Abstract
Libertarian paternalists hold that biases and distortions in human decision-making justify paternalistic interference affecting individuals’ decisions. The aim of this paper is to analzye to what extent an evolutionary outlook supports libertarian paternalism. I will put forward three arguments in favour of libertarian paternalism and six objections that strongly oppose it. While evolutionary economists should take seriously the contention that our positive knowledge of real-world decision-making will have to influence our normative assessment of these decisions, the objections against libertarian paternalism brought forward in this paper serve as a cautionary note. Contrary to the claims of its proponents, libertarian paternalism is neither inevitable, nor does it provide an adequate measuring rod of normative rationality. It is prone to abuse by anchoring its standard of rationality pragmatically to norms and can thus promote conservative bias and stifle innovative exploration. It also presents the policy-maker with a compounded Hayekian knowledge problem. Finally, from a dynamic point of view, libertarian paternalism’s manipulative shaping of preferences might lock-in individuals into heteronomous preference learning paths without them being even aware of it.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
To be clear: while this seems to be the mainstream position in behavioural economics, one could use cognitive limitations also to justify non-intervention in a spirit of Hayek’s “knowledge problem” argument (Hayek 1945). I will take up this very point later on in the paper and argue that cognitive limitations or a shortfall in “economic rationality” will not automatically justify intervention.
See also Schubert and Cordes (2013) as well as Schubert (2012b) who discuss how libertarian paternalism can be used to deal with dysfunctional preference learning. Lades (2012) analyses the underlying motivational mechanisms of impulsive consumption and the potential of self-nudges from an evolutionary perspective.
A slightly less compact but more precise definition is: “X acts paternalistically towards Y by doing (omitting) Z iff (1) Z (or its omission) interferes with the liberty or autonomy of Y. (2) X does so without the consent of Y. (3) X does so just because Z will improve the welfare of Y (where this includes preventing his welfare from diminishing), or in some way promote the interests, values, or good of Y.” (Dworkin 2010, no page number given). All three conditions could be subjected to further philosophical scrutiny (Dworkin 2010) and are not as clear cut as they might prima facie seem: would hiding the sleeping pills of your suicidal partner limit the liberty or autonomy of your partner (1)? Or what about consent (2) if the “beneficiary” of the paternalist intervention is not even aware of the intervention? Or what about policies that have other goals in addition to the welfare of the targeted individuals (3)?
Note that examples of policies that are purely paternalistic are difficult to come by (Dworkin 1972, p. 65). Even in the above-mentioned examples, besides “protecting” the individual from itself, an additional motivation might lie in reducing externalities, e.g. when helmet or seatbelt laws reduce the cost of injuries to the social health care system. Nevertheless, paternalistic policies’ central aim is to improve the welfare of the recipients, whereas, for example, utilitarian policies are justified by reference to the welfare of society, where individuals can actually be made worse off through that policy because the gain in welfare of some others outweighs their loss. Such a policy is not paternalistic as per the definition used here and in the literature.
Note that one could also conceive of paternalism involving a trade-off in present liberty for future liberty, when one’s liberties today are curtailed in order to have larger liberties in the future as a result (a case in point would be a definition of welfare that includes liberties). This sort of trade-off might actually be easier to defend by the paternalist (see Dworkin 1972).
Paternalists and anti-paternalists usually also tend to agree that paternalism is warranted in the case of minors or people that are mentally not competent to judge for themselves. In these cases, it is easy to justify paternalism from an epistemic point of view with the cognitive limitations of the individuals involved and from a moral point of view by helping them because they are ends in themselves.
“That principle is, that the sole end for which mankind are warranted, individually or collectively in interfering with the liberty of action of any of their number, is self-protection. That the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others. His own good, either physical or moral, is not a sufficient warrant. He cannot rightfully be compelled to do or forbear because it will be better for him to do so, because it will make him happier, because, in the opinions of others, to do so would be wise, or even right.” (Mill 1991[1969], p. 30).
