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Libertarian paternalism

In: Research Handbook on Nudges and Society

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  • Richard H. Thaler
  • Cass R. Sunstein

Abstract

Many economists are libertarians and consider the term “paternalistic” to be derogatory. Most would think that the phrase libertarian paternalism is an oxymoron. The modest goal of this chapter is to encourage economists to rethink their views on paternalism. We believe that the anti-paternalistic fervour expressed by many economists is based on a combination of a false assumption and at least two misconceptions. The false assumption is that people always (usually?) make choices that are in their best interests. This claim is either tautological, and therefore uninteresting, or testable. We claim that it is testable and false - indeed, obviously false.

Suggested Citation

  • Richard H. Thaler & Cass R. Sunstein, 2023. "Libertarian paternalism," Chapters, in: Cass R. Sunstein & Lucia A. Reisch (ed.), Research Handbook on Nudges and Society, chapter 1, pages 10-16, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:22035_1
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    File URL: https://www.elgaronline.com/doi/10.4337/9781035303038.00008
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    References listed on IDEAS

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    1. Brigitte C. Madrian & Dennis F. Shea, 2001. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(4), pages 1149-1187.
    2. Samuelson, William & Zeckhauser, Richard, 1988. "Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
    3. Daniel Kahneman & Jack L. Knetsch & Richard H. Thaler, 1991. "Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 193-206, Winter.
    4. Ted O'Donoghue & Matthew Rabin, 2003. "Studying Optimal Paternalism, Illustrated by a Model of Sin Taxes," American Economic Review, American Economic Association, vol. 93(2), pages 186-191, May.
    5. Shlomo Benartzi & Richard H. Thaler, 2002. "How Much Is Investor Autonomy Worth?," Journal of Finance, American Finance Association, vol. 57(4), pages 1593-1616, August.
    6. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2001. "Defined Contribution Pensions: Plan Rules, Participant Decisions, and the Path of Least Resistance," NBER Working Papers 8655, National Bureau of Economic Research, Inc.
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