In my most recent post on paternalism, I criticized claims that paternalistic policies can be justified on the grounds that government-appointed experts have greater knowledge than consumers and are less likely to be influenced to cognitive error. Among other points, I emphasized that government experts have no way of determining how much benefit consumers get from potentially risky products and therefore no good way of deciding which products should be banned or restricted on the grounds that their costs outweigh their benefits. In a recent e-mail, NYU economist Mario Rizzo (himself a leading academic critic of paternalism) points out that F.A. Hayek made a similar point in his classic 1945 article, “The Use of Knowledge in Society”:
It may be admitted that, as far as scientific knowledge is concerned, a body of suitably chosen experts may be in the best position to command all the best knowledge available—though this is of course merely shifting the difficulty to the problem of selecting the experts. What I wish to point out is that, even assuming that this problem can be readily solved, it is only a small part of the wider problem.
Today it is almost heresy to suggest that scientific knowledge is not the sum of all knowledge. But a little reflection will show that there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place. It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active cooperation.
Hayek’s point was directed at arguments for socialist central planning (common in Hayek’s time). But it applies with almost equal force to modern expertise-based arguments for paternalism. Last year, I discussed the broader relevance of Hayek’s thought to our own times in this post. In a follow-up post, I argued for the modern relevance of Hayek’s critique of conservatism.
readery says:
A sure sign of hubris, from Socrates to today, is regarding people who question whether we really have the sum of all knowledge in our possession as heretics. Today’s hubris is no different from the past.
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October 14, 2009, 7:36 pmDavid Welker says:
I don’t know if this post is related to your previous post or not. But if so, I get the sense that you haven’t read “Nudge” and are ignorant of what libertarian paternalism entails. Your examples are all about rules where no opt-out based on individual knowledge and preferences is possible. The possible superiority that an individual may have of their own situation compared to an expert is handled by allowing them to opt-out as conveniently as possible.
What exactly is your objection to making default options based on expert knowledge, where individuals are allowed to opt-out if they want to?
But of course, we are basically from different universes. While I recognize the usefulness of focusing on default options as advocated by Nudge, I would criticize it from the other direction in that I think that in many cases outright bans ought to stay on the table. In contrast, I think you might even object to setting default options based on expert knowledge, due to your persistent ignorance concerning how individuals make choices in the real world. But really, you should actually read Nudge and then comment on libertarian paternalism. I think it is very obvious from your previous post and from this post that you haven’t read the book and really don’t know what your talking about when it comes to critiquing Thaler or Sunstein and libertarian paternalism.
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October 14, 2009, 8:11 pmSandy MacHoots says:
The trouble with paternalism, as C.S. Lewis pointed out a long time ago in God in the Dock, is that there’s no end to it:
“Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.”
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October 14, 2009, 8:14 pmAnderson says:
Okay, so Hayek would oppose mandatory helmet usage by motorcycle riders? And mandatory seat-belt laws for automobile users?
Don’t libertarians have any little sayings about pushing an abstract principle to absurd extremes? ‘Cause y’all need one, if you don’t.
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October 14, 2009, 8:24 pmSteve says:
I guess toys made with lead paint could have benefits to the consumer; they might be cheaper, or more attractive, or whatever. Still, I continue to favor tyranny over consumer choice.
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October 14, 2009, 8:28 pmDavid Welker says:
Steve, this is an excellent point. A lot of abstract ideas are perfectly appealing. But the devil is in the details, or in the application of those abstract ideas to concrete reality. Quoting abstract ideals by Hayek is no substitute for dealing with the reality on the ground.
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October 14, 2009, 8:39 pmyankee says:
It seems this argument proves too much. If taken seriously, we’d have to repeal all paternalistic regulations designed for the safety of the consumer. Who are we to say what benefits people may obtain from lead paint and rotten meat?
Of course, if you are willing to go to the libertarian extreme of arguing that all such laws should be repealed, you will not find this counter convincing. But you should not expect your argument to convince anyone who isn’t already a hardcore libertarian.
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October 14, 2009, 8:45 pmSandy MacHoots says:
It’s a stupid thing to tell someone writing about a book that he hasn’t read it. What you mean is that in your opinion he obviously didn’t understand what they were saying.
I haven’t read the book, but I read its precursor, Libertarian Paternalism, and it’s twaddle. I was frankly stunned that two well-known academics could expect anyone to take it seriously. Nothing I’ve heard about Nudge leads me to believe they’ve fixed the problems.
