Human beings have the capacity to reason. But we often don’t do it nearly as well as we could. We all make choices in our lives that add up to socially suboptimal outcomes. Could the government do better making some choices for us? Should it?
Consider the libertarian argument for the claim that a just society is one in which individual rights are rigorously and consistently protected by law. The key premise in this argument is that these rights — i.e., to life, liberty and property — are of paramount importance because each individual person requires these as conditions for the exercise of rationality. But if human beings don’t in fact exercise this capacity as they might (and perhaps as they should) would this ensure that the case for a free society falls apart? To his credit, Nobel laureate Daniel Kahneman doesn’t want to go down that road, based on a reading of his recent book Thinking, Fast and Slow (hereafter, ‘TFS’).
The author asserts that although “Humans are not irrational, they often need help to make more accurate judgements and better decisions, and in some cases policies and institutions can provide that help.” (TFS, 411) Interestingly, Kahneman admits that this claim is “controversial,” because it is opposed to the view that
…human rationality is closely linked to an ideology in which it is unnecessary and even immoral to protect people against their choices. Rational people should be free, and they should be responsible for taking care of themselves. … The assumption that agents are rational provides the intellectual foundation for the libertarian approach to public policy: do not interfere with the individual’s right to choose, unless the choices harm others. (ibid.)
In other words, there exists a presumption in favor of the point of view represented by Milton Friedman (see Free to Choose) that is shared by both leading economists associated with the Chicago School of Economics and behavioral economists like Kahneman. As Kahneman says: “freedom is not a contested value; all the participants in the debate are in favor of it.” (TFS, 412) Unlike the libertarians of the Chicago School, however, the behavioral economists believe that “freedom has a cost, which is borne by the individuals who make bad choices, and by a society that feels obligated to help them.” (ibid.)
To the extent that failures of rationality mean that individuals’ choices do not align with their self-interests, the behavioral economist’s desire to see some form of government intervention to incentivize the “right” choices is at least understandable. But any such intervention will have to be reconciled with the fundamental social value of individual freedom, if indeed that value is not “contested.” So this puts the behavioral economist in a dilemma: how do we justify the appropriate interventions given the side constraints imposed by individual rights?
Kahneman seems to endorse the approach taken by Richard Thaler and Cass Sunstein in their 2008 title Nudge, called “libertarian paternalism.” This the position that “the state … [is] allowed to nudge people to make decisions that serve their own long-term interests.”
Unfortunately, the notion of libertarian paternalism is incoherent, and predictably leads to inconsistent policy prescriptions. An example of a valid nudge would be the “designation of joining a pension plan as the default option,” for it is “difficult to argue that anyone’s freedom is diminished by being automatically enrolled in the plan, when they merely have to check a box to opt out.” (TFS, 413) An example of an invalid nudge would be labeling requirements on meat products, which force sellers to add redundant statements like “10% fat” in addition to existing markings of “90% fat-free.”
What is the difference? While both nudges are intended to help people make better choices, the former involves no individual rights violations, while the latter example does. While seemingly equally innocuous in practice, the paternalism of both examples shields an important distinction of principle: in the latter example, the government’s labeling requirements trumps whatever business decisions the meat producer has made with regard to product packaging, thereby limiting that producer’s freedom in a way that a libertarian could not accept. The seller doesn’t get a box to check to opt out of the government’s labeling mandate. (The libertarian would, of course, accept laws against outright fraudulent or deliberately misleading product labeling.)
If you accept individual freedom as a primary social value, the only restrictions upon it that can be justified in a social context are those that maximize the freedom of others by preventing harm to them (or their property). Interventions that restrict liberty further can only be justified by appeal to other considerations such as equality or social justice. “Paternalistic” interventions are incompatible with due regard for freedom as the highest social value.