Note that a defence of anti-paternalism along utilitarian lines seemed weak even before the advent of behavioural economics (see more extensively Dworkin 1972, pp. 74–76): Mill’s position on paternalism is much more complex than the one argument presented here and he gives further arguments against paternalism but also conditions where it is permissible in his “On Liberty” (Mill (1991[1969]); on Mill’s view on paternalism, see also more extensively (Dworkin 1972; Arneson 1989)).
By referring to “idiots”, Camerer et al. (2003) quote an early legal case where the justification for paternalism was spelled out with respect to those who cannot make competent decisions for themselves, namely “idiots, minors or married women” (Rogers v. Higgins 1868, quoted from Camerer et al. 2003, p. 1213 fn 5).
Libertarian paternalism is sometimes also called “soft” or “light paternalism” (see Loewenstein and Haisley 2008), for a survey). It is very similar to “asymmetric paternalism” (Camerer et al. 2003), which is not defined in terms of limiting choice options but through asymmetrically benefitting individuals making decision errors while imposing small costs on individuals who act completely rational. For the purpose of the present paper I’ll focus on libertarian paternalism while noting that the two are rather similar in many cases and most of the discussion will also apply to asymmetric paternalism.
These instruments can be combined with other procedural or even substantive constraints, thus posing more severe restrictions of liberties. For example, opt-out can be limited to specified waiting periods or other substantive constraints, e.g. conditions under which opt-out will be possible or not (Thaler and Sunstein 2003, pp. 1188–1190).
People might want to be nudged in some cases. However, according to our definition of paternalism, nudging people who consent to this is no longer paternalism (Sugden 2011, p. 32). Moreover, people enjoy making decisions and in many cases, one could as easily argue that they want to be offered the possibility to choose and resent being manipulated (see Rebonato 2012).
In my understanding evolutionary economics thus extends behavioural economics with a dynamic (evolutionary) perspective and a focus on the motivational underpinnings of human decision-making (Witt 2012). This is not to say that there are no dynamic models in behavioural economics or no models that deal with the malleability or change of preferences. It rather suggests that evolutionary economic concerns can enrich behavioural economics where not taken into account and vice versa.
This definition of “autonomy” in terms of leaving the nominal choice set intact is problematic and leaves out critical aspects usually associated with the notion (Dworkin 1988, pp. 7–9 and p. 48). As argued below, decreasing options might actually increase autonomy if the decrease encourages critical thinking about the remaining options. Such a definition of “autonomy” in terms of critically reflecting upon and then attempting to accept or change one’s desires (ibid., p. 48) seems preferable and less counter-intuitive in cases where many options lead to “choice overload” (Iyengar et al. 2003).
An interesting recent twist on this argument has been given by Duflo (2012) who argues that libertarian paternalism might be justified in the context of poverty alleviation in the sense that nudging people with respect to basic goods such as health and nurture are the prerequisites for these individuals to be able to enjoy other more valuable positive freedoms.
One has to add that Schubert and Cordes (2013) seem to suggest that they would also see these dynamics as legitimizing hard paternalism (p. 150).
A different example would be entrepreneurship: excessive risk-taking or overconfidence might actually be a good thing for society in terms of innovativeness. While overconfidence of entrepreneurs might be detrimental for the individual entrepreneur who fails with a business, overall it does benefit society because, once in a while, a successful entrepreneur markets an innovation (Rizzo and Whitman 2009b, p. 704).
