By Insula Qui
Everyone familiar with the work of Thaler and Sunstein knows about the concept of libertarian paternalism. This idea is most prominently expressed in the book “Nudge”, and has caused a lot of confusion to many orthodox libertarians. However, since I am as unorthodox as a libertarian can be, I fully agree and support this specific form of paternalism, even to the point of considering anarcho-capitalist paternalism. But to explain what I mean by anarcho-capitalist paternalism, I have to break down what libertarian paternalism entails.
The first part, which completely fits into my own framework, is a libertarian support of social responsibility. I have not explained how libertarians can agree with the concept of social responsibility, so I will do that here using the framework of behavioural economics and libertarian paternalism. Social responsibility, at its core, is the concept that entities should work for the betterment of society and not just themselves. However, as all capitalists know, entities that work for the betterment of themselves work for the betterment of society, provided that exchanges can be made relatively freely and no violence is involved. So when a statist promotes social responsibility, they promote government control and artificial regulation, which is not a policy that libertarians should embrace.
So for a libertarian, the concept of social responsibility becomes fairly simple. Since organizations and individuals work for their own benefit, and since the combination of all personal interests creates a spontaneous order from which everyone benefits, the only way that businesses can be harmful is if they manage to hide harmful parts of their business. This means that libertarian social responsibility boils down to disclosure. This can also be applied at the individual level and retains the same degree of importance. The main purpose of this policy is simple, people can get away with much more when they’re in private, and this can actually cause harm.
This does not mean that privacy needs to be done away with, but rather that the public should trust what people do in private. If you cannot expect your neighbour to not be conducting animal sacrifices in his own home and businesses to not poison your food, there is a startling lack of social responsibility. The way to build up social responsibility is genuinely allowing people to access the inner workings of the entity that lacks social responsibility, and to affirm that private dealings do not conflict with public interests.
The second aspect of libertarian paternalism is even more unorthodox, this is how choices themselves are designed. Most libertarians are stuck with a notion that people make choices from all available options without bias. So when people are allowed to make free choices, they will make the best choice. But libertarian paternalists draw attention to the flaws in this line of thinking, people are not experts on every choice they make. When it comes to decisions that are made frequently and that are not a major commitment, people can easily become experts. But when it comes to the most important choices, which tend to require an immense commitment and are only undertaken infrequently, people are prone to make the greatest mistakes.
Libertarian paternalists do not suppose that any experts should make those important decisions, but rather that the parties that offer the choices in the first place should tailor those choices to the people making them. For example, in the current system, financial dealings with banks tend to be overwhelmingly difficult, and most people do not have a personal accountant. This means that the financial system has a lot of very poor choice architecture as most people are more prone to making bad decisions due to not understanding the complete totality of the choices they make.
This means that the way that different options are expressed must be salient and legible. People must understand and care about the different options that they are presented with. This means that good choice architecture allows people to choose all possible options, but presents them in the most convenient manner. Another relevant factor here are default options. Whenever people are asked to make a choice, there must be a default option, even if that default option is doing nothing. The best default options vary when different choices are made. In some cases, the best default option is mandating a choice, in other cases, it may be an automated and personalized option. But the important part is giving people a framework in which they can make choices.
And libertarian paternalists do not want people to be given any less choice, quite the contrary. Libertarian paternalists favour low-cost opt-outs for every paternalist intervention, so no person would be forced into any decision that they do not want to make. But the various different biases and complexities in life require that decisions are not just left up to poor choice architecture. People are influenced by everything around them, and the goal of libertarian paternalists is to create the best influences possible for advancing individual self-interest.
These two concepts combine to create the entirety of libertarian paternalism and being sensible on their own, they are sensible when combined into a system. However, a lot of this theory is still entrenched in a statist worldview where states are seen as legitimate, the important question here would be what anarcho-capitalists can draw from these influences and how these ideas can be used in a completely voluntary system. I will touch upon libertarian statecraft and libertarian paternalism in a different article.
A fundamental feature of an anarcho-capitalist paternalism would be a sort of voluntary technocracy based on the division of labour. This would not be a technocracy of governance or compulsion, but simply a matter of choice architects who help people find the best frameworks to make choices in. This obviously means that the technocrats will influence the choices people make, but in a completely voluntary society, this would not be a bad thing. When people are provided with better choice architecture, they are more fit to make the choices that benefit themselves the most. This would create a new and very important career option as most firms would want their customers to make good choices.
This is further tempered by the fact that fraud is definitively forbidden under anarcho-capitalist ethics. The means by which this can be enforced vary from person to person, but there is an overarching consensus that if decisions are made under deceit, they are not valid and constitute a form of theft. This definition can and should be expanded to include deliberately influencing people so that they would make bad decisions. This means that a company using choice architecture to make people choose recklessly should be liable for causing people to make worse decisions. This also defeats a lot of libertarian enthusiasm for prostitution and the porn industry, as both of those industries rely on choice architecture deliberately designed to make people choose options that go against their own self-interest.
If companies are held liable for causing people to make bad choices that go against their own self-interest, there is a more powerful entity at play than any degree of government regulation ever could be. Companies themselves would have to perfectly disclose how unhealthy their products are, how much they pollute, and what negative consequences their business practices have on local populations. If they do not do so, they will be held liable for any damages they cause. This means that all companies will have to improve their business practices as the government will not protect them when they mislead the public. Furthermore, by removing corporate protections, business officials cannot even fall back on limited liability, they would bear the full brunt of whatever damages they caused. This means that people would be able to make whatever choices they want to make, but they would have to be fully informed of how bad those choices are.
None of this seems especially paternalist, but when we recognize that the essence of paternalism is protecting people from bad choices, all of this fits under that label. Even in an anarcho-capitalist society, it is desirable to engage in paternalism, provided that it is done on a completely voluntary basis. But this does not mean that private businesses will always provide good choice architecture, which is why it is vital to include the clause that businesses can be held liable for their actions, even when it’s only fraud on a very limited scale.