They routinely draw the wrong conclusions from the studies they rely on, such as the famous NJ/PA auto insurance case. They gloss over the fact that the choice of which value to further with the default is itself a contested political decision, and therefore the planners will be empowered to decide which values are to be furthered. They ignore the fact that experts suffer from the same cognitive biases as everyone else, plus one more — the belief that they know more than they do. They minimize the information problems inherent in setting a default rule for 300 million people. They assume that their experts will always act disinterestedly for the benefit of the masses they govern, but experience on that score does not give us much comfort.
Most fundamentally, their “libertarian” paternalism would actually coerce some people (employers, for example) to do certain things so that other people (employees) would make better choices. This may or may not be a good idea, but there is absolutely nothing “libertarian” about it.
The whole exercise is fundamentally dishonest. They want to push paternal regulations without having to justify them as interference with free choice. I’ll concede that there may be many situations in which rules should be set to protect people from themselves. But when we set such rules we should be clear that we are overriding individual choice, not pretending that we are somehow enhancing it.
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October 14, 2009, 8:46 pmDoc Merlin says:
Yes, and the law you two are citing wrt lead paint on toys also ended up banning rhinestones and old children’s books and metal zippers on old children’s clothing, etc etc etc. When you accuse him of “Quoting abstract ideals by Hayek ” and not “dealing with the reality on the ground.” You are doing just that. When people can chose for themselves they make better choices in general than the experts and then natural selection can affect our memes so we grow as a society. Using force to enforce every bit of paternalism ends with us having stunted social evolution /and/ significant externalities that in order to fix we have to add more and more and more regulation.
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October 14, 2009, 8:48 pmDoc Merlin says:
Absolutely! Libertarian paternalism strikes me as an attempt to co-opt the word libertarian much like the word liberal was co-opted in the US by those wanting more government control.
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October 14, 2009, 8:51 pmSteve says:
Yes, and the law you two are citing wrt lead paint on toys also ended up banning rhinestones and old children’s books and metal zippers on old children’s clothing, etc etc etc.
I didn’t cite any specific law. Are you seriously under the impression that the CPSIA was the first law to regulate lead paint in toys?!?
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October 14, 2009, 9:03 pmDavid Welker says:
Sandy MacHoots,
Before you make assertions about what they ignore, I suggest you read the book. They in fact address that issue explicitly in the book.
Actually, in this case, I am quite certain that Ilya Somin did not read the book. I am confident that if Somin did read the book, he would understand how his arguments and quotes fail to address the argument in the book, which deals nicely with his objections by allowing people to opt-out and make their own choices if they do not like defaults chosen by policy-makers.
Further, it should be noted that these posts are not about this particular book per se. So, Ilya Somin’s failure to read this particular book is not exactly crazy. However, given the topic of Somin’s criticism, i.e. Richard Thaler and libertarian paternalism–it really is necessary that he read this book before he will be in a position to offer informed criticism.
The same point applies to you. Your criticisms are simply not informed. In fact, I would expect you to be quite open to the arguments in the book, given your assertion that protecting people from themselves is sometimes necessary. That said, I would not expect you to agree with every argument made in the book. I myself certainly did not.
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October 14, 2009, 9:04 pmDavid Welker says:
Doc Merlin,
How does your observation that laws and regulations should also deal with “reality on the ground” undermine the assertion that abstractions such as those offered by Hayek fail to do so?
The point is, one needs to deal with “reality on the ground” and abstractions only take you so far. You seem to agree with that point. Am I missing something?
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October 14, 2009, 9:08 pmfrankcross says:
I haven’t read the book. But there is a potentially good argument for paternalism — transaction costs. Think about Delaware corporate law — generally renowned as wise and demonstrably good for business. Yet it is paternalistic. It tells corporations the rights that must be accorded minority common shareholders and overrides contracts. But this provides an assurance to minority shareholders that they will have rights and helps them avoid the considerable transaction costs associated with divining the meaning of contracts and associated rights for all the companies in which they might wish to invest. Without such paternalism, people would be unable to diversify their portfolio, or would have to assume significant risk. The empirical research on securities laws makes it clear that this paternalism is efficient presumably by reducing transaction costs. And similar principles operate with many other regulations, including safety protections.
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October 14, 2009, 9:33 pmAnderson says:
Yes, and the law you two are citing wrt lead paint on toys also ended up banning rhinestones and old children’s books and metal zippers on old children’s clothing, etc etc etc.
