Glaeser (2006), “Paternalism and Psychology”

Ed Glaeser, “Paternalism and Psychology [pdf].” University of Chicago Law Review 73(1): 133-156, Winter 2006.

• This article is a relatively early contribution in what has become a crowded area, critiques of the policy prescriptions -- typically soft or hard paternalistic policies -- that often accompany behavioral economics analyses.

• The sorts of shortfalls from full rationality that behavioral economics documents strengthen the case against government intervention. (Glaeser focuses on bounded rationality, not self-control shortcomings.) The key consideration is that mistakes are not exogenous, but respond to incentives. 

• Consumers have better incentives to make choices that are valuable to them than do bureaucrats, who are choosing for other people. Lab experiments generally do not capture the full scope of methods that people have for informing themselves about important decisions. 

• A firm might find it in its interest to persuade people to buy its product or behave in a certain fashion. It is probably cheaper to convince one bureaucrat (or a small number of bureaucrats) than it is to directly influence millions of consumers; therefore, leaving decisions in the market and not coerced by bureaucrats will mute the power of such a firm. 

• Consumers have better incentives to be informed and to choose wisely in their market activity than in their voting behavior. Politicians can be poor agents for voters. 

• Soft paternalism can become costly if implemented unwisely by bumbling politicians. 

• Do we want government to have more scope for, and practice at, persuading citizens? Propaganda is effective. Many policy positions that now are widely reviled were once promoted by the government.

• The emotional tax of soft paternalism might be dominated by an explicit tax – and soft paternalistic policies are harder for citizens to monitor. Further, political economy considerations suggest that soft paternalism is a road to hard paternalism.