New Paternalism on the Slippery Slopes, Part 4: Context Dependence

by Glen Whitman

New paternalists have also relied on the notion of context dependence to justify their policies. But as with hyperbolic discounting, they unjustifiably assume the existence of an inconsistency of preferences gives the policymaker license to choose among the inconsistent preferences. That assumption is the paper’s next target (pp. 703-704):

For a variety of decisions, people are subject to what behavioral economists call context-dependence. This means that how they choose among two or more options depends on seemingly irrelevant aspects of how the situation is described. For example, medical patients are more likely to assent to a treatment with a 90% survival rate than one with a 10% death rate, even though these are the same. In this case, people seem to favor “positive” over “negative” framing. People also seem to prefer options framed as the existing or a baseline position; this may be called status-quo bias. Another example of the power of framing is the persistent difference between willingness-to-pay (WTP) and willingness-to-accept (WTA), meaning that people will demand more money to part with an item than they will pay to acquire it, even when the item’s value is a trivial portion of their wealth or income.

New Paternalism on the Slippery Slopes, Part 3: Hyperbolic Discounting

by Glen Whitman

New paternalists often rely on the phenomenon of “hyperbolic discounting” to justify their policies. Hyperbolic discounting is difficult to define in a non-mathematical way. It is sometimes summarized as excessive impatience, but that’s an over-simplification. A person with a high-but-consistent rate of time discounting would not be a hyperbolic discounter. What hyperbolic discounting really means is having inconsistent rates of time-discounting. One consequence is that a hyperbolic discounter may exhibit “time inconsistency,” a tendency to make choices and then reverse them. After explaining hyperbolic discounting (in more technical terms that I have here), Mario and I explain how paternalists have made unjustified leaps in their use of the concept (pp. 699-700):

In short, hyperbolic discounting means that people at first make long-term plans for saving or dieting but then, when the time comes to implement these plans, they succumb to the desire for short-term gratification. For the new paternalists, this type of behavior suggests an opening for paternalist intervention or correction. Examples include the previously mentioned proposal to automatically enroll people in savings plans, and to impose a sin tax (on unhealthy foods, cigarettes, and so forth) to provide additional incentive for impatient people to resist their temptations.

New Paternalism on the Slippery Slopes, Part 2: How New Paternalism Creates Gradients

by Glen Whitman

A key conclusion of the literature on slippery slopes is that they are especially likely in the presence of gradients — meaning situations in which there is a relatively smooth continuum from one policy to another, and in which it is difficult to draw sharp distinctions. Gradients don’t guarantee slippery slope events, but they increase their probability in the presence of other slope processes.

In “Little Brother,” Mario and I review the literature on gradients and slippery slopes, and then we consider how the new paternalists deliberately frame policy choice in terms of gradients (pp. 693-694):

The new paternalist paradigm, as presented by its leading advocates, relies on discarding sharp distinctions in favor of gradients. Specifically, they reject standard distinctions between choice and coercion and between public and private action. Cass Sunstein and Richard Thaler minimize the importance of the distinction between paternalism in the private and in the public sectors. In explaining their concept of “libertarian paternalism,” they say that the distinction between libertarian and non-libertarian paternalism “is not simple and rigid.” Moreover, they explicitly state that libertarian and non-libertarian paternalism lie on a continuum: “The libertarian paternalist insists on preserving choice, whereas the non-libertarian paternalist is willing to foreclose choice. But in all cases, a real question is the cost of exercising choice, and here there is a continuum rather than a sharp dichotomy . . . .”

Sunstein and Thaler thus present us with a gradient on which choice is characterized by low costs of escaping the prescribed course of action, while coercion corresponds to higher costs of escape. Who imposes the costs of escape and how these costs are imposed are regarded as unimportant questions.

New Paternalism on the Slippery Slopes, Part 1

by Glen Whitman

As Mario has already announced, we’ve just published a new article, “Little Brother Is Watching You: New Paternalism on the Slippery Slopes,” in Arizona Law Review. You can find the full text here.

The article is quite long. As a result, I expect few people will read the whole thing. I’ve therefore decided to excerpt the article in a series of blog posts. I won’t be covering all of our arguments in the paper, but I’ll be pulling out some passages that I particularly like — and that might otherwise be missed.

