A reader reacts to the slippery slope problem
Reader Phil Armour, a 23-year-old economics major who says he has been “interested in Behavioral Economics and Asymmetric/Libertarian Paternalism” for a quarter of his life offers some intelligent commentary on the slippery slope problem. Bans and mandates should be absolutely prohibited, he says.
I agree that (libertarian paternalism) offers sound economics a firm footing to increase overall welfare while being politically feasible. However, I do worry, no matter how you’ve dispensed with it so far, about slippery slopes. The spirit of libertarian paternalism, I believe, is free of such slopes (reframe/redefault while preserving choice), but in the manifestos of both asymmetric and libertarian paternalism, there is a tendency to start sacrificing some choice for higher welfare, and the idea of a strict line, is indeed implausible. To me, there is a qualitative difference between libertarian paternalism and paternalism that employs behavioral economics while trying to preserve a measure of choice. That’s not to say I disagree with said paternalism, and I whole-heartedly embrace your RECAP ideas, re-default plans, and the wonder that is Save More Tomorrow.
Before the passage of the Pension Protection Act of 2006, many asymmetric/libertarian paternalists embraced a mandatory default, only to find that the bill did better by simply encouraging a default (and Nudge did well in praising its virtues). My interpretation of libertarian paternalism precludes anything mandatory or any bans, no matter how welfare-enhancing they are (not to say they shouldn’t happen, but if they do, they just aren’t libertarian paternalism; they’re paternalism).
He goes on to propose “default” cooling off periods instead of “mandatory” ones. A cooling off period, for those readers who are not familiar with it, is a defined period of time after an agreement is signed that a participant is able to cancel or withdraw from the agreement without incurring a legal or financial penalty. Cooling off periods are one idea for combating impulse purchases made from door-to-door sales people that customers frequently come to regret. Reactions to this idea are welcomed.
Mandatory “cooling off periods” are encouraged by many proponents of libertarian paternalism; however, in as much as they may preserve choice for individuals, they ban certain contracts (individuals may want to waive such a period if they are sure of the purchase in exchange for a better deal). Instead, why not eliminate the “mandatory” part and simply include these “cooling off periods” as the default in these contracts, which can be waived by a separate and lucid form signed at the time of purchase? This would preserve choice, and since it would be much more difficult for a salesperson to talk a buyer out of a cooling off period than a buyer to talk a salesperson into one, it stands to increase welfare. Maybe not as much as having it be mandatory, but it comes without the costs associated with preventing certain contract formations beneficial to the rational and well-informed buyer. And it seems even more in the spirit of my humble understanding of libertarian paternalism.