In Nudge, legal theorist Cass Sunstein and the behavioral economist Richard Thaler argue that the government can adopt policies that don’t limit individual liberty but encourage better choices. This is known as “libertarian paternalism”.
There are some classic examples of this: the cigarette packaging labels proposed by the FDA and the so-called soda ban proposed by Mayor Bloomberg. Had these proposals not been blocked by courts, people would have still had the opportunity to smoke (in some places) and drink as much soda as they would want. The idea was to make it just a little bit harder.
My personal evolution from a Keynsian to a Hayekian was due in no small part to this concept floated in The Fatal Conceit:
It may be admitted that, so far as scientific knowledge is concerned, a body of suitably chosen experts may be in the best position to command all the best knowledge available… [Yet] scientific knowledge is not the sum of all knowledge… [A] little reflection will show that there is … the knowledge of the particular circumstances of time and place. It is with respect to this that practically every individual has some advantage over all others in that he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active cooperation.
One of the fallacious assumptions underlying the concept central planning is the notion that any committee will have sufficient information to make judgments about what is best for everyone. It is desirable, therefore, for each individual, with sufficient information about what he perceives to be in his best interest, to make those judgments on his own.
Libertarian paternalism seems to allow individuals to make those judgments, so what’s the problem? Many libertarians argue that libertarian paternalism is still paternalism:
Instead of helping people overcome cognitive weaknesses, policy makers are just nudging people towards the interests that policy makers prefer.
We actually do know that scientific knowledge is the sum of all knowledge in some respects, like smoking. Although I personally opposed the graphic cigarette warnings on First Amendment grounds, making it harder for people to choose to smoke without banning the sale of tobacco doesn’t seem objectionable.
My only real objection to libertarian paternalism is that it creates a slippery slope, opening the door for the government to nudge us where scientific knowledge is not the sum of all knowledge.