Governments should influence individuals' actions while preserving their freedom of choice, prominent legal scholar Cass Sunstein argued in a lecture last night.
The talk, titled "Libertarian paternalism is not an oxymoron," focused on merging two seemingly contradictory ideologies: libertarianism, which holds that governments should grant people complete freedom of choice; and paternalism, which advocates centralized government commands. Sunstein is a professor at the University of Chicago Law School.
The past six or seven years in the United States have been characterized by a debate between libertarians, who advocate a laissez-faire approach, and planners, who call for government regulation of markets, Sunstein said.
"Maybe in the next generation, we can get beyond the laissez-fair versus planner debate and move onto something more productive," he added.
Sunstein's solution, a product of work with economist Richard H. Thaler, is "libertarian paternalism."
Libertarian paternalists, in both private and public spheres, seek to influence people's choices in beneficial directions while respecting their liberty. Such an approach, Sunstein said, "preserves freedom of choice but directs decisions in a beneficial way."
The primary mechanism of this ideology is inspired by what Sunstein calls "the stickiness of the default." He pointed to several examples in which people, given the choice to adhere to a default given to them by an authority or to change their position, are likely to stick to the default.
In one study of students at the University of Chicago, one group was told that their employer is offering them two weeks' vacation with the option of an additional two weeks for less pay. Another group was given four weeks of vacation with the option of two weeks for more pay. In both instances, most students chose to stay with the default amount.
Sunstein explained that this adherence to the status quo is motivated by inertia: People are discouraged from changing the default because they believe that the status quo is determined by someone informed.
Therefore, Sunstein said, libertarian paternalism can influence people's choices just by changing the default option. For instance, if employees have to sign up to have some of their earnings automatically entered into a savings account, as few as 20 percent choose to do so. If a portion of the employee's earnings automatically go to into savings, however, he is more likely to save his earnings and not opt out from the plan.
Such changes of the default are meant to steer people in the "right" direction by providing the appropriate balance between regulation and choice. "People's own choices don't always promote their own welfare," Sunstein said.
Moreover, in forced choice situations such as President Bush's prescription drug plan, people are likely to become overwhelmed by the degree of choice available to them. So by providing them with a beneficial default, which Sunstein said must "depend on the heterogeneity of the people," the government or private institution can "steer people in directions that will benefit their welfare."
"Libertarian paternalism, I insist, is not an oxymoron," Sunstein said. "It provides the foundation for rethinking many areas of private and public law."
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