Abstract
The goal of making people better off “by their own standard” in
the New Paternalism research program of Thaler-and-Sunsteininspired
“nudging” raises a number of theoretical and practical
risks. Some of these risks are straightforward. Others are subtle.
I enumerate rarely acknowledged risks that nudging programs
face based on informational loss, forgone individual payoffs, and
social welfare losses. This essay draws on neoclassical information
economics, social welfare theory, and the methodological literature
on normative behavioral economics to focus on experts who propose
policies based on New Paternalism and the apparently unforeseen
social costs that their policies may impose.
What is the socially optimal intensity of skepticism toward choice
architects? Zero skepticism cannot be social-welfare maximizing
insofar as voters’ skepticism serves an important role in the political
economy of disciplining political power. At the other extreme,
maximal skepticism is unlikely to be social-welfare maximizing
because it wastes good information that uninformed voters and
politically appointed experts would both like to be transmitted and
acted upon. Therefore, the socially optimal intensity of skepticism
is a strictly interior value somewhere between zero and maximal.
Because there is risk of other non-transparent objectives (e.g.,
lobbying) influencing paternalistic choice architecture, one of its
first-order effect is to increase skepticism. As policy makers impose
increasingly aggressive policy experiments in choice architecture
under the cover of social science (behavioral economics, in this
case), the political economy shifts down a slippery slope along which
individual response functions (e.g., updating of subjective beliefs)
rationally select increasingly skeptical views of expert advice and
government speech.
Social costs from information loss and reduced coordination services
(that would otherwise have been achieved by decentralization
without choice architecture) suggest a more cautionary approach
to policy and regulation. New Paternalism risks rationalizing increased
skepticism which, in its limit, can rationalize conspiracy
theories about shrouded objectives influencing choice architects.