Tuesday, 10 November 2009

Paternalism and slopes

Glen Whitman continues blogging on paternalism and slippery slopes.
At the far end of the continuum lies an outright ban on certain activities. Sunstein and Thaler embrace this conclusion: “Almost all of the time, even the non-libertarian paternalist will allow choosers, at some cost, to reject the proposed course of action. Those who are required to wear motorcycle helmets can decide to risk the relevant penalty, and to pay it if need be.”

Notice that the same argument would place outright prohibition of alcohol, drugs, or anything else on the same spectrum. You are free to use any drug you want, says the argument, if you are willing to incur the cost of potential imprisonment. At this end of the continuum, we find, lies genuine hard paternalism. In Sunstein and Thaler’s words:
A libertarian paternalist who is especially enthusiastic about free choice would be inclined to make it relatively costless for people to obtain their preferred outcomes. (Call this a libertarian paternalist.) By contrast, a libertarian paternalist who is especially confident of his welfare judgments would be willing to impose real costs on workers and consumers who seek to do what, in the paternalist’s view, would not be in their best interests. (Call this a libertarian paternalist.)
Movement along a paternalist continuum should come as no surprise when the two ends of the continuum depend on which word is italicized, as well as on the subjective confidence of the policymaker in his welfare judgments.
It bears emphasis that the sequence of steps we have outlined—from nudging (changing the order of cafeteria items) to pushing (imposing costs on those who deviate from the state’s preferred terms of contract) to shoving (ruling out some terms entirely) to controlling (banning some activities altogether)—is not our creation. Sunstein and Thaler present the same proposals in approximately the same order, to demonstrate the existence of a continuum.
I continue to worry that the gradient isn't made less slippery with moves toward socialization of the costs of personal decisions under Obamacare proposals. As Jeff Miron notes
Consider, for example, the question of weight. Existing evidence seems to suggest that being overweight is bad for one's health and causes higher than average health care expenditure. So, government might want the health insurance plans it subsidizes to include incentives for exercise and weight loss.

Yet that approach runs headlong into a ban on pre-existing conditions, a crucial feature of Obamacare. This ban implies that overweight people get the same insurance, at the same price, as everyone else. This defeats an attempt to improve health by discouraging obesity and generates resentment from the non-obese who believe, accurately or not, that they are being forced to subsidize unhealthy behavior by others.
The very likely result is solution by regulation: private decisions that are both socially disapproved and that are likely to impose fiscal externalities will be subject to regulation. The odds of "fat taxes" go up considerably if policy has the effect Miron predicts. Miron continues:
In a private, unregulated insurance market, competition between insurers would determine whether obesity actually predicts higher than average health expenditure. (Even if the obese are less healthy, their lifetime health expenditures might be near or below average because of shorter life expectancy.) Competition would determine whether provisions like required exercise regimes actually improve health. People who are overweight might face higher premiums, but they would bear the burden.

The same issue arises for an enormous range of behaviors: smoking, excessive drinking, downhill skiing, and so on. Government takeover of health insurance, implicitly or explicitly, takes a stand on all these issues. Government will not always get it right, no matter how well-intentioned, and competitive forces will not be allowed to correct the mistakes. In addition, imposition of a particular approach, with the implied cross-subsidies from the healthy to the unhealthy, constistutes one more way in which government intervention promotes an embittered, polarized society.
My prediction: regulation or taxes to mitigate the fiscal externality, regardless of the current sign of the externality, on behaviours subject to public disapprobation. So increased tobacco and alcohol taxes but no tax on skiing, mountain climbing, failing to get your kid vaccinated, travelling to countries where polio and TB are present, or risky sexual behaviour.

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