More on slippery slopes and nudges
In a follow up post about nudges and shoves Eric recommends a piece by David Friedman on slippery slopes that argues:
An optional charge where the default choice is to pay it is the sort of thing Sunstein and Thaler propose, a nudge in the direction of doing what those responsible believe, possibly correctly, that most of those nudged would want to do if they took the time to think about it. But the people constructing the choice architecture know what result they want to get, they believe they are doing good and so not constrained by what they themselves would consider proper principles of morality and honesty in a commercial context, so it is very easy to make the “wrong” choice more and more difficult and obscure until what is optional in theory becomes mandatory in practice.
Essentially, the argument is that once you start meddling with people’s choices it’s very hard to avoid imposing your own views of the world. The idea behind nudges is that you help people to make the best choice from their own perspective, not yours, but that’s very hard to do in practice.
As far as it goes, that sounds very sensible and Friedman is probably right that people trying to nudge others are likely to stray in paternalistic territory. However, what the argument is missing is a plausible counterfactual. The choice architects will still need to frame people’s choices in some way. If they use nudges as their guiding principle then they will attempt to frame the choice to maximise the expected benefit to the person making the choice. As Friedman cautions, the architect may not be very good at divining the preferences of others and may end up being more paternalistic than they intended. But the alternative is not that the choice disappears, or that it is not framed in some way. The alternative must be some other guiding principle for framing the choice.
One possibility is randomisation, but there are many instances in which that will result in terrible choices for most people becoming the default. It seems hard to justify that position. A more likely alternative is that the framer will use their own preferences to guide the framing of the choice. The outcome is likely to be rather paternalistic and not at all to Friedman’s liking! It’s all very well to suggest imperfections in the mechanism for framing choices but imperfection doesn’t mean it’s not the best of the bunch.
Do hit the stuff Rizzo and Whitman wrote on paternalism and slopes, linked here:
http://offsettingbehaviour.blogspot.co.nz/2009/11/whitman-and-rizzo-on-paternalism.html
And, the Cato Unbound discussions between Thaler, Whitman and Klick.
http://www.cato-unbound.org/2010/04/05/glen-whitman/the-rise-of-the-new-paternalism/
I agree with you that in cases like Kiwisaver, we can’t help but affect outcomes by deciding whether it ought to be opt-in or opt-out and that it’s not a bad idea to try to set the choice so that the fewest people would want to change (weighted by costs of error).
Do note that I have been teaching the original working paper by Sunstein and Thaler, “Libertarian Paternalism is Not An Oxymoron”, to my grad class since 2004. I love that article. And, within its domain, it’s correct. But the politicos have used the nudge idea that’s come from it as justifying a rather broader range of policies than Sunstein and Thaler may have intended, despite Thaler’s assurances that mission creep would never happen.
Note that in my post I gave two examples of policies by an organization, Oberlin College, which claims high moral standards, both of which could have been initially defended as examples of libertarian paternalism. One of them resulted in fraudulently collecting some tens of thousands of dollars and failing, after the error was pointed out, to make any effort to notify the victims and return the money.
I agree that Thaler and Sunstein made interesting points in Nudges, but I think they seriously underestimate the risk that actors will use their arguments to justify policies that do not actually meet their requirements.