Behavioral economics and paternalism.

• Author: Sunstein, Cass R.
• Position: III. Against Paternalism: Welfare through Conclusion, with footnotes, p. 1867-1899 - Storrs Lectures

3. AGAINST PATERNALISM: WELFARE

   Let us put the definitional issues to one side. Why might paternalism be objectionable? There are two time-honored reasons; both have firm roots in Mill's own argument. The first involves welfare. The second involves autonomy.

   Because we are focusing here on paternalism from the government, we should observe that there are special concerns in that context. On a familiar view, it may not be unacceptable if a private employer acts paternalistically in an effort to protect its employees, or if a credit card company does so in an effort to protect its customers. Because of the operation of the free market, harmful, insulting, or unjustified paternalism will ultimately be punished. (144) But if government acts paternalistically--to improve health, to lengthen lives, to save money--some people believe that the question is different. Certainly it is true that many of the most prominent objections to paternalist interventions (decrying "elitism," "government overreach," or "the nanny state") have a great deal to do with the distinctive social role of particular paternalists: those who work for the government.

   To be sure, there are political constraints on the actions of a paternalistic government, at least in a democratic society, and on an optimistic view, those constraints will sharply limit the occasions for harmful or unjustified paternalism. But that view may be too optimistic, especially in light of the fact that some forms of paternalism are not salient or highly visible, (145) and the associated fact that well-organized private groups, with their own interests at stake, may wish to move public policy in their preferred directions.

   Whatever the origins of the objections to paternalistic government, the force of those objections should depend on whether paternalism, from government, threatens to reduce people's welfare (broadly understood) or to intrude on people's autonomy. It is not unreasonable to fear that the risks of a paternalistic government are more serious than the risks of private paternalism. But if those risks come to fruition, the underlying concerns involve welfare, autonomy, or both. Many of the concerns about paternalistic government focus on the idea of "legitimacy," but in this context, at least, it is possible that the term is a placeholder, or perhaps even a mystification, rather than a freestanding concept. (146)

   I focus on welfarist concerns in this Part and turn to autonomy in the following Part. I begin with a set of apparently powerful welfarist objections to paternalism and then turn to responses, focusing on the fact that as an empirical matter, paternalism can in fact increase people's welfare. I suggest that a great deal depends on context and that the objections cannot be shown to be convincing in the abstract. In fact, the problem is that these objections operate at too high a level of generality, potentially making them into a form of chest-thumping. The best that can be said is that there is an intelligible rule-consequentialist argument against paternalism, both hard and soft, but the argument is unhelpful insofar as choice architecture (and hence a form of paternalism) is inevitable. Insofar as paternalism can be avoided, the rule-consequentialist objection depends on empirical claims that are unlikely to be true, at least in important contexts.

   1. Five Welfarist Objections: An Antipaternalist's Quintet

      1. Information. Suppose that we care about people's welfare, understood broadly to capture how well their lives are going. Suppose that we believe that people's lives should go as well as possible. We might insist that individuals know best about what will make their lives go well and that public officials are likely to err. Such officials might be mistaken about what people's ends are, and they might also be mistaken about the best means of achieving those ends. People might really enjoy running, sleeping, having sex, singing, jumping, smoking, drinking, gambling, or (over)eating. They might have their own views about how, exactly, to go about enjoying those activities.

         So long as they are not harming others, people should be allowed to act on the basis of their own judgments, because those judgments are the best guide to what will make their lives go well. A central argument, applicable to any kind of paternalism (soft or hard, means or ends), is that errors are more likely to come from officials than from individuals. Public officials lack the information that individuals have.

      2. Competition. In a free economy, companies compete with one another, and people are free to choose among a range of options. If a refrigerator is not cold enough and if it costs a lot of money to operate, it will not do well in the market. Companies will produce better refrigerators that cost less. If cars have poor fuel economy and end up costing a lot over time, companies will compete to increase fuel economy. If important features of products are shrouded, and are bad, they will eventually be revealed. Some consumers may be fooled or tricked, but in the long run, the process of competition will help a great deal.

         Here is a major problem: paternalistic approaches may freeze the process of competition. Especially if they are hard rather than soft, they may impair the operation of a competitive process that produces a mixture of diverse products that are well suited to diverse tastes and circumstances. We can thus identify a Hayekian challenge to paternalism. (147) Even if public officials are armed with knowledge of behavioral market failures, and even if they are public-spirited, they will do far worse than free markets, which can produce a wide range of products and rapid responses to changing tastes and needs.

         I have emphasized that participants in the market are able to counteract all of the problems identified here. Companies themselves can help promote self-control. They can reveal shrouded attributes. They can counteract unrealistic optimism. They can promote an accurate understanding of probability. As technologies evolve, such correctives should be increasingly available. For every behavioral market failure, it may soon be possible to say, with the old Apple commercial, "There's an app for that."

      3. Learning. It is true that people err, and their errors can impair their welfare. But mistakes are often productive. Life is a movie, not a snapshot, and people can learn from what goes wrong. We should not freeze people's frames. On one view, government ought not to short-circuit the valuable process of learning-by-doing. That process greatly increases human welfare. Indeed, people become better choosers as a result. If people make mistakes about diets, drinks, love, or investments, they can obtain valuable lessons, and those lessons can make their lives go much better.

         Perhaps there is no reasonable concern about efforts to ensure that people's choices are well informed--at least if those efforts do not discourage people from learning on their own. But if people are defaulted into a certain savings or health care plan, rather than asked to choose such a plan on their own, learning is less likely to occur. In a sense, soft paternalism can infantilize its citizens by preventing such learning, and reduce liberty in the process.

         For those who emphasize the value of learning, it might seem best to call for active choosing rather than default rules. (148) In many areas, government might dispense with default rules and instead require people to make choices on their own. Perhaps this approach can also be counted as a form of soft paternalism insofar as it is steering people toward active decisions, when people have not actively decided in favor of active decisions! But even if so, it will be congenial to those who emphasize both learning and choice.

      4. Heterogeneity. Human populations are highly diverse in terms of tastes and values, and one size is unlikely to fit all. In many contexts, an effort to impose a single size will reduce welfare on balance. With respect to diet, savings, exercise, credit cards, mortgages, cell phones, health care, computers, and much more, different people have divergent tastes and situations, and they balance the relevant values in different ways. (149) The same is true with respect to tradeoffs between the present and the future. People have diverse ends, and they choose diverse means. Young people will make different tradeoffs from old people. It is hardly irrational to value the present more than the future, and different discount rates can reasonably be chosen by people who are in different life circumstances. There may be no self-control problem if people decide to enjoy today and tomorrow, even if the consequence is not ideal for the day after.

         To be sure, we should not rely on abstractions here. We have to investigate the details, and relevant empirical questions, to know whether and how heterogeneity matters. If people are required to buckle their seatbelts or to wear motorcycle helmets, and if they are forbidden to text while driving, it is at least imaginable that no matter how diverse the population, the welfare of the overwhelming majority of people will be increased as a result. On plausible assumptions, they will live longer and safer lives, and they will not lose a lot.

         The admittedly serious problems with one-size-fits-all approaches should not be taken to suggest that one size never fits all. (With respect to one-size-fits-all approaches, universal skepticism is itself a one-size-fits-all approach, and a bad one.) But the simple fact of human diversity suggests that if government prescribes a certain outcome, and departs from people's own sense of what is best, human welfare might be reduced rather than increased. For those who find these points convincing, soft paternalism has significant advantages, but insofar as it steers all people in the same direction, it raises problems of its own.

         We should emphasize...