Tracing consequences both seen and unseen.
Eric D. DixonThe Knowledge Problem of New Paternalism
Posted at 4:14 pm on March 28, 2010, by Eric D. Dixon

Tom Palmer‘s book reviews are more than enough to explain why Cass Sunstein is an extraordinarily sloppy thinker, but bad ideas never die — and Sunstein’s bad ideas are plentiful. One of his pet theories, developed with Richard Thaler, is “libertarian paternalism,” which posits that central authorities can frame the choices available to people in society in such a way that “better” choices will more often be made — all without running afoul of libertarian objections to authoritarian compulsion.

David Friedman has made compelling arguments that “nudges,” attempts to establish innocuous choice architecture, would likely soon become more like shoves.

Yesterday, I discovered that economists extraordinaire Mario Rizzo and Glen Whitman (check out this nice encomium to Rizzo by Peter Boettke) had thoroughly dismantled the idea that would-be paternalists have the ability to make better utility-maximizing decisions than the aggregate population they hope to influence, let alone cement this ability in a set of public policies that would implement the benefits of their omniscience in practice. Titled “The Knowledge Problem of New Paternalism,” one additional reason it caught my eye is because they published it in the law journal of my own alma mater.

(Last time I went poking around the archives of BYU’s scholarly journals, incidentally, I stumbled across this gem from 1976, which provides the interesting bit of trivia that Milton Friedman and Dallin H. Oaks had been friendly colleagues during their mutual time in Chicago.)

At any rate, Rizzo and Whitman give “libertarian paternalism” the full Hayekian analysis, concluding:

In principle, we can embrace the idea of making people better off according to their own true preferences. That goal cannot be made operational in practice without access to information that policymakers do not, will not, and often cannot possess. Yet policymakers have to make policy on the basis of something, and so they will appeal to their own preferences, the preferences of self-appointed experts, or the (alleged) preferences of the public at large. They cannot implement people’s “true” preferences, but they can implement what they believe are the “right” ones, and the new paternalist paradigm will provide the intellectual cover to do so.

It’s an excellent piece, worthy of a full, careful read.

[Cross-posted at Shrubbloggers.]


Filed under: Economic Theory, Nanny State, Regulation
Comments: 3 Comments
 

3 Comments »

  1. [...] concern that I have about agressive ticketing and selective taxes: paternalistic policies, such as the kind that Eric D. Dixon recently described, frequently fail to accomplish their official [...]

    Pingback by The Lesson Applied » Inefficaciousness: Hot New Trend? — March 30, 2010 @ 10:48 pm

  2. [...] cover to do so. It’s an excellent piece, worthy of a full, careful read. [Cross-posted at The Lesson Applied.] — Eric D. DixonComments (0) [...]

    Pingback by The Shrubbloggers » The Knowledge Problem of New Paternalism — March 31, 2010 @ 12:56 am

  3. [...] they do the $5. Even if said bags of popcorn sold at $100 per, the same holds true. And although the New Paternalists may have something to say about that (waiting periods for high-cost items, etc…), it is still [...]

    Pingback by The Lesson Applied » Pop the Corn Bubble Burst — April 4, 2011 @ 9:49 pm

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Henry Hazlitt"[T]he whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."
Henry Hazlitt, Economics in One Lesson
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