New Paternalism on the Slippery Slopes, Part 5: Deference to Authority

by Glen Whitman

Another problem with the new paternalism is that it necessarily involves greater deference to the authority of experts. Here is the basic logic (p. 710):

Substantial deference to authority is inherent in the application of new paternalist ideas to public policy. This is because the complexities, vagueness, and indeterminism of their analysis (previously discussed) raise the costs of decision-making on the part of voters, politicians, and bureaucrats. The locus of effective decision-making will then quite reasonably shift to experts (“authorities”) or to simplifiers of technical ideas who may have agendas of their own. As Eugene Volokh puts it, “The more complicated a question seems, the more likely it is that voters will assume that they can’t figure it out themselves and should therefore defer to the expert judgment of authoritative institutions . . . .” There will thus be a tendency for policy to slide away from the values of the targeted agents themselves toward those of outsiders regarded as authorities. This happens in at least two ways. First, experts simplify their own theories to make them applicable in a policy context. Second, people seeking to advance their own interests will further simplify the theory and distort the facts to suit their purposes. Continue reading

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. Continue reading

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. Continue reading

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. Continue reading

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. Continue reading

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.”   Continue reading

Fast Track To The Single Payer

by Mario Rizzo  

For some time I have been interested in the dynamics of public policy – specifically, how particular policies make further policies more likely. Glen Whitman and I explored this in general terms in our paper, “The Camel’s Nose is in the Tent”  and our own Sandy Ikeda’s book, The Dynamics of Interventionism offers a different, but largely compatible, general dynamic framework  

I believe that dynamic-tendency (or slippery-slope) analysis — if carried on in a coherent theoretical framework with plausible empirical assumptions — can be a powerful supplementary critique of public policy.

The healthcare area seems especially prone to the dynamics of the slippery slope. In this post I wish to point to several factors that will ensure that the current proposals, if adopted, will not constitute a policy-equilibrium. Thus, they will likely lead to more and worse intervention by the state.  Continue reading

University of Michigan: Teacher Yes, Father No

by Mario Rizzo  

 

The University of Michigan has announced that it will become completely smoke-free in 2011.   

 

The University has chosen parentalism (in loco parentis) over encouraging the development of responsible, intelligent adults capable of making choices for themselves.

 

Normally, I would refer to such policies as paternalism but in this context in which a university is involved with the nurturing of young adults, the former term seems appropriate. But unlike normal parents, however, the school is an organ of the state (here, Michigan). So there is a case for the (legal) paternalism description as well.

 

Before we even get to the reasons for this policy, however, we are told, as in many cases of abridging liberty, it is both no big deal and an important innovation for the public good. Continue reading

In Defense of Reasonable Ideology

 

 

by Mario Rizzo

 

There have been many statements recently to the effect that we should not let “ideology” or “philosophy” stand in the way of solving our economic problems.  Indeed, the Obama Administration (and the previous Bush Administration) are keen to persuade us to drop all of this prejudice and to go after each problem – banking, stimulus, and so forth – on its own terms. We should examine each solution on its own merits.

 

President Obama’s inaugural address includes an apparent attack on ideology:

 

“What the cynics fail to understand is that the ground has shifted beneath them – that the stale political arguments that have consumed us for so long no longer apply. The question we ask today is not whether our government is too big or too small, but whether it works …”

 

 

What appears to be a sensible idea to turn our problems into purely technical ones is, on the contrary, profoundly unscientific and, more generally, anti-intellectual.

