Sunday, April 18, 2010

Libertarian paternalism

Excellent discussion over on CATO on the topic of "libertarian" paternalism. ASET book club members remember a discussion of the book Nudge and general misgivings about the Thaler/Sustein argument and perhaps the "use" of behavioral economics. In thinking about Thaler and Sustein's "confidence" I can't help but think of Hayek's caution, well articulated in The Use of Knowledge in Society. In preparing for a Liberty Fund conference on Hayek I am reading his essays on Socialist Calculation. In contrasting a market order with a planned order he recognizes that most society is located somewhere in between and the movement from the former to the latter in a wonderfully apt phrase he labels "interventionist chaos".

The Dangers of Letting Someone Else Decide

The more we protect individuals from making decisions (good or bad), the less willing they will be to invest in decisionmaking capacities. A few years ago, I was bemused when I spoke at an orientation session for new law students, finding that a third of the room was filled with their parents. This feeling eventually turned to despair when I discovered this is a fairly ubiquitous phenomenon. By coddling their children (setting up default rules in such a way to protect them from their failure to make a good decision, so to speak), it seems, today’s helicopter parents have actually stunted their children’s development. You may think I am exaggerating the costs of this (and that I may be a little bitter that the parents, year after year, assumed I was the A/V guy, reacting with shock when they found out I was the professor they had come to hear speak), but there is at least some evidence of this coddling leading to negative long term consequences. Apparently a number of firms report that entry-level candidates are now bringing their parents to job interviews and letting mom negotiate their benefits for them.

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