On the debate about effectiveness and adaptiveness of biases and heuristics see also more extensively Rebonato 2012, pp. 47–48). It is far from settled that deviations from normative rational choice standards are suboptimal: Berg and Lien (2005), for example, show that financial markets where individuals hold wrong beliefs can achieve Pareto improvements over rational expectations equilibrium (see also relatedly Berg 2003; Berg and Hoffrage 2008; Berg et al. 2011a)
Camerer et al. (2003), p. 1254, discuss this general question shortly when it comes to an irrational demand for extended warranties that are extremely expensive compared to their actual expected value. In this calculation, the “peace of mind“ extended warranties provide for is typically ignored. What if people actually are willing to pay a lot of money for not having to fear a breakdown of their appliances? Similarly, state lotteries pay much less than a dollar on the dollar “invested” and yet it has not to be irrational if people spend the money to purchase some thrill or a shred of hope of becoming rich (see Gruene-Yanoff 2012, p. 643).
(See more extensively Rebonato (2012), on the problems of a multiple selves view in this context and to what extent the metaphor of an “internality” that the warring selves create is actually problematic.
In the least, libertarian paternalism needs to be developed into a more dynamically minded theory that takes into account these features of human learning. For example, if one wanted to propagate such intervention, a distinction should be made whether decision-making errors can be overcome through experiential learning or not. If individuals can learn from their mistakes, the libertarian paternalist should aim at providing information in helping people to overcome the mistake. If a decision bias cannot be overcome even in repeated situations and through learning (or if a decision is indeed a one-shot problem without the possibility to learn from the experience), then the setting of a default might have more legitimacy. These kinds of considerations are, as of yet, largely absent in the libertarian paternalist debate.
This is not to say that we should ignore human fallibility in decision-making, but instead of exploiting it in government decision-making, we should aim at increasing our faculty for critical thinking and deliberation. The libertarian paternalist should not exploit decision-making deficiencies but help in overcoming them (Rebonato 2012, pp. 218–220). In its core, the last argument is thus a moral one about autonomy (understood as critical reflection) that is undercut by the manipulative character of some libertarian paternalist interventions.
References
Albert H (1978) Traktat über rationale praxis. J.C.B. Mohr (Paul Siebeck), Tübingen
Albert H (1991) Traktat über kritische vernunft, 5th edn. J.C.B. Mohr (Paul Siebeck), Tübingen
Amir O, Lobel O (2008) Stumble, predict, nudge: how behavioral economics informs law and policy. Columbia Law Rev 108(8): 2098–2137
Anand P, Gray A (2009) Obesity as market failure: could a ‘deliberative economy’ overcome the problems of paternalism?Kyklos 62(2): 182–190
Arneson RJ (1989) Paternalism, utility and fairness. Rev Int Philos 43(170): 409–437
Bentham J (1830) The rationale of reward. Robert Heward, London
Berg N (2003) Normative behavioral economics. J Soc Econ 32:411–427
Berg N, Lien D (2005) Does society benefit from investor overconfidence in the ability of financial market experts?J Econ Behav Organ 58:95–116
Berg N, Gigerenzer G (2007) Psychology implies paternalism? Bounded rationality may reduce the rationale to regulate risk-taking. Soc Choice Welfare 28(2):337–359
Berg N, Hoffrage U (2008) Rational ignoring with unbounded cognitive capacity. J Econ Psychol 29(6):792–809
