Libertarian Nudges.

Author:Mitchell, Gregory
Position:Evaluating Nudge: A Decade of Libertarian Paternalism

    Libertarian paternalism gave birth to the nudge. (1) Under the philosophy of libertarian paternalism, a person in power seeks to create policies that steer people toward outcomes that should promote their welfare but also allow people "to go their own way." (2) The classic example of libertarian paternalism is an employee pension plan in which the employer sets the default to automatic enrollment with automatic annual contributions for all employees. (3) Under this plan, employees predisposed to accept the default option, due to motivational or cognitive inertia, will be sure to accrue some retirement savings, but those who want to spend time deliberating over their options can choose an alternative course. The libertarian paternalist planner does engage in some paternalistic judgments when designing the policy, but those judgments are not bindin; the final choice ultimately resides with those who must live under the policy. (4) Hence, under libertarian paternalism, the central planner "nudges" in a helpful direction rather than compels or restricts choices. (5)

    The nudge, however, has outgrown its libertarian paternalist origins and now encompasses any policy that does not directly involve mandates, bans, rewards, or penalties. (6) Under this broader conception of nudging, there is no requirement that the nudge seek to promote the interests of those directly affected by the policy nor that those affected by the policy have any choice in the matter. Thus, we find attempts to push people toward other-regarding choices through the manipulation of charitable solicitation forms, (7) as well as placing restrictions on the number of pills that can be dispensed to reduce the risk of intentional overdose, (8) both being labeled nudges. Even policies that involve direct payments to encourage desired behaviors have been described as nudges. (9) A cynic might contend that the nudge label is sometimes used opportunisticall, as cover for run-of-the-mill paternalism.

    With the proliferation of so many different nudges, with so many different justifications and implications for welfare and freedom of choice, it is a good time to return to the origins of nudging and ask whether any nudges can really fulfill libertarian paternalism's promise of promoting individual interests without infringing impermissibly on personal liberty. (10) I argue that a number of interventions now placed under the label nudge can in fact be fairly described as libertarian nudges. (11) In particular, libertarians should welcome nudges that seek to promote rational choice without favoring any particular choice. (12)

    Nudges that fit the definition of truly libertarian nudges are what we might call instances of choice-independent nudging: when a "choice architect" (13) seeks to provide information, make the decision-making process less difficult, or make one's choice easier to implement, then the design is choice independen. So long as these designs are implemented in ways that may improve decisio -making competence in general or the rationality of a particular decision, while remaining agnostic about what choice should be made, there is no reason to object. The motivation behind the intervention need not be paternalistic: market forces may demand more information or the availability of commitment devices. In any event, given the lack of steering, the motivation behind the intervention should be irrelevant. Furthermore, even covert choice-independent nudging presents no special libertarian concerns so long as the effect is to encourage deliberation rather than favor a particular outcome. (14)

    In contrast, many nudges do seek to steer choosers in particular directions. (15) These choice-dependent nudges increase the difficulty or cost of choosing one option over another, seek to take advantage of the cognitive or motivational biases of choosers to favor one choice over another, or may even seek to change preferences in a particular direction. (16) A choice-dependent nudge could still be acceptable to the libertarian if the nudge allows an easy way out of the choice that has been favored by the choice architect. (17) However, as we will see, this libertarian work-around will be meaningless for people who do not have the cognitive or motivational resources needed to overcome the nudge. (18) For these people, the nudger effectively makes the choice. Therefore, choice-dependent nudges cannot ever be truly libertarian nudges.

    We can properly call a number of nudges libertarian nudges, but the domain of libertarian nudging is smaller than is often realized. This domain is populated by choice-independent nudges, but a number of choice-dependent nudges pose no great concern from a libertarian perspective with respect to rational choosers where there is an easy opt-out (e.g., this will often be the case with nudges that steer through default setting). Choice-dependent nudges will interfere with the autonomy of irrational choosers, however, because the opt-out will be meaningless for this group. Thus, most nudges, whether choice-independent or choice-dependent, should be of no concern with respect to rational actors, at least not if they do provide an easy opt-out. Choice-independent nudges should be of no concern with respect to irrational actors and in fact should be welcomed, but choice-dependent nudges can never be libertarian nudges with respect to irrational actors.

    After a fuller exposition of the argument, this Article concludes by considering whether efforts to improve decision-making competence can be reconciled with libertarianism's strong opposition to paternalistic measures. (19) I argue that choice-independent nudges can satisfy the libertarian requirement that the government not interfere with private exchanges except to rectify coercive transactions. Specifically, because choice-independent nudges seek to further no policy other than promoting self-ownership through competent decisio -making and because some irrational consumers may be unfairly exploited by private actors, one can justify the use of choice-independent nudges on grounds of preventing this exploitation.


    We can formulate two alternative routes for nudges to avoid treading on the personal autonomy that libertarians prize. First, if an intervention is designed to help the chooser make the choice that would be made absent mistakes or irrational influences, then the intervention has promoted rather than impeded self-ownership, with self-ownership being one of the primary rights under libertarianism. (20)

    As James Child discusses, implicit in libertarian conceptions of self-ownership is the idea that citizens possess a "general competence" or "have sufficient capacities to engage in practical reasoning and to be moral agents." (21) "General competence" as used by Child is synonymous with the capacity for rational choice:

    By relying on much recent work on the notion of general competence and the related notion of a capacity for autonomy, we can formulate the constituents of the competence to enter market transactions. They would include the following deliberative capacities: (1) to acquire, understand and appraise information, which includes considering its probability of truth or falsity and its relevance; (2) to entertain a stable set of preferences by which choice among various options with various payoffs can be made; and (3) in light of this information and these value, to consider choices and weigh the possible risks, costs, and benefits of those choices. This includes the risk and cost of acting on false in formation. These would be combined with the broadly volitional capacities to arrive at decisions on the basis of those deliberations and act in accord with those decisions. (22) Given the importance of rational choice to self-ownership, if nudges promote rational choice without controlling how that choice is exercised, then nudges promote self-ownership. (23) One may still worry that an intervention that promotes rational choice involves some slight interference with self-determination, (24) but the most serious objection that someone else's reasoning and preferences have determined the choice (i.e., that the policy is paternalistic) will be met. As we will see, a number of nudges take this route and thus should not worry libertarians.

    A second route to defending nudges from libertarian attack, and the route that Sunstein and Thaler favor, is to create interventions in ways that allow the chooser to opt out at little or no cost. (25) If an intervention allows choosers easily and inexpensively to avoid the choice preferred by someone else, then the intervention should not be seen as a serious intrusion on personal autonomy, especially because it is inevitable that choice situations will be set up in a way that favors some course of action over another. (26) Given the inevitability of specifying a starting point and the possible influence that starting point might have, why not frame policies in ways that promote the...

To continue reading