Proving that legislation must be carefully drafted is not the same thing as proving that paternalism is wrong.
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October 14, 2009, 10:16 pmAnonymous says:
Proving that legislation must be carefully drafted is not the same thing as proving that paternalism is wrong.
After all, all aspects of citizens’ lives are validly decided by the political process; right, Mussolini?
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October 14, 2009, 10:43 pmAnderson says:
You say “Mussolini,” I say “Oliver Wendell Holmes, Jr.” — let’s call the whole thing off?
I think that the word liberty in the Fourteenth Amendment is perverted when it is held to prevent the natural outcome of a dominant opinion, unless it can be said that a rational and fair man necessarily would admit that the statute proposed would infringe fundamental principles as they have been understood by the traditions of our people and our law. It does not need research to show that no such sweeping condemnation can be passed upon the statute before us. A reasonable man might think it a proper measure on the score of health.
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October 14, 2009, 10:53 pmsubpatre says:
David Welker says, “A lot of abstract ideas are perfectly appealing. But the devil is in the details, or in the application of those abstract ideas to concrete reality. Quoting abstract ideals by Hayek is no substitute for dealing with the reality on the ground.”
Yeah, like outlawing kids motorbikes because the battery has lead in it and would ‘harm the child’ if they ate the motorcycle. That’s the reality of our government.
The same thinking outlaws kid’s book that contains a staple —not because eating staples is bad— but because the staple might possibly perhaps have a smidgen of lead in it that, after eating the book and staple, could raise the child’s lead levels.
So here is Welker again, but fixed to meet the real world
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And Steve, nobody cares if you cite a particular law or not. The CPSIA is a predictable, inevitable outcome of big government paternalism.
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October 14, 2009, 11:46 pmBruce Hayden says:
It may be “generally renowned as wise and demonstrably good for business”, but there are a lot of people who would respectfully disagree. What it is good for is entrenched management. Much less so for stockholders. For one thing, it is far harder to prove a case of breach of fiduciary duty by officers and/or directors under Delaware law than under the laws of many of the other states. And, yes, that is one of the reasons that the companies stay incorporated under Delaware law.
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October 14, 2009, 11:48 pmLarryA says:
Given the track record of governments in “carefully drafting” legislation (pretty much throughout history) I’d say it does. Particularly when the law of unintended consequences steps in and everything goes awry. And that’s presuming that the science is clear enough to make universal pronouncements in the first place.
Then there’s mission creep. Sure, we start with an “opt out” provision, but then too many people start opting out, and it gets removed. And what about when administrations change? The Democrats are all in favor of paternalistic regulations until a Republican administration uses them to further right-wing interests. Likewise the Republicans are all in favor of paternalistic regulations until a Democratic administration uses them to further left-wing interests. In both cases we the people get more and more regulated.
It turns out that the only way you can protect your right to live your life the way you want to, is to protect other peoples’ rights to live their lives the way they want to.
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October 15, 2009, 12:00 amSteve says:
The CPSIA is a predictable, inevitable outcome of big government paternalism.
Sure, of course it is. If only those fools who banned lead paint all years ago had possessed your foresight, they wouldn’t have committed such a crime against humanity. Also, Mussolini.
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October 15, 2009, 12:38 amDavid Welker says:
subpatre,
For the record, I believe that the reality on the ground is always important. What is your position?
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October 15, 2009, 1:25 amAnonymous says:
I think that the word liberty in the Fourteenth Amendment is perverted when it is held to prevent the natural outcome of a dominant opinion
I agree that the two figures have something in common. A “dominant opinion” can come in direct conflict with the government’s charter’s principles: if some vocal group demands a government which is totalitarian in nature or simply seeks to crush dissenting political speech, they’re either going to have to flagrantly ignore the highest law of the land or work to repeal it. In that way, the 14th Amendment restrictions of government can’t negate the 1st Amendment restrictions of government because somebody perverts “liberty” into “equality and poverty” (which also defeats the whole “pursuit of happiness” thing, unless one defines that as preventing other people from pursuing happiness, which is the basis of entire ideologies which the Constitution was written to combat).
Which is to say, if you’re going to allow the government to parent its citizens, then you’re saying that there is legitimacy in its actions for the reason that it can know or do something better than them. So, where do you draw the line? Rather: why is drawing the line so difficult? Because it has no legitimacy in the first place.