Berg N, Gigerenzer G (2010) As-if behavioral economics: neoclassical economics in disguise?Hist Econ Ideas 18(1):133–166
Berg N, Biele G, Gigerenzer G (2011a) Does consistency predict accuracy of beliefs? Economists surveyed about PSA. University of Texas-Dallas, Working Paper
Berg N, Eckel C, Johnson C (2011b) Inconsistency pays? Time-inconsistent subjects and EU violators earn more. University of Texas-Dallas, Working Paper
Binder M (2010) Elements of an evolutionary theory of welfare. Routledge, London
Binder M, Witt U (2011) As innovations drive economic growth, do they also raise well-being? Papers on Economics & Evolution #1105
Brennan G, Lomasky L (1983) Institutional aspects of “merit goods” analysis. Finanz Archiv 41(2):183–206
Buchanan JM (1991) The foundations for normative individualism. In: The economics and the ethics of constitutional order, chap 18. The University of Michigan Press, Ann Arbor, pp 221–229
Camerer CF (2006) Wanting, liking, and learning: neuroscience and paternalism. Univ Chicago Law Rev 73:87–110
Camerer C, Issacharoff S, Loewenstein GF, O’Donoghue T, Rabin M (2003) Regulation for conservatives: behavioral economics and the case for “asymmetric paternalism”. Univ Penn Law Rev 151:1211–1254
Carlin BI, Gervais S, Manso G (2009) When does libertarian paternalism work? NBER Working Paper No. 15139
Choi JJ, Laibson D, Madrian BC, Metrick A (2004) For better or for worse: default effects and 401(k) savings behavior. In: Wise DA (ed) Perspective on the economics of aging, chap 2. University of Chicago Press, pp 81–125
Conlisk J (1996) Why bounded rationality. J Econ Lit 34(2):669–700
Desai AC (2011) Libertarian paternalism, externalities, and the “spirit of liberty”: how Thaler and Sunstein are nudging us toward an “overlapping consensus”. Law Soc Inq 36(1):263–295
Duflo E (2012) Human values and the design of the fight against poverty. Tanner Lecture 2012
Dworkin G (1972). Paternalism. Monist 56:64–84
Dworkin G (1988) The theory and practice of autonomy. Cambridge University Press, Cambridge
Dworkin G (2010) Paternalism. Stanford encyclopedia of philosophy. http://plato.stanford.edu/entries/paternalism. Accessed 11 Nov 2012
Fiske ST, Taylor SE (1984) Social cognition. Addison-Wesley, Reading
Frank RH (1999) Luxury fever: why money fails to satisfy in an Era of excess. Free Press, New York
Frank RH (2012) The Darwin economy—liberty, competition and the common good. Princeton University Press, Princeton
Freytag A, Renaud S (2007) From short-term to long-term orientation—political economy of the policy reform process. J Evol Econ 17:433–449
Gigerenzer G (2008) Rationality for mortals—how people cope with uncertainty. Oxford University Press, New York
Gigerenzer G, Todd PM, ABC Research Group (1999) Simple heuristics that make us smart. Oxford University Press, New York
Gilbert DT (2007) Stumbling on happiness. Harper Perennial, London
Gintis H (1974) Welfare criteria with endogenous preferences: the economics of education. Int Econ Rev 15(2):415–430
Glaeser EL (2005) Paternalism and psychology. NBER Working Paper No. 11789
Graham C, Felton A (2005) Variance in obesity across cohorts and countries: a norms-based explanation using happiness surveys. Mimeo
Gruene-Yanoff T (2012) Old wine in new casks: libertarian paternalism still violates liberal principles. Soc Choice Welfare 38(4):635–645
Hausman DM, McPherson MS (1994) Preference, belief, and welfare. Am Econ Rev 84(2):396–400
Hausman DM, McPherson MS (2008) The philosophical foundations of mainstream normative economics. In: Hausman DM (ed) The philosophy of economics—an anthology, chap 13, 3rd edn. Cambridge University Press, Cambridge, pp 226–251
Hausman DM, Welch B (2010) Debate: to nudge or not to nudge. J Polit Philos 18(1):123–136
Hayek FA (1945) The use of knowledge in society. Am Econ Rev 35(4):519–530
