Academic journal article Missouri Law Review

Libertarian Quasi-Paternalism

Academic journal article Missouri Law Review

Libertarian Quasi-Paternalism

Article excerpt

I. INTRODUCTION

Suppose you are in charge of designing a retirement savings plan for some group of people (e.g., employees at your firm, residents in your state) and your goal is to make the people in that group as well-off as possible. The specific choice you face is whether individuals will be automatically enrolled in the savings plan with an option to opt out, or whether the enrollment default will be non-participation and individuals will have an option to opt in. Although the other features of the savings plan itself will be the same in either case, you know from past experience that more people will choose to participate when enrollment is opt-out than when it is opt-in. (1) Which design should you choose, and how can you make this decision in a non-paternalistic way?

Answering questions like this requires, first and foremost, a definition of paternalism, but traditional notions of paternalism are not up for the task. As the concept is usually understood, a policy counts as paternalistic if it is justified on the belief that it will make a person better off than if the person had been left to choose between the available options for him or herself. But in many settings, such as the savings plan example described above, recognizing and accounting for individual mistakes is the only reasonable way to go about designing policy. That is, when individuals' choices vary according to seemingl -arbitrary features of the choice environment (such as which option is the default), policymakers can conclude one of two things: either (1) some people are making systematic mistakes (i.e., selecting the default option when they would have been better off under the non-default), or (2) which option people prefer truly depends on the feature of the choice environment that varies (i.e., the enrollment default). Often, it is impossible to maintain the latter claim with a straight face--does anyone seriously believe that the amount most people should be saving for retirement turns on which plan they happen to have been defaulted into? In such cases, one reaches the unappealing conclusion that any sensible approach to policymaking is necessarily paternalistic. (2)

In this short article, I propose a distinction between two different forms of paternalism. As a starting point, we can divide decision-makers into two groups. "Inconsistent choosers" are those whose choices vary based on some arbitrary factor under the government's control (like defaults), and "consistent choosers" are those whose choices are not sensitive to such factors. The basic idea in this article is that in some sense it is more paternalistic to make policy assuming that the consistent choosers are making a mistake than it is to make policy assuming that the inconsistent choosers are doing so. Specifically, a policy is consistent choice paternalistic if it is based on the belief that it improves the decisions of the consistent decision-makers--i.e., if it assumes that individuals' voluntary choices are mistaken even when those choices do not vary based on any arbitrary factor. In contrast, a policy is only quasi-paternalistic if it is designed to improve the choices of the inconsistent decision-makers but takes the choices of the consistent decision-makers to be correct. (3)

Returning to the savings plan example, quasi-paternalistic policymaking assumes that those employees who decide to enroll in the savings plan under both the opt-out and opt-in enrollment defaults are actually better off participating than not participating. And similarly, a quasi-paternalist policy assumes that those who choose not to participate under both enrollment defaults are in fact better off not participating than participating. In contrast, quasi-paternalism does not dictate anything about what policymakers should take to be the preferences over participation of those employees whose enrollment decisions vary based on whether or not participation is the default. …

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