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October 15, 2009, 1:44 amSandy MacHoots says:
I dislike dishonesty, which is what this approach is. If you want to justify taking my choice away because I’m too stupid and poorly informed to make it, fine. But don’t pretend that you’re somehow enhancing my choices.
Just that one? How did they get over that hurdle?
I don’t know the source for this assertion, because it’s not my take on Delaware law. Minority shareholders in corporations have virtually no protections in Delaware. The LLC law specifically allows the parties by contract to do anything they like, including eliminating virtually all fiduciary duties. In Delaware you get what you bargain for.
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October 15, 2009, 2:28 amDavid Welker says:
Sandy MacHoots:
That isn’t what the book is about. The book is about default choices. For example, research shows that people go along with the default choice a lot of the time, no matter what it is. If by default people are enrolled into a 401(k) upon employment, then people will tend to be enrolled in such plans more often than if the default choice is to not be enrolled. This is true even when the benefits of enrolling in a 401(k) are overwhelming, as when there are employer matches and people assert when asked that they would like to be enrolled. A lot of people just never get around to it. Inertia is a powerful thing.
This is NOT about taking away your ability to actively choose to participate in a 401(k) plan or not. It is about what happens in the absence of your active decision to make a choice.
Anyway, like I said, read the book if you would like to have a valid opinion on what it is about. Then you will be in a position to actually understand the argument. Not surprisingly, you assertions about what the book is about made without reading the book have been way off.
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October 15, 2009, 4:02 amAnonymous says:
In other words, some people some of the time lack the will or ability to think critically about their (eg) financial choices. So when the government decides that is the case, it should have the power to make the choice for you, on the grounds that it can make a better choice than the employer who printed up the form or the mob who popularized a trend.
My problem with that isn’t that the government will draw that line of decision in a bad place. My problem is that people think it has the power to draw that line.
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October 15, 2009, 6:20 amPersonFromPorlock says:
One point that hasn’t been touched on yet is that the ‘body of knowledgeable experts’ tends over time to be replaced by that of the morally superior ignoramii, as witness gun control, global warming, domestic violence and so on. Once knowledge is replaced by assertion, paternalism in that matter loses whatever justification it had.
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October 15, 2009, 8:12 amSteve says:
My problem with that isn’t that the government will draw that line of decision in a bad place. My problem is that people think it has the power to draw that line.
So how do things work, in a world where government doesn’t have the power to select a default choice? They can’t say you’re enrolled in a 401(k) by default, and they can’t say you’re unenrolled by default. Does the Constitution require them to flip a coin or something, to insure that they don’t devilishly influence your choice?
One point that hasn’t been touched on yet is that the ‘body of knowledgeable experts’ tends over time to be replaced by that of the morally superior ignoramii, as witness gun control, global warming, domestic violence and so on. Once knowledge is replaced by assertion, paternalism in that matter loses whatever justification it had.
I’m pretty confident that the government continues to be justified in banning domestic violence.
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October 15, 2009, 9:07 amSeaDrive says:
Not my fields, but I think this discussion could use some input from an expert in information theory and computability. In the political and economic spheres, there is acknowledgment of unintended consequences, but I think little understanding of how inevitable they are. The world is a much more complicated place that it appears viewed from a legislative lectern or regulation-drafting bureaucrat’s cubicle.
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October 15, 2009, 9:19 amGreek Geek says:
How does a paternalistic society not bear citizens completely incapable of making choices of their own? It seems to me that the real driving force behind these ideas is not the ivory towered, philosopher king litterati, but instead the people who wish to do nothing and have all of their choices made for them. God forbid people be responsible for their own actions . . .
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October 15, 2009, 9:20 amDuracomm says:
Steve says:
Lead paint was already illegal. Instead of enforcing the existing law the idiots in washington, showboating all the way, passed the CPSIA.
This law ended up favoring large corporate interests, forced independent toy makers to abandon the US market, outlawed reselling old books, outlawed reselling certain types of childrens clothing and had a mass of destructive unintended consequences.
I’m guessing the point of your comment was to note that most regulations passed by showboating politicians inevitably create negative unintended consequences that cause more harm than good.
You probably also noticed that these regulations always end up helping the existing large corporate interests because they help drive their smaller competitors out of business.
Did I understand you correctly?
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October 15, 2009, 9:59 amAmerican Psikhushka says:
Steve wrote–
I guess toys made with lead paint could have benefits to the consumer; they might be cheaper, or more attractive, or whatever. Still, I continue to favor tyranny over consumer choice.
