Libertarian Paternalism

A False Assumption and Two Misconceptions

Many people who favor freedom of choice reject any kind of paternalism. They want the government to let citizens choose for themselves. The standard policy advice that stems from this way of thinking is to give people as many choices as possible, and then let them choose the one they like best (with as little government intervention or nudging as possible). The beauty of this way of thinking is that it offers a simple solution to many complex problems: Just Maximize Choices—full stop!

This policy has been pushed in many domains, from education to health care to retirement savings programs. In some circles, Just Maximize Choices has become a policy mantra. Sometimes the only alternative to this mantra is thought to be a government mandate that is derided as one-size-fits-all. Those who favor Just Maximize Choices don’t realize there is plenty of room between their preferred policy and a single mandate. They oppose paternalism, or think they do, and they are skeptical about nudges. We believe that their skepticism is based on a false assumption and two misconceptions.

The false assumption is that almost all people, almost all the time, make choices that are in their best interest or at the very least are better than the choices that would be made by someone else. We claim that this assumption is false—indeed, obviously false. In fact, we do not think that anyone actually believes it on reflection.

Suppose a chess novice were to play against an experienced player. Predictably, the novice would lose precisely because he made inferior choices—choices that could easily be improved by some helpful hints. In many areas, ordinary consumers are novices, interacting in a world inhabited by experienced professionals trying to sell them things. More broadly, how well people choose is an empirical question, one whose answer is likely to vary across domains. Generally, people make good choices in contexts in which they have lots of experience, good information, and prompt feedback—say, choosing among familiar ice cream flavors. People know whether they like chocolate, vanilla, coffee, or something else.

They do less well in contexts in which they are inexperienced and poorly informed, and in which feedback is slow or infrequent—say, in saving for retirement or in choosing among medical treatments or investment options. If you are given fifty different insurance policies from which to choose, with multiple and varying features, you might benefit from a little help. So long as people are not choosing perfectly, some changes in the choice architecture could make their lives go better (as judged by them, not by some bureaucrat). The practical question is which changes help people achieve their own goals.

The first misconception is that it is possible to avoid influencing people’s choices. In countless situations, some organization or agent must make a choice that will affect the behavior of some other people. There is, in those situations, no way of avoiding nudging in some direction, and these nudges will affect what people choose. Choice architecture is inevitable. In the authors’ hypothetical example, Carolyn arranges the food in school cafeterias. Here, as elsewhere, people’s choices are pervasively influenced by the design elements selected by choice architects. No website, and no grocery store, lacks a design. It is true, of course, that some nudges are unintentional; employers may decide (say) whether to pay employees monthly or biweekly without intending to create any kind of nudge, but they might be surprised to discover that people save more if they get paid biweekly, because twice a year they get three paychecks in one month, and many bills come monthly.

It is also true that private and public institutions can strive for one or another kind of neutrality—by, for example, choosing randomly, or by trying to figure out what most people want. But unintentional nudges can have major effects, and in some contexts, these forms of neutrality are unattractive. It is true as well that choice architects can insist on active choosing—by, for example, saying that if you want to work for the government, you have to specify the health care plan you prefer. But active choosing is itself a form of choice architecture, and it is not one that everyone will prefer, especially when options are numerous and decisions are difficult. In a French restaurant where customers are presented with a cart loaded with what seems like hundreds of varieties of cheese, it can be a blessing to have the option of asking the server to suggest a selection. People do not always like to be told to choose, and if they are forced to do that, they might not be at all happy.

Some people will gladly accept these points for private institutions but strenuously object to government efforts to influence choice with the goal of improving people’s lives. They worry that governments cannot be trusted to be competent or benign. They fear that elected officials and bureaucrats will be ignorant, will place their own interests first, or will pay excessive attention to the narrow goals of self-interested private groups. We share these concerns. In particular, we emphatically agree that for government, the risks of mistake, bias, and overreaching are real and sometimes serious. That is why we generally favor nudges over commands, requirements, and prohibitions (except when people are harming others). But governments, no less than cafeterias (which governments frequently run), have to provide starting points of one or another kind. This is not avoidable. They do so every day through the policies they establish, in ways that inevitably affect some choices and outcomes. In this respect, the anti-nudge position is a logical impossibility—a literal nonstarter.

