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The Knowledge Problem of the New Paternalism
Brigham Young University Law Review (2009)
  • Mario J Rizzo
The “new paternalism” is a set of policy prescriptions based on recent findings in behavioral economics whose purpose is to help individuals overcome a wide variety of behavior and cognitive biases. According to its proponents, it does not aim at replacing the preferences of individuals with those of the paternalist but rather to uncover the “true” preferences of individuals, that is, the preferences they would have if they had perfect knowledge, unlimited cognitive abilities and no lack of willpower. The purpose of this Article is to show that new paternalist policies founder on the shoals of a profound knowledge problem revealed in Friedrich Hayek’s famous critique of central planning. Feasible policies require not only accurate scientific knowledge but also accurate knowledge of “the particular circumstances of time and place” that constitute the local and personal knowledge of individuals. This knowledge is not accessible by paternalists. This Article takes the findings of the behavioral economic and psychological literature seriously and shows that new paternalist policies can reliably increase welfare only if they take account of individual circumstances. These circumstances include the extent of biases, the existence and degree of self-debiasing, the interaction of different biases, and the unraveling of self-regulation due to paternalist policies. New paternalists must also deal with the indeterminacy of true preferences in the context of conflicting preferences within individuals. We do not argue that individuals always make welfare-enhancing choices. Instead, we argue that despite individuals’ mistakes, the paternalist does not know better in the concrete sense of what would be welfare-enhancing in particular circumstances and at particular times. Thus the new paternalist project fails to attain its self-imposed goals.
  • Paternalism,
  • Hayek,
  • Thaler,
  • Sunstein,
  • Nudge
Publication Date
Fall 2009
Citation Information
Mario J Rizzo. "The Knowledge Problem of the New Paternalism" Brigham Young University Law Review (2009)
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