David Welker wrote–
Steve, this is an excellent point. A lot of abstract ideas are perfectly appealing. But the devil is in the details, or in the application of those abstract ideas to concrete reality. Quoting abstract ideals by Hayek is no substitute for dealing with the reality on the ground.
No, as Duracomm mentions above it was the tort lawyers suing the stuffing out of the toy companies that did it. Not regulation. The politicians and bureaucrats came along after.
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October 15, 2009, 10:18 amFub says:
Where legislation is involved, I think “unintended consequences” are scarce as hens’ teeth.
If a legislator fails to read the statute he’s voting for; if a legislator ignores the warnings of actual voters (not corporate lobbyists) about the practical consequences of a statute for ordinary people; if a legislator blithely rationalizes his vote with something like “this must be good because it’s for the children...”; then that legislator has intended every foul consequence that arises from the statute.
Hanlon’s Razor does not adequately account for intentional ignorance.
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October 15, 2009, 10:50 amSandy MacHoots says:
You haven’t said a single thing to make me think that Nudge departs from Libertarian Paternalism. The fact that you can’t spend two sentences explaining how they get over the expert-bias problem (the only issue I raised that you say they addressed) suggests that I’d waste my time trying to find it.
To the extent they argue that my employer (or the manager of a school cafeteria) could “paternalistically” choose voluntarily to frame an issue in the way that he/she thinks is in my best interest, they’re correct, but the point is trivial. There’s no government coercion. My employer can do any damned thing it wants to. But to move from that position to saying that the government can compel my employer to frame choices in a way that (in the government’s considered opinion) protects me from myself, is to move from choice to coercion. The government is coercing my employer. Coercion of private citizens who are not harming others is not libertarian. Period.
What defaults are we talking about? Whether to opt in or out of a 401k? If the government is your employer, it can set whatever default rule it chooses. (Though if you think it will always pick the one that’s in your best interest, I think you’re naive.) But if the government isn’t your employer, it has no particular obligation to set a default rule. Your employer can decide whether it wants opt-in or opt-out. If the government orders my employer to choose the default that the government prefers, the government is violating my employer’s right to choose. Again, that may in some circumstances be a good thing, but to pretend that it’s libertarian is deceptive.
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October 15, 2009, 12:01 pmsubpatre says:
David Welker says, “The book is about default choices. For example, research shows that people go along with the default choice a lot of the time, no matter what it is.”
People go along to get along. We knew this all along, the knowledge is in our own Founding documents:
Orin Kerr has a post, immediately below this one, that coincidentally addresses that exact subject. When given a ‘default choice’ [Welker’s phrase] his father went along with it.
When Welker uses the phrase ‘default choice’ it means the opposite; it means less options or no alternative. People go along to get along; we knew this all along; but deliberately using it means we are going down the wrong road.
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October 15, 2009, 12:04 pmSeaDrive says:
No. You are saying, more or less, that if you merely read the rules of chess, then you can play an optimal game. Computation theory teaches that, even for some simple situations, there is no way to figure out the ending without letting the process play out.
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October 15, 2009, 12:39 pmFub says:
No. I’m saying that if you don’t read the rules of chess before playing, then you intended to play a bad game.
Merely reading the rules may not lead to an optimal game, but refusing to read the rules generally guarantees a bad game.
To use the previously mentioned example of the CPSIA statutes — it doesn’t require a rocket scientist, or a physically unrealizable computer, to read the statute and recognize its broad and obvious effects. Among those effects is to outlaw all childrens’ books published before the advent of Pb-free inks, and to empower the FTC to raid garage sales or second hand stores where such books might be traded or sold.
The legislators who voted for it either knew exactly what they were doing, or they chose to remain ignorant of its most likely effects. It’s not as if nobody told them before they voted.
Thus CPSIA’s consequences were not “unintended.” Legislators’ refusal to even consider amending the statute now that public outcry has begun is further evidence that those same legislators intended the statute to do the damage that it is doing.
If you step on someone’s toe, and refuse to move when they say “excuse me, you’re standing on my toe”, then you intend to step on their toe.
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October 15, 2009, 1:52 pmRPT says:
“SM:
Coercion of private citizens who are not harming others is not libertarian. Period.”
Who decides who is harming whom? Won’t the [alleged] polluter, predatory lender, etc. always deny the existence of any harm to others and, if the harm is conceded, deny that there is a casual connection between their conduct and the harm?
These libertarian arguments seem to end up at “I want to do what I want to do, and damn the consequences to anyone else”; sort of the anti-golden rule.
