Glaeser on Paternalism

by Russ Roberts on September 21, 2006

in Regulation

On the latest episode of EconTalk (now up at EconTalk’s home page), Ed Glaeser and I discuss whether the insights of behavioral economics justify what he calls "soft paternalism," warning labels and other government interventions short of outright bans and taxes. One of Glaeser’s concerns (and he has many) is the slippery slope—that government starts with warning labels and then eventually regulates products more aggressively.

I find the idea of the State looking out for my interest deeply disturbing. First, government intervention invariably crowds out private activities that might help me make better decisions. And given that there is no such thing as "the government," inevitably, a complex set of political forces come into play that result in some political outcome rather than what might in a perfect world, be in my own interest. That is, it’s meaningless to say "the government will make that decision better than I can." There is no actor/decision maker/thinker/parent involved, just the inevitable interplay of special interests and self-interested politicians. And as Glaeser points out, if I as a decision maker am prone to mistakes why are politicians immune from these same imperfections?

You can listen to the Glaeser podcast here. One of the highlights for me is Glaeser’s recognition of the Nazis’ paternalism–their concern for exercise and good nutrition, for example.

The next episode of EconTalk will be available Monday, a conversation with Darius Lakdawalla of Rand and NBER about obesity.

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Wild Pegasus September 21, 2006 at 12:23 pm

The problem is line-drawing, of course. If a box of minute steaks (my lunch) actually contains ground rat instead of ground oxen, the minute steak company has committed fraud by selling one thing and delivering another. But what if it says "minute sliced meats"? I don't intend to eat rat, and when someone says "meat", I never think "rat". But rat meat is still meat. Is there fraud?

Labelling products is a question of how to deal with fraud. When I buy minute steaks, I want ground oxen, and if it's not ground oxen, it should tell me what it is. Where to draw the line?

- Josh

ben September 21, 2006 at 6:52 pm

Josh, you're ignoring market responses to the problem you pose. Like reputation. Like proper labelling. If I see two packs of meat next to each other, one labelled meat the other ground oxen, I will pick ground oxen. If I see two packs of meat, one from a supplier I have happily purchased from for years, another from one I have never heard of, I will go with who I know.

Nate September 21, 2006 at 10:47 pm

Have you ever heard of Consumer Reports maagzine? It's really amazing that the uneducated masses are able to find and purchase everything form automobiles to steam irons to Roth IRA's without the government making the best choices for us, pointing us toward the right answer. If you think corporations like to deceive customers, just imagine yourself as a politician…

Lafayette September 22, 2006 at 12:49 am

"I find the idea of the State looking out for my interest deeply disturbing."

In an American context, this is not surprising. In a European one, it is.

Statism has varying degrees. On the left, state intervention can stifle individual initiative by incarcerating people in welfare. It can hamper innovation by creating a regulatory monolith, which simply prompts talented individuals to "go elsewhere". None of this is acceptable in a day and age where societies as well as economies must adapt to continually changing events, both infrastructural an geopolitical.

On the other hand, any victim of unbridled capitalism, a la Enron, will have wished the state was keeping an eye over someone’s shoulder. Anyone who believes that Kyoto is essential to “life as we know it” does NOT buy the Bush administration’s denial of it. And, finally, for anyone who believes that the accumulation of multi-billion dollars by any given individual may be one man’s “American dream” but another’s “American nightmare”.

The truth is somewhere in between. It is where a society assures not welfare but the well-being of all its citizens. That the social mobility up the ladder is not reserved for a comparative few but open to a comparative many. This is the crux of any debate on economic fairness, which harks back to the utilitarian notion of the “most good for the most people” – a principal at the basis of capitalism but seemingly forgot since its first use in utilitarian philosophy of the 18th century.

America is beset with the Gordon Gekko dictum (from the movie "Wall Street") that "Greed is good". It can be good and it can be bad – it is not up to the individual to decide but the collective, where this latter's will is the sum of individual judgement. In America, that typically translates into "fairness".

Keith September 22, 2006 at 8:06 am

Qoute from Lafayette: "America is beset with the Gordon Gekko dictum (from the movie "Wall Street") that "Greed is good". It can be good and it can be bad – it is not up to the individual to decide but the collective, where this latter's will is the sum of individual judgement. In America, that typically translates into "fairness"."

Define "the collective" for me. Define "good" and "bad". Define "fairness". It all sounds wonderful, but I'm not sure how it all translates into reality.

Bill September 22, 2006 at 5:01 pm

I don't like paternalism anymore than the next average reader of this blog, but I think warnings on things like cigarettes are useful. Tobacco companies knew smoking was bad long before the average consumer did. Where was the private company which sprung up to inform people of these risks? Tobacco companies were running adds saying four out of five doctors preferred their brand. I am just not comfortable shrugging off ill effects of products on people who are not bright, not thinking, or maybe too busy to investigate every unobvious risk.

Speaking of slippery slopes, when comparing anything American government does now to something the nazis did is a ridiculous tactic, leading straight to being discounted as a paranoid extremist and is often employed by nutty liberals. Yes, if we head down the paternalism path we might ban fatty foods and salty french fries. I think this fear is somewhat paranoid. If there was no paternalism, then we might end up with gladiator fights to the death. The slippery slope argument works both ways.

True_Liberal September 22, 2006 at 5:02 pm

I'm glad that Lafayette brought up the Enron issue. I'll bet thousands of people made pretty good money on the irrational runup of Enron, and got out when the getting was good. Still others might have sold short, betting they could fill the calls by buying cheaply.

Of course it helps to have just a little market savvy, take insider "guidance" with a bit of skepticism, and diversify like mad.
An investor who fails in these areas has placed his eggnest in one very vulnerable basket.

I guess by placing your hopes in SS you might make, say, one percent annual return, during a few decades when the Dow returned several times that.

triticale September 23, 2006 at 9:22 pm

Cigarettes were known as "coffin nails" and "gaspers" in common slang long before the government stepped in. As for Enron, they were a company whose business plan was built on market distortions created by government interference.

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