Libertarian paternalism
Soft Paternalism, also referred to as asymmetrical paternalism and libertarian paternalism, is a political philosophy that believes the state can “help you make the choices you would make for yourself—if only you had the strength of will and the sharpness of mind. But unlike 'hard' paternalists, who ban some things and mandate others, the softer kind aims only to skew your decisions, without infringing greatly on your freedom of choice.”[1]. The term "libertarian paternalism" is intended to evoke the idea that soft paternalism is an approach to public policy that can be endorsed by libertarians because it does not abridge individual freedom, though most self-described libertarians are firmly opposed to it. Asymmetric paternalism refers to two asymmetries: the policies are designed to help irrational people who are not advancing their own interests while not interfering with the autonomy of those who are making rational, deliberate, decisions. It is also asymmetric in the sense that the policies are designed to be acceptable to those who believe that people behavior rationally and to people who believe that people behave less than rationally.
As an example, take the default contribution rates on defined contribution tax-deferred retirement savings plans. Until recently, the default contribution rate for most plans was a zero, and despite the enormous tax advantages, many people took years to start contributing if they did ever. Behavioral economists attribute this to the "status quo bias" -- the common human resistance to changing one's behavior -- combined with another common problem – the tendency to procrastinate. Research by behavioral economists demonstrated, moreover, that firms which raised the default rate instantly and dramatically raised the contribution rates of their employees (see, e.g., Choi, James J., Laibson, David I., Madrian, Brigitte C. and Metrick, Andrew, "For Better or For Worse: Default Effects and 401(k) Savings Behavior" (December 2001). NBER Working Paper No. W8651. Available at SSRN: http://ssrn.com/abstract=294089). The asymmetry of soft paternalism can be seen in the case of a policy which raises default rates. Those who are making an informed deliberate choice to put aside zero percent of their income in tax deferred savings still have this option, but those who were not saving simply out of inertia or due to procrastination are helped by higher default contribution rates. It is also asymmetric in the second sense: If you don't believe that defaults matter, because you believe that people will make rational decisions about something as important as retirement saving, then you shouldn't care about the default rate. If you believe that defaults matter, on the other hand, you should want to set defaults at the level that you believe will be best for the largest number of people.
External links
- Cass R. Sunstein and Richard H. Thaler. Libertarian Paternalism is Not an Oxymoron. University of Chicago Law Review 70 (4), (2003): 1159-1202.
- Richard H. Thaler and Cass R. Sunstein. Libertarian Paternalism. The American Economic Review [AER] 93 (2), (2003): 175-179
- Interview with Richard Thaler about libertarian paternalism. An EconTalk podcast
- Camerer, C., Issacharoff, S. Loewenstein, G., O'Donoghue, T. & Rabin, M. (2003). Regulation for Conservatives: Behavioral Economics and the Case for "Asymmetric Paternalism" University of Pennsylvania Law Review, 1151(3), 1211-1254.(available at http://www.accessmylibrary.com/coms2/summary_0286-6924912_ITM)
- Loewenstein, G. and Haisley, E. (forthcoming). The economist as therapist: Methodological issues raised by 'light' paternalism. In A. Caplin and A. Schotter (Eds.), "Perspectives on the Future of Economics: Positive and Normative Foundations", volume 1 in the Handbook of Economic Methodologies, Oxford, England: Oxford University Press. (Available at SSRN: http://ssrn.com/abstract=962472)
- Thaddeus Mason Pope, "Counting the Dragon's Teeth and Claws: The Definition of Hard Paternalism," 20 Georgia State University Law Review 659-722 (2004).
- Thaddeus Mason Pope, "Is Public Health Paternalism Really Never Justified? A Response to Joel Feinberg," 30 Oklahoma City University Law Review 121-207 (2005).