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October 15, 2009, 3:10 pmSuperSkeptic says:
Unless you can come up with a better system, probably a jury.
No, in fact, it’s exactly the golden rule.
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October 15, 2009, 5:21 pmSandy MacHoots says:
And the opposite is “I ought to be able to make you do whatever I think is best no matter what you want, and I want to be able to imprison you or kill you if you resist.”
Given the two poles, I’d choose the former. I might have to breathe tobacco smoke, but I wouldn’t get shipped to the gulag.
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October 15, 2009, 5:30 pmloki13 says:
I love it!
Here we have a conversation about changing the default rules, and whether that’s a good thing. Now, for me, I can see why that might be adviseable. Brains built for the savannah aren’t always the best for modern life, and changing the default (as opposed to coercion) seems like a good idea.
Change the default to putting 2% in the 401(k), with the option to opt out (for example), instead of having the default be no 401(k) contribution, and having to opt in.
Now Sandy McHoots thinks that forcing others to change their default rules is coercion in and of itself. I’m not sure I agree– I think if there isn’t a rule, that might be the case, but where something is offered, or if the rule is in place, “forcing” the default would not be coercion. However, I understand from an intellectual level what Sandy is getting at; I just think that it isn’t coercion (assuming that the rule/offer is in place) and that it both accomplishes good from a societal perspective (the most good at the default setting) while still allowing the freedom to chose.
OTOH, we get the UnderFather, who immediately leaps to– “it’s just like the NAZIS forcing the jews to work in the ghetto for food!”
I tell you, I’d call it high comedy if it wasn’t for the whole holocaust thing.
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October 15, 2009, 6:22 pmSandy MacHoots says:
Not sure I follow this. If I match my employees’ 401k contributions to a max of 2%, but I set the default as opt-in, and the government then tells me that I must change my default to opt-out, how is that anything other than coercion? If I’m forced to change the default, I will be forced to reduce the match amount unless I want to contribute more money. (In this economy?)
Why would I want to pick an a higher match with an opt-in default, you ask? Because it allows me to provide a benefit that some employees value very highly the employer to provide a benefit to those who value it highly. Those employees will obviously opt in. But I don’t have to do the match for employees who don’t value it. Making me increase the number of employees who get matches means that I can’t target that money to employees who value it highly and makes it harder to attract them.
As to whether socking money in a 401k is an unambiguous good, that depends on lots of things, including whether you think you’re going to get free retirement benefits and health care from the government when you get old, whether you think financial assets will hold up if we go through a period of hyperinflation or a drastically devalued dollar, whether you’ve got alternative lucrative uses (like investing in gold or real estate or your own business), or any number of other things.
The government is probably better off if you invest, since it increases future tax flows, but it’s not a sure thing that you will be. So I would expect that the default would be set in the government’s interest.
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October 15, 2009, 9:59 pmDavid Welker says:
Sandy MacHoots,
You do know that the term 401(k) comes from section 401(k) of the Internal Revenue Code right?
Exactly how is it coercion to say that those companies who want to take advantage of that section of the code need to meet certain requirements? Do you think it is coercion for the government to require you to keep receipts or other evidence if you want make certain deductions? Do you think it is coercion when the government requires you to depreciate rather than immediately expense assets that have an expected life greater than a year? Do you think it is coercion when the government requires welfare recipients to look for work in exchange for welfare benefits? Is the government negotiating and or looking for a lower prices when buying goods and services coercion?
The government can set whatever conditions it wants for the benefits it offers. That isn’t coercion.
Your point of view that attaching requirements to participation in government benefits is coercion is simply incomprehensible to me.
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October 15, 2009, 10:45 pmAmerican Psikhushka says:
loki13–
Now Sandy McHoots thinks that forcing others to change their default rules is coercion in and of itself. I’m not sure I agree– I think if there isn’t a rule, that might be the case, but where something is offered, or if the rule is in place, “forcing” the default would not be coercion. However, I understand from an intellectual level what Sandy is getting at; I just think that it isn’t coercion (assuming that the rule/offer is in place) and that it both accomplishes good from a societal perspective (the most good at the default setting) while still allowing the freedom to chose.
As Sandy says above, you’re just switching the coercion to the employer, by forcing a particular set of choices on them. What’s stopping them from instead using voluntary, privately funded education, advertisement, etc. initiatives to get the word out? That would be true libertarian paternalism. The problem is what they want to do isn’t quite libertarian. They could set up some kind of organization that promotes “best practices” in employment benefits.
