How much the government should involve themselves in the lives of the public has been a theme of 2020 and the Covid crisis. Whatever your views it is unlikely you are totally happy. Die hard libertarians, even in the most conservative of jurisdictions, can point to plenty of ways that the right to do exactly what you want has been limited. On the opposite end those urging more regulation have plenty to complain about, with late, inconsistent and half-hearted measures that have been less effective than we might all hope.
Behavioral economics has much to say on regulation. In 2003 Colin Camerer and his colleages tried to frame the problem of regulation for a legal audience. They argued that some government action seeks redistribution (to help the less fortunate) and other actions seek to address the provision of public goods (to make us all better off). They don’t address the value of such activities. Instead they outline their idea of asymmetric paternalism which creates regulation that is designed to help individuals who would otherwise not make perfect decisions.
The challenge with paternalism is somewhat obvious. Telling people what they can and cannot do is rarely popular. In addition, who wants to hear that they can’t make the right decisions for themsleves? That said, the idea from traditional economics that we all think through all decisions and come up with the best answer — often, I think wrongly, called ‘rationality’ — is clearly strange to anyone who has met a human being.
The authors’ asymmetric paternalism aims is a type of paternalistic regulation where the benefits to those who don’t naturally make perfect choices are high compared to the costs to those who would make perfect chocies without the paternalistic regulation. (They also consider the costs to implement the policy and any change — positive or negative — in firm profits).
The authors want regulation to help consumers but only when the value of regulation to the imperfect decision makers has been weighed against, and greatly exceeds, the costs of the regulation to the perfect decision makers. Given this seems relatively uncontenious they think such asymmetric paternalism with its large benefits and low costs should be embraced even by conservatives who might not be naturally as keen on regulation.
The aim of the approach is that: “asymmetric paternalism helps those whose rationality is bounded [imperfect decision makers] from making a costly mistake and harms more rational folks [perfect decision makers] very little. Such policies should appeal to everyone across the political spectrum and can potentially shift the debate from one about whether or not paternalism is justified, to one about whether the benefits of mistake prevention are larger than the harms imposed on rational people” (Camerer, Issacharoff, Loewenstein, O’donoghue, & Rabin, 2003, page 1254). Sadly, everyone agreeing on the right form of regulation doesn’t seem to have happened but at least their idea seems reasonable to think about.
Read: Colin Camerer, Samuel Issacharoff, George Loewenstein, Ted O’donoghue, & Matthew Rabin (2003). Regulation for Conservatives: Behavioral Economics and the Case for” Asymmetric Paternalism”. University of Pennsylvania Law Review, 151(3), 1211-1254.