 

This is a big subject and deserves comprehensive treatment. Let it suffice here to make a few crucial observations. Continue reading

Economic Planning versus Democracy: Illustrations from the Commentators

 

 

 

 

1. Carl Bernstein, the noted journalist, on the Morning Joe TV show on MSNBC:  

“Everything we have been hearing this morning on this broadcast indicates that the reason Barack Obama is showing such masterful- and I think we can use that word- leadership so far is that he’s in the process of solving the problem of the U.S. Congress, the fact that it is a largely dysfunctional institution. That he’s got to work around it to get this economic program moving and through.” Continue reading

U.S. Treasury’s Bailout Framework: Mockery of the Rule of Law

by Mario Rizzo

 

In an attempt to provide greater transparency and predictability the US Treasury has issued the basic “framework” that will determine whether a troubled “financial institution,” defined extremely broadly as the law allows (see my previous post), will receive governmental aid. Many commentators, including this one, have thought that the Treasury policy was in great need of clarification. Instead, what we have gotten is an extremely vague set of standards followed by a statement that targeted investments will be on a “case-by-case basis.” Continue reading

Biiiiig Surprise!!!

by Sandy Ikeda

In another about-face, the Bush administration says Congress needs to free up the second half of the $700 billion federal bailout. And now that automakers are getting a share, the floodgates are almost certain to open for other nonfinancial industries that want government help.

You can read the rest of the story here.

The insurance industry and state and local governments are said to be next, and we haven’t heard the last from the housing industry.  How much longer does this line have to grow before it strangles the economy?

Madoff Scandal Illustrates Cognitive Hazard

By Chidem Kurdas 

In the past week a new and dramatic chapter was added to the decades-long history of hedge fund fraud. Barnard Madoff, a well-known, long-time money manager, confessed to a Ponzi game that cost his clients $50 billion. The specific nature of his scheme and the exact amount of the money lost is still not clear.  

What is pretty clear is that over the years the US Securities and Exchange Commission (and probably other government agencies) were repeatedly warned of fraud at Madoff Investment Securities. Rumors about Madoff circulated for a decade. At least two different people told the SEC over the years. There were articles in the press.  

The firm was a heavily regulated broker-dealer over which the SEC had extensive authority. At various times regulators investigated and found minor violations. Madoff paid a fee, fulfilled some bureaucratic requirement and went on his merry way. Continue reading

None Dare Call It Socialism

by Mario Rizzo

 

The Wall Street Journal reports today that the Republican Administration may agree to a bailout package for the US auto industry that would give the government a large financial stake (“warrants”) in at least GM and Chrysler.

 

 

While it is not clear at this writing whether the warrants would be voting, nonvoting, preferred or common shares, it would be a form of ownership. The warrants would amount to about 20% of the value of the loans. The restructuring that will take place under such a deal would necessarily be open to all sorts of political manipulation and rent seeking. A “car czar” (notice how humor is used by the planners  to make things seem all friendly and nice)  will be appointed by the president to oversee the restructuring. Unlike a bankruptcy judge this appointee will be subject to the winds of political expediency. I hope this plan will die because of political wrangling and disagreement. Nevertheless, it demonstrates where we are. No one in power is counting the long-run costs. The slippery slope is in fine form.

 

 UPDATE: There is a good complementary post at CafeHayek.

The Coming Slavery

by MARIO RIZZO

_______________

 

It is said that when railways were first opened in Spain, peasants standing on the tracks were not [i]nfrequently run over; and that the blame fell on the engine-drivers for not stopping: rural experiences having yielded no conception of the momentum of a large mass moving at a high velocity.

 

The [above] incident is recalled to me on contemplating the ideas of the so-called “practical” politician, into whose mind there enters no thought of such a thing as political momentum, still less of a political momentum which, instead of diminishing or remaining constant, increases. The theory on which he daily proceeds is that the change caused by his measure will stop where he intends it to stop. He contemplates intently the things his act will achieve, but thinks little of the remoter issues of the movement his act sets up, and still less its collateral issues.

 

Herbert Spencer, “The Coming Slavery”

 

 

 

Quite a few years ago I gave a presidential address at a dinner meeting of the Society for the Development of Austrian Economics which was titled after Herbert Spencer’s 1884 article, “The Coming Slavery.” At that time I failed to understand the nature of an after-dinner talk and struck a too-somber tone for too long a time. Nevertheless, I have an enormous respect for Herbert Spencer and his analysis of the dynamics of government intervention in the economy and believe his observations are highly relevant to current events.

 

We are clearly on a slippery slope toward massive and ill-advised government interference in the market. Unlike many slippery slopes this one is not likely to take a long time. Continue reading