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October 15, 2009, 10:52 pmAmerican Psikhushka says:
loki13–
OTOH, we get the UnderFather, who immediately leaps to– “it’s just like the NAZIS forcing the jews to work in the ghetto for food!”
Well, they haven’t started torturing, raping, enslaving, stealing property, expelling target groups from lucrative professions, enacting racist laws, illegally experimenting on human subjects, etc. so maybe that comparison isn’t applicable to choices for retirement investments. But if someone were doing those things the comparison to the Nazis would certainly be appropriate.
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October 15, 2009, 10:58 pmAmerican Psikhushka says:
David Welker–
Exactly how is it coercion to say that those companies who want to take advantage of that section of the code need to meet certain requirements?
Because it’s a benefit that businesses provide voluntarily. Adding requirements just might cause fewer businesses to provide them. And mainly its the business owner’s and employee’s money we’re talking about.
The government can set whatever conditions it wants for the benefits it offers. That isn’t coercion.
Well, except conditions that are racist, etc.
And provided we’re talking about benefits rather than property that is really the citizen’s and not the governments.
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October 15, 2009, 11:12 pmSandy MacHoots says:
I’ve always loved the argument that when the government doesn’t take your money away from you, you’re getting a “benefit.” Never really understood it, of course, but love it.
Let me make sure I understand. The government lets me keep some portion of what I earn. This means that the government has conferred a benefit on me. The government is entitled to put conditions on the benefits it gives to citizens. Therefore, the government is entitled to tell me exactly what I can and can’t do with my “benefit.” And without infringing my personal liberty at all!
Yep, sounds pretty libertarian.
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October 16, 2009, 12:11 amloki13 says:
AP & Sandy,
I think you missed it. On an *intellectual level* I understand your argument. I just don’t agree with it.
Here’s the deal:
–If we go with Sandy’s preference idea, whether the default is set at opt in or opt out shouldn’t matter, because people that want it would enroll regardless.
–However, studies have shown that people are.... well.... lazy/confused etc. and tend to not get around to it.
–Therefore, why not set it the default (if you’re offering it!) to the one that does the most good for the most people, while preserving the freedom to choose to not participate.
–And if the employer doesn’t want to offer it, feel free! But if you do, have the default that does the most benefit. You see it as coercion, I see it as more akin to modern-day accurate advertising.
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October 16, 2009, 12:19 amAnonymous says:
I see it as more akin to modern-day accurate advertising.
I love opt-out ads.
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October 16, 2009, 12:32 amAmerican Psikhushka says:
loki13–
Therefore, why not set it the default (if you’re offering it!) to the one that does the most good for the most people, while preserving the freedom to choose to not participate.
Because you’re using coercion and may cause less businesses to offer it. If you or any of the other paternalists out there are so interested, why not make efforts to get the word out? Why not do it to a degree where most businesses will eventually advertise that they’re a “best practices” employer and the like? Why do you have to use force rather than persuasion?
And if the employer doesn’t want to offer it, feel free! But if you do, have the default that does the most benefit. You see it as coercion, I see it as more akin to modern-day accurate advertising.
Except when its not accurate.(That’s called false adertising.) And as Sandy mentioned above there are situations where it isn’t — someone wants to get a larger paycheck and invest the money elsewhere, for instance.
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October 16, 2009, 2:50 amRicardo says:
Who do you want to spend resources to “get the word out” on enrolling in a 401(k)? Employers? The government? AARP? Rigorous research on exactly this question tells us that no method is more effective in terms of absolute enrollment than opt-out. Which is to say in terms of cost effectiveness, the benefits of opt-out are even higher. Let’s save the resources that would be spent on some mediocre, only partly effective advertising campaign. If an employer really doesn’t want to institute default 401(k) contributions, I don’t see how the government could stop them — but I doubt most HR directors have really strong opinions about it.
Research also tells us that very few people who initially “default in” to a 401(k) plan later take the initiative and opt out. The reality is that if someone is a sophisticated enough investor who wants to invest his money elsewhere, he’s probably going to just take five minutes out of his time to walk over to HR and sign the damn paperwork to cancel his 401(k) enrollment. You seem to be imagining someone who has strong opinions on how best to invest his money but is too lazy to actually fill out a simple form to opt out of the 401(k) plan. I would have doubts such a hypothetical person could ever be motivated to open his own brokerage account or go scouting around for investment deals on his own.
