Libertarian Paternalism

Princeton’s “University Channel” (link on left of main page) provides all kinds of interesting, and free, lectures, round-table discussions, and other events, featuring the top thinkers in a broad array of fields. Big names and big brains.

Each item is about an hour long, and sometimes the sound isn’t that great for the Q & A (depending on whether the guy with the mike can get to the questioner in time). But if you have the time, go there and be impressed.

The last lecture I listened to outlines a newish idea in Libertarian thought. It’s being called, “Libertarian Paternalism,” which is a purposely outrageous name. (Link)

Of course, the lecture, and especially the lecturer’s answers to challenges from the audience, does a much better job of explaining it than I will in the next couple of paragraphs, but I’ll give it a go.

Libertarian vs. Paternalist

So, part of pure Libertarianism might be thought of as keeping the government out of our daily choices. Let the government not interfere with our decisions, whether we choose to make good ones or bad.

For example, the typical Libertarian would say that the government shouldn’t tell me that I must save for my future.  They shouldn’t tax me, only to invest the money and give it back to me when I’m old. If I want to save, then that’s my business. If not, also my business.

The pure Paternalist might say that people need to be helped to make decisions that are in their interest. It’s been shown (over and over again) that people don’t save enough, and end up much worse off than they would have been with just a little foresight. Government should do what it can to make sure that people don’t screw themselves too badly.

A sort of compromise might be a checkbox on the tax form that allows you the choice to give money to the government for saving. Most Libertarians would be ok with that idea. Most Paternalists would say it doesn’t go far enough.

So what would a Libertarian Paternalist do?

Libertarian PLUS Paternalist

The Libertarian Paternalist is happy with giving the citizen the choice to save or not, but wants to make it a little more likely that people will save. (This is just an example, and for the purpose of argument, we’re assuming that saving is in the best interest of the citizen.)

So how does he do that, while retaining his Libertarian ideals? How does he push people into making one decision over another, without interfering with their choice?

I think that the shortest way to say it is that the Libertarian Paternalist looks at how people make decisions, and uses that knowledge to leverage them into making ones that are in their best interest. He doesn’t take away the choice, but he presents it in a way that will tend to produce the outcome he wants.

For example, people tend to stick with whatever defaults they’re given, even if the default isn’t the best option. So people will tend not to check a box that changes the default. If the default is that the government doesn’t save for you unless you check the box, then people will tend to not save.

The Libertarian Paternalist would say to change the default. He’d say to have the tax form read, “Check here if you don’t want us to save for you.” Again, people will tend not to check it. Therefore, they’ll tend to save.

The key here is that there has to be a default anyway. Either way, people are being pushed a little by their nature to not check the box. The Libertarian Paternalist just says to have that push go in the right direction.

Another example is that people tend to more easily give up future earnings than current holdings. So rather than a tax box saying, “Yes, I’ll pay more now,” the box could say, “Yes, take a bit out of my future paychecks.”

Again, no choice is being taken away, but more people will choose to save.

Anyway, if you’ve read this far, you’d probably like the lecture, which I’m surely butchering. The guy’s very clear and precise in his language, and he makes a good case. Go get it.

[Update: The debate gets going. (Link)]