The most remarkable thing about Richard Thaler and Cass Sunstein's Los Angeles Times Op-Ed on April 2 was their treatment of the title for their "new movement," libertarian paternalism, with such affection. (Thanks to Mark Thoma for the tip.)
Put away your jumbo shrimp -- that's one whopper of an oxymoron the economist and the law professor at the University of Chicago have dreamed up. Libertarians despise paternalism! That whole nanny-state thing? They are so not down with it. In libertopia, people get to make their own free choices, as long as they don't hurt anyone else, or infringe upon their property rights. Big Daddy can take a hike.
But some libertarians also like to dabble in contrarianism (how else do we explain Ron Paul?), so perhaps that gives us a clue. Thaler and Sunstein describe a style of government in which citizens are free to choose -- how they invest their money, how they give away their money -- but the options among which they can select from are structured so as to steer them in the socially correct direction. Designing those options, they write, is a process known as "choice architecture." Government, they argue, needs to do a better job picking choices.
We welcome you to our new movement: libertarian paternalism. We are keenly aware that both those words are weighted down by stereotypes from popular culture and politics. Why combine two often reviled and seemingly contradictory concepts? The reason is that if the terms are properly understood, both concepts reflect common sense. They are far more attractive together than alone -- and taken together, they point the way to a whole new approach to the role of government.
The libertarian aspect of the approach lies in the straightforward insistence that, in general, people should be free to do what they like. They should be permitted to opt out of arrangements they dislike, and even make a mess of their lives if they want to. The paternalistic aspect acknowledges that it is legitimate for choice architects to try to influence people's behavior in order to make their lives longer, healthier and better.
By now readers are probably wondering how Barack Obama fits into all this. Easy -- Obama's chief economic adviser, Austan Goolsbee, is a paradigmatic choice architect. Thaler exerts considerable influence on Goolsbee's views. In Noam Scheiber's illuminating look at Obama's advisers in the New Republic, the relationship is described as follows:
As it happens, Thaler is revered by the leading wonks on Barack Obama's presidential campaign. Though he has no formal role, Thaler presides as a kind of in-house intellectual guru, consulting regularly with Obama's top economic adviser, a fellow University of Chicago professor named Austan Goolsbee. "My main role has been to harass Austan, who has an office down the hall from mine, " Thaler recently told me. "I give him as much grief as possible." You can find subtle evidence of this influence across numerous Obama proposals. For example, one key behavioral finding is that people often fail to set aside money for retirement even when their employers offer generous 401(k) plans. If, on the other hand, you automatically enroll workers in 401(k)s but allow them to opt out, most stick with it. Obama's savings plan exploits this so-called "status quo" bias.
At Economist's View, Thoma says he is bothered by the implications of libertarian paternalism -- "the subtle manipulation to get me to do things someone else thinks I should be doing." Which raises a great existential dilemma: Is it better to be told to do something directly, or to be given the illusion that you are the master of your destiny?
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