Let’s Get Ready to Rumble!!

Here’s my opening bit for my debate with Robin tonight.  Needless to say since we’re both all about Overcoming Bias, there will be no cheap point-scoring or sophistry and much gentlemanly conceding of valid points.  And maybe a little hitting each other with metal folding chairs.  At least in my day college kids liked that sort of thing.

Aside from basic functions like enforcing contracts and maintaining order, there are three justifications for governmental intervention in people’s lives:

1. Correct market failures.
2. Redistribution (make Peter do or not do something, or take from Peter, for the benefit of Paul).
3. Paternalism (make Peter do or not do something for Peter’s own benefit).

This discussion is about #3.  The traditional arguments against paternalism are:

A. You can’t help someone by restricting options; doing so will either have no effect or it will hurt.
The idea here is that people do the best they can, by their own lights, subject to the constraints that they face.  You can help them by relaxing a constraint (say by giving them some money), but you can’t help them by taking away a choice; if they weren’t going to choose the choice you took away, then there is no effect, but if they were, then you have made them worse off by forcing them into a less preferred choice. 

B. People have a fundamental right to make their own mistakes.
It may be that some people would be better off if someone took part of their freedom away from them, but freedom is an irreducible right, so it’s not OK even if it would help.

C. You can’t trust the government.
Even if you think that it is possible to make people better off by taking away part of their freedom, and even if you don’t have a fundamental philosophical problem with the idea, you shouldn’t give the government the power to do so because it is the nature of government to either screw it up or to use it as the thin end of the wedge to take more and more freedom away from people or both.  Even if it seems to work in the short run, it will fail in the long run as the policies get more and more entrenched and hard to get rid of and as citizens get less and less used to taking care of themselves.

Despite its usefulness for some kinds of economic theorizing, I don’t think many people really take Argument A seriously.  The idea that it’s impossible to make a decision that is in some meaningful sense bad for you just flies in the face of common sense.  Argument B has some appeal to it, and would probably have a lot of appeal beyond a certain level of paternalistic intrusiveness, but I think most people who invoke it really mean some version of Argument C; it’s not that they have an irreducible philosophical opposition to paternalism, it’s just they they think that beneficial paternalism is pretty much never on offer, at least from the government.

So Argument C is where the action is.  In order to believe that the government should paternalistically use its coercive powers on Peter, you have to believe both that the government knows better than Peter what’s good for him and that it will use this power in his interest, and do so without causing too much dimunition in his ability to look after himself, or to raise kids who are capable of looking after themselves.  By no means are these conditions guaranteed to hold, and that’s why paternalism should be limited in scope and in intrusiveness, more or less in the spirit of "libertarian paternalism."  But it is not hard to imagine that they could hold.  The government can sometimes know better; it wouldn’t have to be staffed with impossible geniuses in order to know better than, say, the least intelligent 20% of the population (probably much more) the consequences of investing in a pyramid scheme, or of having no savings for retirement, or of ingesting some dangerous snake oil miracle cure.  As Eliezer Yudlowsky has pointed out, without paternalism, these people will just suffer, and sometimes suffer a lot.  And even smart people get benefit out paternalistic regulation as it allows them not to have to become knowledgable about each and every issue for themselves (firm reputation effects and private monitoring agencies will only get you so far). 

Nor is it impossible, in a well-functioning society, for the political stars to be lined up so that governments and bureaucracies have an incentive to engage in paternalism and to do at least a decent job of it.  It is well to remember not to fall into Tyler Cowen’s "libertarian vice," which is to believe that the quality of government is fixed (and very low) rather than what it is, which is highly variable and dependent on how well the society has its act together.

Robin has suggested that instead of using coercive power to ban bad things, the government could instead operate "would have banned" stores that offer the government’s advice (and require that you pay it some heed), but don’t actually compel you to do or not do anything.  Of course, there are a lot of cases where this won’t work (say Ponzi schemes or Social Security), and there are a lot of practical issues (would the store be located in prime real-estate or in a slum?, would it be allowed to advertise?, how strict would be the rules about who could shop there?), but let’s leave all that aside and examine the principle.  In my view, if such a program actually served to warn off a lot of people who would have swallowed poison while giving a lot of smart people access to, say, drugs that have been approved and used successfully in Europe, then great.  But in my view that’s not an alternative to libertarian paternalism, that’s a kind of libertarian paternalism.  The question of whether it works remains, and I’m skeptical that it would, but I don’t see any major question of principle.

So far I’ve just laid out the standard case for an (I would say) mild pro-paternalism position.  And that pretty much is my position. But there is something else, something that is absent from most debates on this subject, which somewhat increases the scope of the paternalism program that I favor, and which very much increases my zeal for the central bits of it.  And that is the role of capitalism.  Markets are attractive in that they are an efficient way to allocate resources to satisfy human wants, if you take those wants as given.  But in modern capitalist societies, firms don’t just provide you with the means to satisfy a set of pre-existing wants, what they do is use advertising and other tactics to tell you what to want, and they do so incessantly and remorselessly and from extremely early childhood. There is nothing in economics that says that the effect of this has to be benign, and in my view it is catastrophically bad in a lot of ways, and this is one of them; they very often tell you to want things that are bad for you.  When the government abandons the field, they don’t just leave behind a bunch of fallible humans who might stumble into making an unfortunate mistake from time to time.  They leave behind a bunch of overmatched, outgunned marks who will be manipulated and cajoled and badgered into making extremely costly mistakes, again and again and again.  It’s not a fair fight, and only the government can even hope to even up the sides.