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.

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.

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.

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.

American Psikhushka: 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?

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.

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.

I love opt-out ads.

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.

David Welker: Your point of view that attaching requirements to participation in government benefits is coercion is simply incomprehensible to me.

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.

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.

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.

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.

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.

loki13: 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.

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.

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.

RPT: 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.

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.

RPT: 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?

Unless you can come up with a better system, probably a jury.

RPT: 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.

No, in fact, it’s exactly the golden rule.

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.

SeaDrive: 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.

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.

Fub: 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…

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.

People go along to get along. We knew this all along, the knowledge is in our own Founding documents:

“. . . and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed.” –DoI

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.

“At the time, able-bodied men in the ghetto could agree to perform manual day labor outside the ghetto for the Third Reich in exchange for benefits such as food. My father, then a teenager, was one of the people who did this work when he was in the Vilna ghetto from 1941-1943.” – Orin Kerr

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.

David Welker: 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.

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.

Steve: 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?

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.

SeaDrive: n the political and economic spheres, there is acknowledgment of unintended consequences, but I think little understanding of how inevitable they are.

Duracomm: 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.

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.

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.

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.

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?

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.

David Welker: 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. [...] It is about what happens in the absence of your active decision to make a choice.

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.

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.

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.