Little Brother Is Watching You: New Paternalism on the Slippery Slopes

by Mario Rizzo  

Glen Whitman and I have published another article about the new paternalism – it appears in the Arizona Law Review, volume 51, no. 3 (2009). You can get it here. 

This article applies a slippery-slope or policy-dynamic analysis to the “moderate” policies proposed by some new paternalists. (The general slippery-slope analysis was first laid out in a UCLA Law Review article Glen and I published in 2003.)  

The following is a summary of the article:  

“The “new paternalism” claims that careful policy interventions can help people make better decisions in terms of their own welfare, with only mild or nonexistent infringement of personal autonomy and choice.  This claim to moderation is not sustainable.  Applying the insights of the modern literature on slippery slopes to new paternalist policies suggests that such policies are particularly vulnerable to expansion.  This is true even if policymakers are fully rational.  More importantly, the slippery-slope potential is especially great if policymakers are not fully rational, but instead share the behavioral and cognitive biases attributed to the people their policies are supposed to help.  Accepting the new paternalist approach creates a risk of accepting, in the long run, greater restrictions on individual autonomy than have been heretofore acknowledged.”  

The Knowledge Problem of New Paternalism

by Mario Rizzo 

Glen Whitman’s and my long-awaited (by us!) paper on the knowledge problem of the new paternalism is finally appearing in The Brigham Young University Law Review this fall. The interested reader can access the final version here. (You may download the paper when you reach The Berkeley Electronic Press page linked.)

There have been many critiques of the new paternalism but none, to our knowledge, that applies an aspect of the Hayekian knowledge problem to its policies. This Article deals with both theoretical and policy-oriented issues. We hope it launches a new line of criticism of paternalistic policies.  

Here is the Abstract:  

The Political Element In Empirical Data?

by Mario Rizzo  

In a recent article in the Financial Times Joseph Stiglitz argues for a more comprehensive measure of social well-being than Gross Domestic Product (GDP).  

As all principles of economics students know, GDP leaves out many interesting things. When I was a student the prime example was: When a man marries his paid housekeeper GDP falls. I am not sure how to adjust this if the housekeeper is also a man and they move to a state with gay marriage. Humor aside, you get the point. GDP misses stuff.  

Nevertheless, Stiglitz has bigger fish to fry. This is just a sample:  

“What we measure affects what we do. If we have the wrong metrics, we will strive for the wrong things. In the quest to increase GDP, we may end up with a society in which most citizens have become worse off. We care, moreover, not just for how well off we are today but how well off we will be in the future. If we are borrowing unsustainably from this future, we should want to know.” 

Did I get all the “we’s”?

Paternalist Complexities

by Mario Rizzo

Glen Whitman at Agoraphilia continues to write important posts on the less obvious problems of the new paternalism. One is on the obesity obsession and another on the illusion of choice in “libertarian paternalism.” Check them out.

UPDATE: Tyler Cowen at Marginal Revolution also has an interesting post on this subject.

Paternalist Obfuscation

by Mario Rizzo  

The “new paternalism” seems to thrive on not making important distinctions. For an analysis of a recent New York Times column by Richard Thaler, see the blog post over at Agoraphilia by Glen Whitman.

Glen and I have two articles coming out in the fall subjecting new paternalist arguments to in-depth criticisms. I’ll post these as soon as the final versions are available.

Daddy Knows Best?

by Gene Callahan

Does economics have to assume that Daddy (or anyone else) knows what’s best form himself? I’m reading Dan Klein’s Libertarian Essays, in which he asserts “that the individual knows best in matters that concern her alone” is “one of the most basic precepts of economics.”

That assertion seems to me to be mistaken. As I see it, all that economics need assume to explain, say, market prices, is that the individual, if left free to do so, will choose based on what she thinks is best for her, regardless of whether or not anyone knows better. Now, if you want to reach a laissez-faire policy conclusion, then you might want to assume that “the individual knows best.” But that would be a political assumption, not an economic one. (And one need not even make it to reach libertarian conclusions: You might think, for instance, “Man oh man is Gene a dumbass who doesn’t know what’s best for himself — but I’ve no right to stop his foolishness by force.”)