by Richard Thaler
April 7th, 2010
There are a lot of things out there to be afraid of, and there seem to be phobias named for each one. For example, you may not be familiar with bathmophobia, which is an abnormal and persistent fear of stairs or steep slopes, or a fear of falling. Less well known is “nudgephobia,” also known as the Whitman-Rizzo syndrome, which is the fear of being gently nudged down a slope while standing on a completely flat surface. This phobia is sometimes associated with other disorders such as the fear of being given helpful directions when lost; the fear of obtaining reliable medical advice when sick; and, in rare cases, some have even suffered from a fear of having someone recommend a book or movie that you will really like.
It is presumably bathmophobia that has led Professor Whitman (and his co-author Mario Rizzo) to be so afraid that the policies that Cass Sunstein and I call libertarian paternalism will eventually lead to society falling down a steep cliff. I attribute this critique to an irrational phobia because I cannot make any other sense of it.
First, let’s be clear about what Sunstein and I mean by libertarian paternalism. We use the word libertarian (small “l”) as an adjective to modify paternalism, and it implies that we advocate policies that maintain people’s freedom to choose at as low a cost as possible. As for paternalism, we say on page five of our book, and repeat ad nauseam, that we call a policy paternalistic “if it tries to influence choices in a way that makes choosers better off, as judged by themselves.” (The emphasis is in the original.) Nonetheless, Whitman accuses us (and some of our fellow behavioral economics travelers) of wanting to push people in the directions that we ourselves prefer. I am not sure how we could have been any clearer that this is precisely not our intent, and I am not sure how we would have decided what to push for since Sunstein and I do not agree ourselves. I am a lover of fine wines; Cass prefers Diet Coke. With fundamental philosophical differences such as these, we wouldn’t get very far in pushing in the directions we prefer! This applies to the rest of our gang as well. Matthew Rabin prefers to dress in tie-dyed T-shirts, but I have never known him to lobby for a subsidy for this article of clothing.
Another basic point that Whitman does not recognize is that paternalism of some sort is inevitable. Consider the following common problem. Most firms have an open enrollment period in November when employees can elect their benefit package for the following year. At my employer, the University of Chicago, you have a few weeks to log on to the appropriate web site and make your selections. The question is, what should the employer do for those employees who forget to log on? (Professors’ reputations for absent-mindedness are well deserved.) For each of the choices the employee has, the employer needs to select a default option for those who do not log on, and normally the default is either “same choice as last year” or “back to zero” (meaning, decline this option). At Chicago the default option for the health insurance plan is the same as last year.
Of course it is possible to criticize this choice of the default option, but it is essential to understand that the employer must choose something. Some employers use “back to zero,” which minimizes the costs to the employer; somewhat less drastic would be to default employees into the plan that is cheapest for the employer; one could even choose a default plan at random (don’t laugh — this is the strategy used for some participants in the Medicare Part D prescription drug coverage implemented by the Bush administration); or the employer could somehow force employees to make a choice. The Nudge philosophy here is that the person who designs the plan, whom we call the choice architect, should choose the default that she thinks, all things considered, will make the participants best off. Does Professor Whitman have a better suggestion?
In short, the risk of the slippery slope appears to be a figment of Professor Whitman’s imagination, and clear evidence of his bathmophobia. To be fair to him, this phobia is hardly unique to him and Professor Rizzo. Slope-mongering is a well-worn political tool used by all sides in the political debate to debunk any idea they oppose. For example, when the proposal was made to replace the draft with an all-volunteer army, the opponents said this would inevitably lead to all kinds of disastrous consequences because we were turning our military into a band of mercenaries. The argument is perfectly versatile. If we allow (blacks, women, gays. . . .) into the military then (fill in the awful but inevitable consequence here). If we allow free speech then we will give voice to the next Hitler. “Allowing a partial privatization of Social Security will destroy the moral fabric of our society.” Never mind that Sweden did it a decade ago. You get the idea.
Instead of slope-mongering we should evaluate proposals on their merits. (We devote a chapter of Nudge to an evaluation of the choice architecture used in Sweden’s social security experience.) Helping people make better choices, as judged by themselves, is really not a controversial goal, is it?
As an employer, I often wrestle with questions around whether or note a particular policy or practice encourages “informed choice” or could be considered “paternalistic.” As usual, Thaler places the rhetorical labels into context by explaining the reasoning behind many employers’ default options in a way that reduces the labels to a petty debate.