans and mandates (though Posner, interestingly, defends the ban on trans fats in New York City restaurants; libertarian paternalists would disapprove of any such ban). But libertarian paternalists do not mean to allow government to forbid the triumph of the supposed "weaker" self over the supposedly stronger one. If people want to eat a lot of candy and ice cream, or refuse to save for their retirement, that is their right. Far from neglecting the bounded rationality of government officials, libertarian paternalists emphasize government error as a strong reason for respecting freedom of choice.
What libertarian paternalists add is that the opposition between "individual choice" and "government" is confusing and unhelpful when government is inevitably establishing default rules that govern outcomes if choices haven't been specifically made -- and that influence people's choices in any case. A key point, then, is that private and public institutions can't possibly avoid a form of paternalism, so long as they establish default rules and starting points. (For some reason, economists in particular seem not to understand this point.) The question is how to make those starting points as good as possible, while also preserving free choice.
Judge Richard Posner briefly responds to comments about his take on libertarian paternalism here.