My Mercatus Center colleague Carrie Conko just alerted me to Julian Le Grand’s and Bill New’s new book, Government Paternalism: Nanny State or Helpful Friend?. I have not yet read this book, so I can’t offer an opinion on it. But its publication does provide an opportunity for me to mention a relevant passage in Albert Venn Dicey’s monumental 1905 study, Lectures on the Relation Between Law & Public Opinion in England During the Nineteenth Century. This passage (from pages 264-265) serves as a warning that nudging – or “libertarian paternalism” as it was originally called – poses a greater threat to freedom of contract than its proponents believe.
Law-making of this sort [i.e., legislation meant to protect people from contractual outcomes deemed by the legislature to be generally undesirable] generally passes through two stages. In the earlier stage the law places upon some kind of contract an interpretation supposed to be specially favourable to one of the parties, but allows them to negative such construction by the express terms of the agreement between them. In the later stage the law forbids the parties to vary, by the terms of their contract, the construction placed upon it by law. The difference between these two stages is well illustrated by the case of a lease made by a landlord to a tenant farmer. As the law originally stood the tenant had no right to compensation for improvements made by him during his tenancy, unless he was entitled thereto by an express term in his lease. This was felt to be a hardship. Parliament, therefore, enacted that it should be an implied term of every lease, unless the contrary were expressly stated therein, that the tenant should receive compensation for improvements. So far there was no interference with the contractual freedom either of the landlord or the tenant, for it was open to the parties by an express term of the lease to exclude the tenant’s right to compensation. It was found, however, that, upon this change in the law, the tenant’s right was habitually excluded by the terms of the lease, and that he did not therefore receive the benefit which the legislature hoped to confer upon him. The next step was for Parliament absolutely to prohibit the bargaining away of his right by the tenant. Here the inroad upon contractual freedom is patent.
People eager to use the power of the state to ‘nudge’ others to behave in ways that the nudgers have divined are appropriate seldom need much nudging to become proponents of forcing people, if necessary, to behave in ways that these once-nudgers-now-forcers have divined are appropriate.
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While we’re on the subject…. If you click on the link to the Le Grand & New book and read the blurbs for it, you’ll notice that Alan Hamlin praises the book as one that “steers a sophisticated course between the extremes of antipaternalism and paternalism.” Since when is antipaternalism “extreme”? By calling antipaternalism “extreme,” Hamlin’s language itself subtly nudges readers to accept as morally legitimate the state’s habit of butting into people’s private affairs.
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Some of the best work on nudging is done by Mario Rizzo.
