Obama and Libertarian Paternalism

Obama has been called a left-libertarian by some. While this is a little bit of a stretch, there is certainly a tremendous difference between him and the nanny-state views of Hillary Clinton and some other Democrats. George Will hopes that Obama is being influenced by the ” “libertarian paternalism” philosphy of two of his advisers from the University of Chicago, Robert Thaler and Cass Sunstein:

Beginning this autumn, Sunstein, while retaining a connection with Chicago, will teach primarily at Harvard, an act of downward mobility that illustrates a central tenet of “Nudge,” that even intelligent and analytical people often make foolish choices. Thaler and Sunstein correctly assume that people are busy, their lives are increasingly complicated and they have neither time nor inclination nor, often, the ability to think through even all important choices, from health care plans to retirement options. Therefore the framing of choices matters, particularly using the enormous power of the default option—the option that goes into effect if the chooser chooses not to make a choice.

For example, Obama advocates that where defined contribution savings plans such as 401(k)s are offered, there should be automatic—note well: not mandatory—enrollment by employers of new workers. Contributions to such plans are tax deductible, taxes are deferred on the accumulating money and often employers match part of the employees’ contributions. What is at stake is, essentially, free money. Yet when an employee must affirmatively opt in, participation falls far below 100 percent. Obama’s proposal would simply change the default option: Employees are in unless they choose to opt out, which they would be free to do.

Will later gives this definition of a nudge:

By a “nudge” Thaler and Sunstein mean a policy intervention into choice architecture that is easy and inexpensive to avoid and that alters people’s behavior in a predictable way without forbidding any options or significantly changing an individual’s economic incentives. “Putting the fruit at eye level counts as a nudge. Banning junk food does not.”

He concludes with comments on the libertarian aspects of this view:

Thaler and Sunstein say the premise of libertarian policy is that people should be generally free to do what they please. Paternalistic policy “tries to influence choices in a way that will make choosers better off, as judged by themselves.” So “libertarian paternalism is a relatively weak, soft, and nonintrusive type of paternalism because choices are not blocked, fenced off, or significantly burdened.”

Thaler and Sunstein stress that if “incentives and nudges replace requirements and bans, government will be both smaller and more modest.” So nudges have the additional virtue of annoying those busybody, nanny-state liberals who, as the saying goes, do not care what people do as long as it is compulsory.

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