Hergenhahn BR, Olson MH (1997) An introduction to theories of learning, 5th edn. Prentice Hall, Upper Saddle River
Hill CA (2007) Anti-anti-anti paternalism. New York Univ Law Lib 2(3):444–454
Iyengar SS, Jiang W, Huberman G (2003) How much choice is too much? Contributions to 401(k) retirement plans. Mimeo
Kahneman D (2003) Maps of bounded rationality: psychology for behavioral economics. Am Econ Rev 93(5):1449–1475
Lades LK (2012) Behavioral and evolutionary economics on impulsive consumption and reflexive thought: nudging ethical consumer behavior. Mimeo
Loewenstein G, Haisley E (2008) The economist as therapist: methodological ramifications of ‘light’ paternalism. In: Caplin A, Schotter A (eds) Perspectives on the future of economics: positive and normative foundations, vol 1 in the handbook of economic methodologies. Oxford University Press, Oxford
Macpherson C (1991) Individualism. In: Eatwell J, Milgate M, Newman P (eds) The new Palgrave: a dictionary of economics, vol II. Macmillan, London, pp 790–793
Madrian BC, Shea DF (2001) The power of suggestion: inertia in 401(k) participation and savings behavior. Q J Econ 116(4):1149–1187
Mast BD, Benson BL, Rasmussen DW (1999) Beer taxation and alcohol-related traffic fatalities. South Econ J 66(2):214–249
Metcalfe JS (2001) Institutions and progress. Ind Corp Chang 10(3):561–586
Mill JS (1991) On liberty. Routledge, London
Mitchell G (2005) Libertarian paternalism is an oxymoron. Northwest Univ Law Rev 99(3):1245–1277
Narveson J (1998) Libertarianism Vs. Marxism: reflections on G. A. Cohen’s self-ownership, freedom and equality. J Ethics 2(1):1–26
Nozick R (1974) Anarchy, state and utopia. Basic Books, New York
Nelson RR, Winter SG (1982) An evolutionary theory of economic change. Belknap Press, Cambridge
Pollak RA (1976) Interdependent preferences. Am Econ Rev 66(3):309–320
Popper KR (1966) The open society and its enemies, 5th edn. Princeton University Press, Princeton
Qizilbash M (2009) Well-being, preference formation and the danger of paternalism. Mimeo
Qizilbash M (2011) Sugden’s critique of Sen’s capability approach and the dangers of libertarian paternalism. Int Rev of Econ 58(1):21–42.
Qizilbash M (2012) Informed desire and the ambitions of libertarian paternalism. Soc Choice Welf 38(4):647–658
Rabin M (1998) Psychology and economics. J Econ Lit 36(1):11–46
Rebonato R (2012) Taking liberties—a critical examination of libertarian paternalism. Palgrave-Macmillan, Basingstoke
Rizzo MJ, Whitman DG (2009a) The knowledge problem of the new paternalism. Brigham Young University Law Review, pp 103–161
Rizzo MJ, Whitman DG (2009b) Little brother is watching you: new paternalism on the slippery slopes. Arizona Law Rev 51(3):685–739
Schelling TC (1978) Micromotives and macrobehavior. W.W. Norton, New York
Schnellenbach J (2012) Nudges and norms: on the political economy of soft paternalism. Eur J Polit Econ 28(2):266–277
Schubert C (2012a) Is novelty always a good thing? Towards an evolutionary welfare economics. J Evol Econ 22:585–619
Schubert C (2012b) Opportunity and preference learning. Papers on Economics & Evolution #1208
Schubert C, Binder M (2011) Reconciling normative and behavioral economics: applying the ‘naturalistic approach’ to the adaptation problem. Accepted for publication: Journal of Economics and Statistics
Schubert C, Cordes C (2013) Role models that make you unhappy: light paternalism, social learning and welfare. J Inst Econ 9(2):131–159
Simon HA (1956) Rational choice and the structure of the environment. Psychol Rev 63(2):129–138
Sobel D (1994) Full information accounts of well-being. Ethics 104(4):784–810
Sugden R (2004) The opportunity criterion: consumer sovereignty without the assumption of coherent preferences. Am Econ Rev 94(4):1014–1033
