Your Thoughts Exactly: The Economist and soft paternalism

Thursday, April 20, 2006

 

The Economist and soft paternalism

Thanks to a piggybacked subscription to the Economist, I now feel like a responsible media consumer again after two years of Newsweek. Ok, true, perhaps, the Economist is generally geared towards elitist media snobs such as ourselves, but it's also (as its name implies) a supporter of big E Economics, which generally pushes fiscally conservative views and socially liberal views. (At least I'm not reading the Nation) And doesn't the use of the 'favourite' and shitloads of text just scream "we're a serious news source!"?

The answer is yes. Maybe there's a little bit of 'if it looks like a duck' thinking going on, but it's hard to put an issue of Newsweek (or Time) next to the Economist and not realize that the Economist is a superior source of information and content. The downside, of course, is that it has small text and dense articles (plus, the cover art is always a little abstract) so its potential readership is reduced. Maybe by putting more pictures and ads in, it would become a little more accessible, but maybe by doing that they'd open the door for sensationalism. Who knows? They might try taking a page out of the Reader's Digest marketing book- subscribers get a normal issue with the actually featured short stories and articles, while the newstands and grocery stores get a cover that always has the same articles on it- "LOSE WEIGHT OFF THAT BELLY!" and "IS BIRD FLU THE NEW SARS WHICH WAS THE NEW ANTHRAX?"

There's my plug for the Economist. Now I have to take issue with them, since they've been disagreeing with me lately. In a recent issue, they talk about "soft paternalism"- the idea that the state should encourage and enforce good behaviors (which is the paternalism part) by using rewards more than punishments, and by not "forcing" people to do things like wear seat belts and save for retirement (which is the soft part.)

The assumption by the writers is that paternalism is bad, because hard pateralism has been the basis of many, many failed governments and systems. Freedom seems to be the key behind the success of capitalism and democracy- so anything that limits freedom is bad as well. But is soft paternalism really the threat that they make it out to be?

Here's a quick example of a system using SP that the writers used: Before you can buy cigarettes, you have to buy a 'cigarette license' that you have to define limits on. Proponents of SP realize (actually the Economist concedes this too) that people are more rational about the future than the present, and therefore will be more likely to realize that they should not be smoking more than a pack a week, like a sort of new year's resolution. So our smoker friend defines a limit of 4 packs a monh. When mid month rolls around, and he's used up all four packs, the government says that he can't have anymore. Lastly, if he wanted to, he could go to the government and have his limit increased, but there would be a waiting period, because without the waiting period, or at least a fee or inconvenience of some kind, the limit would have no meaning.

SP advocates say that at no point was his freedom abridged, because sign up was voluntary. The system simply enforces the freedom of the former self over the present self. The Economist responds in a variety of ways- they complain that there is no reason for the government to abridge anyone's freedom, even if they want you to, they complain that irrational desires such as gambling and smoking have use, and they complain that the government should not be protecting its citizens against themselves. I say that that's a load of crap. What government can possibly be neutral, and composed of perfect citizens? I think what really upsets the Economist is two things:

1) The proponents of soft paternalism don't have the wealth of the system as the ideal of their desires. They encourage quitting smoking, saving for retirement, etc., because it will be good for individuals. But, what if the tobacco industry adds wealth to the economy? What if the institution of such a system destroys the industry overnight and takes down the economy because of it? I think that if the ideas of SP could somehow be applied to the good of capital- and that if the government merely encouraged behavior that created wealth for society, the writers would be much more favorable to the idea as a whole. Of course, the proponents of SP tend to be fiscally liberal and more on the socialist side, so in practice their systems have been liberal social issues.

2) The idea that people can be programmed to do things. I think this one gets their goat even more-- the article ends on a note about that if people don't learn to discipline themselves, they'll end up like apes, who simply do what the government tells them to. How can they become strong, decisive people if they have their hand held all the time? Total bullshit, because what person has somehow made it on their own, without help from government, system, values, family, workers? What government has ever not wanted a citizenship of law-abiding people? And if it is true that people's decisions can be programmed- what sense does it even make to talk about learning discipline and learning to make good decisions? Could those be programmed too?

One last thing I'd like to say, though, is that even though I think they show an undue dislike of soft paternalism, I believe that they are probably correct about needing freedom and capitalism. I just don't think they need to appeal to a sense of "oh no, this is like 1984 with Big Brother!" to show why it may not be a good idea. I suppose saying "We like capitalism and anything that deviates from it is bad" would be unconvincing after a while.

Comments:
You mention that the government forces people to save for retirement as hard paternalism, but from what you seem to have described as soft paternalism wouldn't the government's current methods of encouraging this (e.g. not taxing 401K deferrments from paychecks) be considered soft paternalism?

Also, where is the line between hard and soft paternalism? I feel like the government could use hard paternalism disguised as soft paternalism by making an offer you can't refuse.
 
The dividing line is choice.

Another example from the article: right now you do not have to save for retirement. Saving in a 401K is obviously a good idea, and most people would want to do so if they completely understood it, and if there were no transaction costs to enroll. Unfortunately, many people are discouraged by the confusing or complicated paperwork, and do not enroll simply for this reason.

The soft paternalism route would still allow choice, but it would solve the problem of inertia. The default rule would be that all employees are enrolled (or at least employees in positions qualifying for a 401K), and you have the choice of opting out. Some places have switched to this, and the enrollment rates are much higher. Since people lack will power, the default is changed to the "good" outcome, and it takes will power to switch to the "bad" one - but the choice is still there.

If the goverment made an offer you can't refuse, I don't think that is necessarily hard paternalism, unless they lower the benefit or increase the burden of the "bad" choice by a large degree. If they just place the outcome of inertia on the "good" side, it might look like a great deal since you don't have to do much to get the good outcome, but you still are as free to choose the "bad" as you were to choose the "good" before the default outcomes were switched.
 
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