Berkeley Program in Law and Economics

In a paper published some years ago, Cass R. Sunstein and Richard Thaler argue for a sort of soft paternalism referred to as “libertarian paternalism.” Relying on cognitive findings regarding the status quo bias, one of Sunstein and Thaler’s central claims is that default rules can be used for paternalistic purposes, given people’s proneness to adhere to what is established by these rules. This strategy is also called ‘libertarian’, since parties remain free to contract around the paternalistic rule if they wish. Considering the influence of default rules on parties’ behavior, Sunstein and Thaler affirm that soft paternalism is not just defensible but inevitable, inasmuch as any adopted rule will affect people’s choices. This is an audacious conclusion, which surprisingly has attracted little attention from critics of the paternalism of behavioral law and economics The aim of this paper is to assess the alleged inevitability of paternalism. After examining the distinction between hard and soft paternalism, it sustains that, in order to validate Sunstein and Thaler’s claim, paternalism has to be broadly equated to “influencing behavior”. A more restricted definition of paternalism, according to which an act or norm is paternalistic only if it tries to advance someone else’s objective wellbeing, leads to the conclusion that default rules, whose end is not necessarily to protect parties’ interests, are not paternalistic by definition. Taking into account the potential, but not inherent, paternalism of default rules, the last Section of the paper comments on three criticisms regarding the interventionist character of behavioral law and economics. The first criticism refers to the fact that public authorities are vulnerable to the same cognitive pitfalls of the individuals whose activity is regulated; the second concerns the redistributive effects of paternalism involving rational and irrational people; and the third one warns against the “slippery slope” consequences of soft paternalism, i.e., the risk that milder paternalistic measures, as those supported by Sunstein and Thaler, give rise to more intrusive forms of state intervention.