Sugden R (2006) What we desire, what we have reason to desire, whatever we might desire: Mill and Sen on the value of opportunity. Utilitas 18(1):33–51
Sugden R (2008) Why incoherent preferences do not justify paternalism. Consititut Polit Econ 19:226–248
Sugden R (2011) The behavioural economist and the social planner: to whom should behavioural welfare economics be addressed? Papers on Economics & Evolution #1121
Sunstein CR (2012) The Storrs lectures: behavioral economics and paternalism. Forthcoming in Yale Law Journal
Sunstein CR, Thaler RH (2003) Liberaterian paternalism is not an oxymoron. Univ Chicago Law Rev 70(4):1159–1202
Thaler R, Sunstein CR (2003) Libertarian paternalism. Am Econ Rev 93(2):175–179
Thaler RH, Benartzi S (2004) Save more tomorrow™: using behavioral economics to increase employee saving. J Polit Econ 112(S1):S164–S187
Thaler RH, Sunstein CR (2008) Nudge—improving decisions about health, wealth and happiness. Penguin Books, London
Trout JD (2005) Paternalism and cognitive bias. Law Philos 24:393–434
Tversky A, Kahneman D (1974) Judgment under uncertainty: heuristics and biases. Science 185(4157):1124–1131
Vallentyne P (2012) Libertarianism. The Stanford encyclopedia of philosophy (Spring 2012 Edition). In: Zalta EN (ed.) http://plato.stanford.edu/archives/spr2012/entries/libertarianism/ Accessed 9 Dec 2012
Vanberg VJ (2004) The rationality postulate in economics: Its ambiguity, its deficiency and its evolutionary alternative. J Econ Methodol 11(1):1–29 White MD (2008) New essays on philosophy,
White MD (2008) New essays on philosophy, politics and economics: integration and common research projects. In: Gaus G, Favor C, Lamont J (eds). Stanford University Press, Forthcoming. Available at SSRN:http://ssrn.com/abstract=1274444
Witt U (1987) Individualistische Grundlagen der evolutorischen Oekonomik. J.C.B. Mohr (Paul Siebeck), Tuebingen
Witt U (2001) Learning to consume—a theory of wants and the growth of demand. J Evol Econ 11:23–36
Witt U (2003) Economic policy making in evolutionary perspective. J Evol Econ 13:77–94
Witt U (2008) What is specific about evolutionary economics?J Evol Econ 18(5):547–575
Witt U (2009) Propositions about novelty. J Econ Behav Organ 70(1–2):311–320
Witt U (2012) Economic behavior—evolutionary versus behavioral perspectives. Biol Theory 6(4):388–398
Witt U, Binder M (2011) Disentangling motivational and experiential aspects of “utility”—a neuroeconomics perspective. J Econ Psychol 36(1):27–40
Witt U, Schubert C (2013) Verhaltensökonomische und Evolutorische Perspektiven auf Konsumentensouveränität und Wohlfahrt”, Jahrbuch Normative und Institutionelle Grundfragen der Ökonomik, in press
Zajonc RB, Markus H (1982) Affective and cognitive factors in preferences. J Consum Res 9(2):123–131
Acknowledgments
This research was funded by the ESRC-TSB-BIS-NESTA as part of the ES/J008427/1 grant on Skills, Knowledge, Innovation, Policy and Practice (SKIPPY). I wish to thank the participants of seminars at the University of Jena and the University of Sussex for helpful comments and suggestions. I am most grateful for the very insightful and extensive comments from both Nathan Berg and an anonymous referee. I have also benefitted from discussions with the participants of two workshops on the normative correlates of behavioural and evolutionary economics in Freiburg in 2009 and 2011. Finally, I want to thank Ulrich Witt and Leonhard K. Lades for comments and the latter also for stimulating discussions about nudging and self-nudging. Errors and biases, sadly, remain mine alone.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Binder, M. Should evolutionary economists embrace libertarian paternalism?. J Evol Econ 24, 515–539 (2014). https://doi.org/10.1007/s00191-013-0323-7
Published:
Issue Date:
DOI: https://doi.org/10.1007/s00191-013-0323-7