Why are there so many people who smoke a lot or are addicted to different types of drugs? Why do so many people eat junk food in excess? And more generally ... why do so many people voluntarily decide to do things that they know hurt them in the long term?
Richard Thaler, the last Nobel Prize in Economics, and solid member of the "Economics of Behavior" School, argues that the problem originates in the limited rationality of human beings. In their mental processes, argues the academic, people separate the immediate effects of an action from the aggregate and long-term effects of it, valuing them in different ways (usually more value to the present than to the future), and behaving systematically in a contrary to their own benefit.
In this way, Thaler justifies the state intervention, "libertarian paternalism" he calls, to remedy the incorrectness of people with an exacerbated "limited rationality", giving them a nudge in the right direction. It is, without a doubt, a form of interventionism that liberal libertarians will blaspheme forever.
In any case, the intervention suggested by Thaler is much less "interventionist" than those we are accustomed to seeing in the real policies of the day-to-day governments. Thaler argues that, given the imperfect and limited rationality of many people, small changes in the rules of initiation could encourage people to behave in the "socially desirable" way, reducing long-term interventionism. For example, the basic rule, for him, should be the donation of organs after death; If someone did not want to donate, they could opt for it. The junk food must be in the most hidden places of the supermarkets, so that the effort of buying it is greater. If someone does not manifest their willingness to have a pension fund, it must be considered that they do want one.
Origins of the idea
The term "libertarian paternalism" was coined by the aforementioned behavioral economist Richard Thaler and the jurist Cass Sunstein, in a 2003 article in the American Economic Review. The authors developed their ideas in a more extensive article at the University of Chicago Law Review that same year.
In the aforementioned article, they propose that, both from the private sector and from the government, it is about influencing the behavior of people to make their life longer, healthier and better. They continue that, in proven findings of the social sciences, it has been shown that, in many cases, individuals make very bad decisions, decisions that they would not have made if they had paid attention and had had all the information, unlimited cognitive abilities and absolute self-control.
And while it is paternalistic / interventionist, they justify that it is liberal / libertarian in the sense that its goal is to ensure that people are freed from many of their biases of limited rationality, to disassociate from disadvantageous agreements, if they prefer. According to them, libertarian paternalists want to facilitate people to follow their own path; They do not want to put obstacles in the way of those who wish to exercise their freedom.
Critics
Thaler's critics say that his "libertarian paternalism" is just a modern justification for state interventionism, which starts from considering people are irrational because they do not make the decisions that a certain group of people find desirable.
And critics add: if people are really irrational, as Thaler says, what makes sure that those who design the rules are not? What assures us that their "pushes", far from helping us to be better, enslave us to their tastes and appreciations, depriving us of our tastes and our appreciations?
Justification of Thaler
Libertarian paternalism is a relatively weak and soft type of paternalism that does not involve interference, because the options are not blocked or eliminated, nor are they taxed in a significant way. If someone wants to smoke, eat a lot of candy, subscribe to unfavorable medical insurance or not save for retirement, libertarian paternalists do not force him to act differently, they only induce him with incentives.
Thaler and Sunstein argue that government and private companies often become "architects of choice", because our perceptions often depend on how we organize the different options that are presented to us. The world is full of these "architects" - parents, religious leaders, professors, doctors, etc. - who influence our choices and have the responsibility to give them shape through "nudges", which do not limit us but can compensate for human error , if we use them correctly.
Thaler and Sunstein argue that government and private companies often become "architects of choice", because our perceptions often depend on how we organize the different options that are presented to us. The world is full of these "architects" - parents, religious leaders, professors, doctors, etc. - who influence our choices and have the responsibility to give them shape through "nudges", which do not limit us but can compensate for human error , if we use them correctly.
In summary
State interventionism based on "socially desirable patterns" is not new, although the term "libertarian paternalism" can be. The idea of inducing through "incentives" (fiscal, or otherwise) certain economic behaviors, which do not arise spontaneously, by limited rationality or for whatever reason, is the guide of modern economic policy for a century at least, although now it is better grounded in neuropsychological terms.
Therefore, new labels for old uses and customs of economic policy, although this time with a bias towards a more limited, more intelligent interventionism ... since it is based on a deeper knowledge of human rationality, backed in Neurosciences, and not in mere philosophical speculations about the human psyche, quite deficient in many cases.
Link: https://www.sas.upenn.edu/~baron/475/choice.architecture.pdf
Author: Sebastián Laza (economist, posgraduate course in Neuroeconomics at Higher School of Economics, National Research University, Russia).
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