Tuesday, October 24, 2006

Defaults and "Libertarian Paternalism"

I just watched a lecture by Cass Sunstein titled 'Libertarian Paternalism is Not an Oxymoron'. I'm not so sure. It seems to me that there is something important in the idea of libertarianism that is anti-meddling. It also seems that there is something fishy about Cass's idea of Libertarian Paternalism.

Sunstein says that there must be some default in any government decision. I guess that's true, but he reads a lot more into this than I think is warranted. First he mentions the notion that a no fault law regarding an auto accident is not an instance of government non-intervention, but rather an instance of the government granting privilege. The driver who caused the accident is not forced to compensate the innocent driver, yet the innocent driver is restrained from demanding compensation on his own. Sunstein later compares this to the presumption that an employer can fire an employee when and as they wish unless the specific employment contract states otherwise. He specifically says that this is not an instance of government non-intervention, but rather an entitlement granted to the employer by the government. Since what here appears to be non-action by the government is really a form of pro-business action, the question of whether or not the government should intervene is nonsensical. It is a 'mystification', as Sunstein notes in the Q&A. Since inaction is really a form of covert intervention the question of whether or not to intervene is trivial. We can only argue how we ought to intervene.

This seems to advocate a point of view that I find abhorrent. It suggests that life, liberty, and property are not fundamental rights to be protected but privileges to be granted at the pleasure of government. I would much prefer a philosophy of government in which the fundamental goal of governance is to secure these rights as firmly as possible. Under this assumption there is a default response to each of the situations mentioned in that last paragraph which is obvious and, I think, optimal. In the case of the car accident loss being left where it fell, the government is clearly failing to protect the rights of the victim. The goal of the government (under the aforementioned philosophy) is to secure individual's rights to life, liberty, and property. It would be ludicrous to suppose that this could be accomplished without torts (or likewise without the use of police power to try to prevent wrongful conduct). But in the latter case (that of job security), it is clearly in the interest of the liberty rights of both parties (and very likely the property right of the employer) that they be allowed to structure their contract as they see fit. Within the bounds of this minimalist framework we can do away with the absurd (or so it seems to me) nullification of the concept of non-intervention. Non-intervention would be to adhere to the principle of maximizing individual enjoyment of the rights to life, liberty, and property.

Rather than carry on in this line I will discuss the obvious objection to my discussion thus far. Sunstein is not proposing that we remove people's contract rights, but rather that we impose default contract structures that can then be negotiated away from. First I will say that this is at times quite fuzzy (e.g. the job security argument i.e. I thought that defaults weren't entitlements) in his expression. I sincerely believe that the principle is merely a backdoor approach to regulation, and that his use of the word libertarianism is a usurpation of the term (this is the slippery-slope argument that Sunstein says is silly). Many of his examples involve at least some components which are involuntary and do not allow for choice. My second point along this line is a much more interesting one. Can such policies really be implemented (meaningfully) without imposing upon the liberty of the parties involved? What if I own a business that has never had any sort of structured savings plan? If the government mandates that employees be defaulted into a certain sort of plan, would I not be obligated to set up such a plan? If not, is the program really being meaningfully implemented? Or, say that the government requires that the default employment contract include a provision supplying job security. What does this mean? Either the employer's liberty is unaffected, meaning that they have just as much right to opt out of the default as the employee does, or, only the employee has this right (i.e. the employee has the right to demand a contract with job security) and the 'default' infringes upon rights the employer previously enjoyed. If the employer can just opt out of the default, then nothing is changed and the default is not meaningful.

I also think that Cass glosses over the argument that the 'science' of what makes a good decision is controversial. The sciences (mostly social sciences ) from which these recommendations come, tend to be consensus sciences in which group think is common and people with an agenda can easily push the herd toward a predetermined position. Sunstein thinks that it will be easy to tell when personal interests are involved or when the science is fuzzy. I doubt this.

I don't think that the underlying idea of defaults is bad. There is no doubt that people do tend to stick with defaults. I think that the phenomenon originates in the inherent credulity of cultural animals. The evolution of culture is, or rather was during the course of human evolution (i.e. several thousand years ago and earlier), an ongoing numerical optimization (by randomized search) of a highly chaotic system with regard to the contents of behavioral instruction. The powers of this computational process dwarf those of the human mind. So it would be shocking if the human mind did not possess mechanisms to keep it from rejecting the output of that process: received culture (i.e. defaults). It is also perfectly reasonable to suggest that, given that we no longer live in a culture shaped by the evolutionary process, these mechanisms are defunct. So it makes sense that we would be better off providing people with a rationally determined set of defaults to prevent their credulity mechanism from accepting a bunch of random crap. But this is harder than it sounds. I mean the 'determining a rational set of defaults' part. It can be done, but it requires a great deal of thoughtfulness, trepidation, and investigation. From my point of view, doing so through the auspices of modern democratic government virtually guarantees that we will botch the process.

I think a great example of rational default setting is the creation and adoption of the U.S. Constitution. It's hard to figure out what it is that makes a Constitution distinct from the body of ordinary law if it contains a provision for its own amendment. The real distinction of the Constitution is that it is the supreme default of the land. It has all of the power of social proof behind it. I have said before that I think it is very much a rationally conceived document. So it's a rational default. The tragedy is what the Supreme Court has done to the constitution. They have dismembered our glorious default. It is far easier for a small group of highly educated individuals to overcome their preference for the default than for a great big congress and a huge unruly populace to do the same. So whenever a significant proportion of the population want to change the Constitution, it almost always ends up being easier to have the court skew its interpretation than to get congress to change the actual wording. This path of least resistance is the weakness that undermines the constitutional fortress. The justices have been smart enough to overcome the default but not wise enough to understand why they shouldn't.

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