The second misconception is that paternalism always involves coercion. In the cafeteria example, the choice of the order in which to present food items does not force a particular diet on anyone, yet Carolyn, and others in her position, might select some arrangement of food on grounds that are paternalistic in the sense that we use the term. Would anyone object to putting the fruit and salad before the desserts at an elementary school cafeteria if the result were to induce kids to eat more apples and fewer brownies? Is this question fundamentally different if the customers are teenagers, or even adults? Is a GPS device an intrusion on freedom, even if it is paternalistic, in the sense that it tries to tell you how to get to your preferred destination? When no coercion is involved, we think that some types of paternalism should be acceptable even to those who most embrace freedom of choice.

These insights lead us to embrace a philosophy we call libertarian paternalism. The term may seem off-putting, even contradictory, but if properly understood, both concepts show a lot of good sense—and they are far more attractive together than alone.

The libertarian aspect lies in the straightforward insistence that, much of the time, and so long as they are not harming others, people should be free to do what they like—and to opt out of arrangements they deem undesirable if that is what they want to do. Libertarian paternalists urge that people should be “free to choose” and strive to design policies that maintain or increase freedom of choice. When we use the term libertarian to modify paternalism, we simply mean liberty-preserving. We really mean it: we want to make it easy for people to go their own way; we do not want to burden those who want to exercise their freedom. (We acknowledge that when people are inflicting harm on others, freedom of choice is not the best idea, though nudges can still play an important role. And if people are making truly terrible choices that harm their future selves, nudges might not be enough.)

The paternalistic aspect lies in the claim that it is legitimate for choice architects to try to influence people’s behavior in order to make their lives longer, healthier, and better. This is a paternalism of means, not of ends: the policies we favor aim to influence choices in a way that will make choosers better off, as judged by the choosers themselves. They help people reach their own preferred destination. Drawing on decades of behavioral science, we know that people often make poor decisions both in the laboratory and in real life. They get by, as the Beatles put it, “with a little help from our friends.” Our goal is to help people make the choices they would have made if they had paid full attention and possessed complete information, unlimited cognitive ability, and complete self-control. (That doesn’t mean people shouldn’t sometimes stay out late, overeat, and have fun. “Enjoy life now; this is not a rehearsal.”)

Libertarian paternalism is a relatively weak, soft, and nonintrusive type of paternalism, because choices are not blocked, fenced off, or significantly burdened. If people want to smoke cigarettes, eat a lot of candy, choose an unsuitable health care plan, or fail to save for retirement, libertarian paternalists will not force them to do otherwise—or even make things hard for them. Still, the approach does count as paternalistic, because in important contexts, private and public choice architects should not merely track or implement people’s anticipated choices; they should attempt to move people in directions that will make their lives better. They should nudge.

A nudge is any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not taxes, fines, subsidies, bans, or mandates. Putting the fruit at eye level in a cafeteria counts as a nudge. Banning junk food does not.

Many of these policies can be and have been implemented by the private sector (with or without a nudge from the government). Employers, for example, are important choice architects in areas like health care and retirement plans, where they can give employees far more helpful nudges—through sensible default rules, clear presentation of information, and helpful hints. Private companies that want to make money and to do good can also benefit by creating environmentally friendly nudges. Of course, companies can also use these concepts in unsavory ways to increase sales, imposing what we call sludge. We strive to reduce sludge produced in both the public and private sectors.

By insisting that choices remain unrestricted, we think that the risks of inept or even corrupt designs are reduced. Freedom to choose is the best safeguard against bad choice architecture.