Soft Interventionism: A Hayekian Compromise With Libertarian Paternalism

Abstract

Are behavioral nudges consonant with the free society? Rizzo and Whitman argue that, with few exceptions, behavioral interventions aimed at addressing self-harms are unjustified and deleterious to freedom. At the core of their critique is a rejection of a narrow neoclassical account of rationality that is treated as the standard by which to judge real individual choice. Instead, they emphasize the critical importance of learning for the discovery of human interests, as well as the role of custom as a social response to the bounded rationality of individuals. Our response is that the rejection of neoclassical assumptions clarifies but does not exhaust the case for state intervention to correct for self-harms. Following Hayek’s defense of a defined role for legislation to address social challenges that persist in spontaneous orders, we argue that nudges can be justified so long as they are proportionate, scientifically informed and open to democratic contestation. Moreover, their judicious application can ultimately aid the liberalization of society compared to relevant alternatives.

Keywords: nudge, libertarian paternalism, Hayek, market process, Austrian economics, autonomy, classical liberalism

JEL Classification: D62, D80, D91, B53