{"id":15614,"date":"2020-09-25T15:14:00","date_gmt":"2020-09-25T19:14:00","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=15614"},"modified":"2020-10-12T13:14:18","modified_gmt":"2020-10-12T17:14:18","slug":"libertarian-paternalism","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/libertarian-paternalism\/","title":{"rendered":"Libertarian Paternalism: Paradox of Restricted Choice"},"content":{"rendered":"\n

What is libertarian paternalism? How does it encourage better decisions?<\/p>\n\n\n\n

Described in Nudge<\/em>, libertarian paternalism is a concept that balances the freedom of choice<\/a> with the likelihood of people to make bad decisions<\/a>. Instead of just forcing people to do something, you set them up to make better choices.<\/p>\n\n\n\n

Read on to understand how libertarian paternalism works.<\/p>\n\n\n\n\n\n\n\n

What Is Libertarian Paternalism?<\/h2>\n\n\n\n

Given Humans\u2019 innate propensity to make poor choices<\/a>, whether through cognitive bias<\/a> or social conformity or animal desire, are good decisions simply beyond us? Is there any way, other than severely restricting the number of choices available to us, that public and private entities can help us help ourselves?<\/p>\n\n\n\n

Thaler and Sunstein\u2019s answer is the embrace of a new movement described in Nudge<\/em>: libertarian paternalism<\/strong>. <\/p>\n\n\n\n

Libertarian paternalism seeks to preserve liberty\u2014that is, our freedom to do what we like, as long as it doesn\u2019t infringe on another\u2019s opportunity to do the same\u2014while using techniques suggested by behavioral economics and psychology to point us in the most beneficial direction. In a libertarian paternalistic world, the public and private entities that present us with choices \u2014\u201cchoice architects,\u201d in Thaler and Sunstein\u2019s terminology\u2014use subtle strategies to push us toward the \u201cright\u201d choices. These \u201cright\u201d choices are the ones we would make for ourselves if we weren\u2019t susceptible to cognitive bias, temptation, or social influence. <\/p>\n\n\n\n

These pushes, so subtle that the average person wouldn\u2019t even recognize them as influencing his or her decision, are what Thaler and Sunstein call \u201cnudges.\u201d <\/strong>An effective nudge takes advantage of our decision-making<\/a> weaknesses to steer us toward beneficial\u2014or, at least, less harmful\u2014choices.<\/p>\n\n\n\n

Consider social influence, for example. As established just above, our tendency to follow the herd can get us into serious trouble. But a savvy choice architect<\/a> can use that tendency to alter our behavior for the better.<\/p>\n\n\n\n

An experiment conducted with the citizens of San Marcos, California, illustrates the point. Working with a sample size of 300 households, researchers informed each household of its energy consumption over the previous few weeks and included the average San Marcos household\u2019s energy consumption. In the subsequent weeks, the higher-than-average energy consumers reduced their consumption, while the lower-than-average consumers increased <\/em>their consumption. Each group wanted to be average<\/strong>.<\/p>\n\n\n\n

But there was a further wrinkle in the experiment. Some higher-than-average consumers received a frowny-face emoticon along with their consumption statistics, while some lower-than-average consumers received a smiley face. The above-average consumers who received the frowning face showed an even larger reduction of consumption <\/em>than the above-average consumers that didn\u2019t receive one. And, whereas the below-average consumers who didn\u2019t receive an emoticon raised their consumption to match the average, the below-average consumers who received a smiley face continued to consume at their lower rates<\/em>. Simple social cues had outsize effects on behavior<\/strong>.<\/p>\n\n\n\n

Objections and Rebuttals<\/strong><\/h3>\n\n\n\n

Dyed-in-the-wool libertarians might bristle at the Nudge <\/em>libertarian paternalism techniques, as they seem to constrain or otherwise corrupt free choice. \u201cIt\u2019s a slippery slope from a \u2018nudge\u2019 to a \u2018mandate\u2019,\u201d they might say.<\/p>\n\n\n\n

Thaler and Sunstein offer a three-part response to this sort of objection.<\/p>\n\n\n\n

1) Talking about the \u201cslippery slope\u201d sidesteps evaluating libertarian paternalism on its own merits<\/strong>. Does offering a better default retirement plan lead to better outcomes for workers? Does automatic enrollment in retirement plans result in more financially secure<\/a> seniors? If so, then those suspicious of \u201cbig government\u201d should suspend their misgivings. There will always be opportunities later to critique and, if necessary, retrench libertarian paternalistic approaches.
<\/p>\n\n\n\n

2) Through readily available \u201copt out\u201d choices, libertarian paternalism always offers an escape hatch<\/strong>. Slippery slopes are steepest when options are limited and there\u2019s no easy way to reverse course. Nudges prioritize choice\u2014there\u2019s always the possibility of opting out, even when the default is \u201copt-in\u201d\u2014and so the danger of creeping paternalism is limited.
<\/p>\n\n\n\n

3) Nudges are inevitable. <\/strong>Public and private entities are in the business of choice architecture, whether they want to be or not\u2014there\u2019s no such thing as a \u201cnatural\u201d or \u201cneutral\u201d presentation of choices. Thus it makes sense for these entities to nudge people<\/a> toward the most beneficial choices, as long as choice itself is jealously guarded<\/em>.<\/p>\n\n\n\n

(Although pure neutrality is impossible, there are relative degrees <\/em>of neutrality. For example, a ballot shouldn\u2019t be designed by a choice architect to favor one candidate over another\u2014rather, the candidates should be randomly ordered and nudges minimized.)<\/p>\n\n\n\n

A Word About Markets<\/strong><\/h3>\n\n\n\n

The free market, through its plethora of choices and heated competition to provide the best services at the best price, can take some of the guesswork out of decision-making. But it can\u2019t turn Humans into Econs. In other words, only Econs have all the necessary information and experience to make the rational decision 100% of the time<\/strong>.<\/p>\n\n\n\n

Take the example of \u201cextended warranties.\u201d Most devices or appliances have only a minuscule chance of malfunctioning after the factory warranty expires, yet consumers are consistently convinced to pay for extended coverage (\u201cBetter safe than sorry,\u201d we might say). An Econ knows that extended warranties are always a poor investment, but Humans don\u2019t, and the firms providing the warranties have no incentive<\/a> to nudge us away from them<\/strong>. Firms in a free market can benefit just as much from human frailty as human rationality\u2014maybe more.<\/p>\n","protected":false},"excerpt":{"rendered":"

What is libertarian paternalism? How does it encourage better decisions? Described in Nudge, libertarian paternalism is a concept that balances the freedom of choice with the likelihood of people to make bad decisions. Instead of just forcing people to do something, you set them up to make better choices. Read on to understand how libertarian paternalism works.<\/p>\n","protected":false},"author":6,"featured_media":15954,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[42,9,24],"tags":[132],"class_list":["post-15614","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-motivation","category-psychology","category-society","tag-nudge","","tg-column-two"],"yoast_head":"\nLibertarian Paternalism: Paradox of Restricted Choice - Shortform Books<\/title>\n<meta name=\"description\" content=\"What is libertarian paternalism? 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