Incidentally, I worked at an investment management firm and I think that was the exception that proved the rule. Every morning, the finance geeks I worked with would log onto their 401(k) accounts and eagerly track the market value and plan trades. Nearly everyone was enrolled — which goes to my point about highly motivated investors are going to take charge of their own affairs no matter what the default rule is.
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October 16, 2009, 3:25 amAmerican Psikhushka says:
Ricardo–
Who do you want to spend resources to “get the word out” on enrolling in a 401(k)? Employers? The government? AARP?
Those who feel it is important.(I also think it is important, but not important enough to force business owners to do it using taxpayer money.) Perhaps the academic types advocating it. Libertarians favor using persuasion over force.
Which is to say in terms of cost effectiveness, the benefits of opt-out are even higher.
But the thing is, taxpayer money wouldn’t be used to pay for it.
Let’s save the resources that would be spent on some mediocre, only partly effective advertising campaign.
Rather that than spending taxpayer money on it. I don’t even think it would take that much, just some high profile politicians, celebrities, bloggers, etc. urging businesses to make their 401K’s opt out. Make it a patriotic act and do some public service announcements (privately funded) — that’s something that both left and right could agree on.
Again, I think it is an important, even crucial issue. But the whole concept of “libertarian paternalism” isn’t quite libertarian. The issue of opt-out 401Ks was chosen for a reason. It’s an easy, almost no-brainer issue that can be used to get buy-in for the concept. But what it’s concealing is a statist or interventionist reflex to use force and taxpayer money to accomplish an agenda. And that’s not too bad for something like helping people save for their retirement, but not so great when some other agendas that aren’t so innocuous and clean-cut come up.
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October 16, 2009, 7:15 amDavid Welker says:
Of course the government can put conditions on the ability of people to take deductions or credits or other benefits under the tax code. Such provisions are benefits because they lower the amount of taxes you would otherwise owe under the law or they delay the date upon which such taxes are due.
It is obviously not coercion. Employers remain free to set up retirement plans that do not meet the requirements and thus do not derive the benefits of section 401(k) of the Internal Revenue Code. No one is holding a gun to an employer’s head requiring that they make their plans compliant.
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October 16, 2009, 3:09 pmAmerican Psikhushka says:
David Welker–
It is obviously not coercion. Employers remain free to set up retirement plans that do not meet the requirements and thus do not derive the benefits of section 401(k) of the Internal Revenue Code. No one is holding a gun to an employer’s head requiring that they make their plans compliant.
We’re still talking about the individual’s money and investment earnings on the individual’s money. If a mugger took your property and put conditions on returning it you certainly wouldn’t consider it a “benefit”.
And it is coercion or force. Taking someone’s property or the earnings on their property and refusing to return it unless you comply with their demands certainly isn’t persuasion.
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October 16, 2009, 8:47 pmDavid Welker says:
Having to pay your fair share of taxes is not equivalent to being mugged. If that is your starting position, then you are basically crazy. You can’t really have a rational discussion with a crazy person. For the rest of us, it is indisputable that provisions in the tax code which reduce the amount you would otherwise owe constitute benefits. Taxes are necessary for government and government is necessary for both civilization and to protect us from being dominated by other governments. Having established that government is necessary, it is up to the People to decide on what powers the government should have to advance civilization and the general good and what actions government should take under those powers. These are decisions to be made by all of society and rightly binds individuals, like yourself, who voluntarily choose to be part of that society, whether all the particulars are perfectly aligned with their individual preferences or not.
Finally, it should be pointed out that taxes are voluntary. It is only to the extent that you as an individual voluntarily choose to enter into government enforced contracts within the United States or own property that is protected from invasion that you owe taxes.
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October 16, 2009, 9:48 pmDavid Welker says:
I thought I would clarify the above point as to taxes being voluntary. Once you have earned income, which is typically achieved by entering into contacts, paying taxes is not voluntary. It is the decision to enter into those contacts in the first place which is typically voluntary.
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October 16, 2009, 10:04 pmThe Volokh Conspiracy » Blog Archive » How Markets Make Us More Rational says:
[...] with some other aspects of the current debate over paternalism, the relationship between markets and rationality was well-described by F.A. Hayek. In Volume 3 of [...]
Rationality is a Virtue, Not an Assumption « Let A Thousand Nations Bloom says:
[...] with some other aspects of the current debate over paternalism, the relationship between markets and rationality was well-described by F.A. Hayek. In Volume 3 [...]