One-Click Paternalism

Cass Sunstein:

For a number of years, those interested in behavioral economics have been exploring how recent findings about human fallibility might bear on law and public policy. There has been growing interest in various forms of paternalism — alternately described as light, soft, asymmetrical, and libertarian. For all these approaches, the unifying idea is that private and public institutions might adopt rules that steer people in directions that will make their lives go better while also maintaining freedom of choice. An example is a default rule (say, for savings or for health care) that, if unaltered, helps all or most people; another example is a cooling-off period (say, for encyclopedia sales). Richard Thaler and I have been working on the topic of paternalism for many years, and have been defending forms of paternalism that preserve freedom of choice. Some libertarians, fearful of government bias or error, have objected that if public officials are involved, paternalism has no legitimate place.

In response to this objection, we have recently become interested in the possibility of “one-click paternalism,” embodied in approaches that nudge people in good directions, but that allow essentially costless opt-outs. An example would be an automatic enrollment plan for savings, which workers could reject by a press of a button. Another example would be a default prescription drug plan for seniors, which people could replace with a plan that better suits their needs with a click (or possibly two).

If one-click paternalism provides a useful model, cooling-off periods are a bit more controversial, at least if you can’t one-click your way out of them. Thaler and I think that one-click paternalism is often a useful approach for private institutions (employers, rental car companies, cell phone providers) and that the market will produce at least some protection against self-interested or venal nudging.

For government, we think that a form of public nudging is inevitable (short of anarchy), and that in many domains, one-click paternalism is preferable to both the command-and-control regulation favored by many liberals and the laissez-faire approaches favored by many conservatives.

Note: This post was originally published on the University of Chicago Law School Faculty blog.