Libertarian Paternalism is an Oxymoron
42 Pages Posted: 5 Nov 2004
This essay considers the concept of libertarian paternalism recently advanced by Sunstein and Thaler and argues that, on close inspection, this attempt to reconcile the traditionally opposed concepts of libertarianism and paternalism fails to succeed. Most significantly, Sunstein and Thaler neglect alternative approaches to dealing with irrational choice behavior that are more consistent with libertarian principles and that make choice-framing paternalism evitable, they would subjugate the liberty of irrational individuals to a central planner's paternalistic welfare judgments, and they fail to deal with the redistributive consequences of libertarian paternalism. Libertarian paternalism, as currently formulated, is not designed to liberate individuals from their irrational tendencies but to capitalize on irrational tendencies to move citizens in directions that the paternalistic planner deems best. Libertarian paternalism does leave rational persons a way out of the central planner's paternalism, but often the exit will not be costless, as the paternalistic costs of trying to improve the welfare of irrational persons are shifted to the rational persons. While fidelity to libertarian principles leaves little room for the government to regulate irrational behavior, there are some forms of irrationality regulation more congenial to libertarian principles than Sunstein and Thaler's version of libertarian paternalism, examples of which are discussed here.
Keywords: Behavioral Law and Economics, Libertarianism, Paternalism
JEL Classification: D63, I31, K00
Suggested Citation: Suggested Citation