Richard Thaler on Libertarian Paternalism
Nov 6 2006

Richard Thaler of the University of Chicago Graduate School of Business defends the idea of libertarian paternalism--how government might use the insights of behavioral economics to help citizens make better choices. Host Russ Roberts accepts the premise that individuals make imperfect choices but challenges Thaler on the likelihood that government, in practice, will improve matters. Along the way they discuss the design of Sweden's social security system, organ donations and whether professors at Cornell University are more or less like you and me.

Mailbag (Time mark 57:47)
  • On the episode Skip Sauer on the Economics of Moneyball:
  • Is it the government's duty to break up monopolies? Is antitrust sometimes worse than the monopoly itself?
  • [See also Antitrust, by Fred McChesney in the Concise Encyclopedia of Economics--Econlib Ed.]
  • Also on Skip Sauer on the Economics of Moneyball:
  • Patriatisme économique: (economic nationalism) has been greatly discussed recently in France. Do domestic companies owned by foreigners or their governments behave differently from domestically-owned ones with regard to employment, outsourcing, etc.?
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READER COMMENTS

Jeffrey Rae
Nov 14 2006 at 7:32pm

I have just finished listening to my very first podcast from your site. It was the interview with Richard Thaler on Libertarian Paternalism. I greatly share your general scepticism about the subject and ist implications for public policy. (I am a freelace economic consultant and have written reports for financial institutions on the lessons of behavioural finance, including Richard’s work on the subject.) Neverthless I greatly appreciated your open-minded approach to the interview and your willingness to find common ground with Richard. Too often libertarians come across as closed minded and all knowing. Well done. You have gainmed a dedicated listener on their first exposure.

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AUDIO TRANSCRIPT

 

401k and other plans.<tr52:45How can we as individuals or economists decide where to stand about what governments should or should not do? Inept neglect, advising governments to move forward a step from where they are at, versus advising them to move forward toward an ideal.

Time
Podcast Episode Highlights
0:53Libertarian paternalism defined
2:33Operating procedure means someone has to choose something. Cafeteria example. Presentation order matters. Who picks order?
8:03What if the person picking the order does it by personal idiosyncracies, or even corruptly? Savings example. Defaults matter for
11:00Opt-out v. opt-in. Why can't the market do it as soon as it's understood to matter? Why would a third party do better?
14:34Ed Glaeser, economies of scale. Do individuals typically seek sophisticated investment advice? Cornell research.
22:15Swedish social security privatization example.
32:20Prescription drugs, design features, maximizing choice, Medicaid, Medicare, new pension bill, safe harbor, Labor Dept. Can government choose for me, even ostensibly in my self-interest? What if the government routinely does it poorly?
39:47Should the government just get out of providing guidance about services? Governments do some things effectively, but realistically and in principal, which things? Do defaults under the auspices of a government imprimatur look more respectable than private-sector defaults to the unsophisticated?
48:02Organ donations example, drivers' licences. Opt-in v. opt-out in Spain