Posner's Response to Comments on Libertarian Paternalism

Professor Sunstein has posted a response to Becker's and my postings on the University of Chicago Law School blog. It can be accessed at http://uchicagolaw.typepad.com/faculty/. One comment that was made on my post, a comment similar to arguments made by Sunstein and Thaler, is that paternalism can be libertarian if it does not extinguish consumer choice. An example is "cooling off" requirements in laws such as the Truth in Lending Act. The Act does not forbid people to borrow at what might strike an observer as an exorbitant interest rate, but merely gives him an opportunity to rescind without penalty what may have been his impulsive decison to borrow at that rate. It is true that such a law does not interfere with freedom of choice as much as a law imposing an interest ceiling would do. But it does interfere with it to an extent, by increasing lenders' costs. Moreover, if it is true that borrowers would be happier in the long run to have their impulses checked in this fashion, then some lenders would offer the rescission right without prodding by government--in fact it is quite common for sellers to permit consumers to return goods they have bought without penalty. So perhaps the matter of cooling off can be left to the market after all. Here it should be added that impulse control can often be left to the impulsive. "Chocolaholics" may decide not to keep chocolate in their house because they know they cannot control their "addiction" otherwise. There is something to be said for encouraging self-control rather than shifting some or much of the responsibility for impulse control to the government. I distinguish the cooling-off case and self-control issues generally from the trans fat case (to which several of the commenters returned) on the ground that the market may not solve a problem when information costs are prohibitive. They are not prohibitive in the cooling-off case. There is also an empirical question whether cooling-off requirements have any effect, or whether borrowers ignore them as govrernment-mandated paperwork. I don't consider proposals for energy conservation, even when required by government rather than undertaken on purely private initiatives, to be paternalistic. If as I believe the social costs of global warming and excess empowerment of oil-exporting countries are considerable, then government should intervene, since few individuals will reduce their consumption of energy in order to reduce the social costs of energy consumption; the contribution that the individual's change in consumption would make to energy conservation would be virtually zero. I agree with the comments that disavow doctrinaire libertarianism. I am not an "anarcho-capitalist," which is the extreme of libertarianism, or even a strict Millian (nor was MIll!). I'm happy to listen to arguments for government interventions designed to protect people from themselves, even if they are adults and not mentally incompetent. What troubles me is that the interventions may be thought up by officials suffering from the same cognitive or emotional limitations as the consumers or other private individuals with whose choices they want to interfere; that the interventions may be politically motivated rather than based on efficiency norms; and that once one begins questioning consumer competence it is difficult to know where to draw the line. I do think the cognitive and psychological limitations are real, but II happen to think that they are especially serious in a domain of policy that I have written about extensively in recent years--that of national security intelligence, where the limitations--operating on intelligence officers and policymakers, which is to say govenment actors--explain many intelligence failures.

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