What Nudge Really Says
By David Henderson
Co-bloggers Arnold and Bryan have posted recently on their view that “libertarian paternalism” would be more attractive if its advocates pushed to replace existing paternalist policies with softer “nudging” paternalist policies. Scott Sumner has said something similar.
But as I pointed out in my review of Nudge, that’s exactly what Richard Thaler and Cass Sunstein have done. I won’t vouch for Thaler’s latest argument that regulating smoking is about externalities. I’ve written on that at length (here and here). When you have privately owned rooms in which smoking occurs, there are no externalities within the rooms.
But in their book, Thaler and Sunstein advocate many reductions of straight paternalism. Here are some paragraphs from my Summer 2008 review in Regulation:
The authors also advocate moving in a libertarian direction on motorcycle helmet laws. They approvingly cite New York Times columnist John Tierney’s proposal that people be allowed to go without helmets if they take an extra driving course and submit proof of health insurance. Again, this is a move away from the crushing paternalism most states impose by banning choice altogether.
Perhaps my favorite of their moves away from paternalism is on the issue of medical malpractice. They point out that patients now cannot sign a legally enforceable contract in which they promise not to sue for malpractice. The result is what the authors call a “forced lottery ticket”: courts are capricious in these cases, finding negligence where there is none and missing negligence where it exists. And the lottery ticket is not cheap: they cite estimates that exposure to medical liability accounts for 5-9 percent of hospital expenditures, which gets reflected in higher premiums for health insurance. Why do courts block the kind of contracts that Thaler and Sunstein claim that patients would want? They write, “The answer is non-libertarian paternalism, pure and simple.” They advocate letting patients, or their employers who buy the insurance, have an option that forbids malpractice suits. The nudge to get people to give up their lottery ticket is a default option whereby the patient gives up his right. Interestingly, the nudge
here is not a big part of their proposal. What they advocate — letting people contract
out of the right to sue — has been advocated for many years by many libertarians,
with or without a nudge.
In a chapter titled “Privatizing Marriage,” Thaler and Sunstein advocate, quite sensibly, moving in a libertarian direction by separating marriage and state. They
point out that, despite the evidence, almost 100 percent of people who get married
think that they are highly unlikely to get divorced. This is one of those systematic,
but wrong, biases that people have. People also think that arranging pre-nuptial
agreements will “spoil the mood.” The result? Most people are vulnerable to “a
legal system that has an astonishing degree of uncertainty.” They advocate a
nudge: a default contract that favors the weakest parties, typically women. Then,
people would be free to avoid the default by tailoring a contract to their desires.
They also suggest that taking marriage away from the state would, with one fell
swoop, solve the thorny problem of gay marriage. Let churches and other organizations
choose whatever marriages they want to approve and let people choose their churches. Interestingly, their nudge is a small part of this proposal, just as with their proposal on malpractice.
As I also point out in the review, Thaler and Sunstein mess up in their discussion of Social Security, seeing the elderly as people who somehow have a property right to be financed by the young. So they don’t give us libertarians everything that we want. But when they do give us what we want, shouldn’t we be willing to take Yes for an answer?