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  • Rethinking Nudge: Libertarian paternalism and classical utilitarianism*
  • Hiroaki Itai (bio), Akira Inoue (bio), and Satoshi Kodama (bio)

Recently, libertarian paternalism has been intensely debated. It recommends us to employ policies and practices that “nudge” ordinary people to make better choices without forcing them to do so. Nudging policies and practices have penetrated our society, in cases like purchasing life insurance or a residence. They are also used for preventing people from addictive acts that may be harmful to them in the long run, such as having too much sugary or fatty food. In nudging people to act rationally, various kinds of cognitive effects impacting the consumers’ decision-making process should be considered, given the growing influence of consumer advertising. Since libertarian paternalism makes use of such effects in light of the recent development of behavioral economics and cognitive psychology in a principled manner, libertarian paternalism and its justification of nudges attract our attention as an approach providing a normative guidance for our action. [End Page 81]

This paper has two aims: the first is to examine whether libertarian paternalism can give an appropriate theoretical foundation to the idea and practice of nudges. The second is to show that utilitarianism, or, more precisely, the classical version of utilitarianism, treats nudges in a more consistent and plausible manner. To achieve these two aims, first of all, we dwell on how Cass Sunstein—one of the founder of libertarian paternalism—misconceives Mill’s harm principle, and that this may prompt us to see that utilitarianism can reasonably legitimate nudging policies (section one). We then point to two biases that embarrass libertarian paternalism (the scientism bias and the dominant-culture bias), which we believe stem from the fact that libertarian paternalism assumes the informed preference satisfaction view of welfare (section two). We finally argue that classical utilitarianism not only can overcome the two biases, but can also reasonably endorse any system monitoring a choice architect to discharge his or her responsibility (section three).

Libertarian paternalism and its two deviations: An examination of Sunstein’s challenge against Mill’s harm principle

Libertarian paternalism is a form of paternalism in that it prescribes to help ordinary people do the best.1 The interference in question is mainly grounded by well-known findings in behavioral economics and cognitive psychology which show that “in many cases, individuals make pretty bad decisions—decisions they would not have made if they had paid full attention and possessed complete information, unlimited cognitive abilities, and complete self-control”.2 As Daniel Kahneman epitomizes, the human mind contains two sorts of thinking, i.e., System 1 and System 2: System 1 is intuitive and automatic and so works fast. On the one hand, System 2 is deliberative and reflective, and so reasons slowly.3 Taking advantage of the fact that System 1 is the dominant mode of thinking in everyday life, libertarian paternalism counts nudging as an effective tool of pushing people in welfare-promoting directions.4

A typical way of nudging is to change the default rule only, and thus allow people to unreflectively opt out from a bad choice. It might be thought that the mere change of the default option has limited effects in terms of individual welfare. Yet, according to Richard Thaler and Cass Sunstein, prominent theorists of libertarian paternalism, this change is effective enough to push people to choose [End Page 82] better options, since most of the time people depend on the default rule in everyday life: “Default rules of some kind are inevitable, and much of the time those rules will affect preferences and choices”.5

One might worry that nudges would wrongly signal the government or public officials to control people in their favored direction. However, this worry can be warded off if we endorse the publicity principle that “bans government from selecting a policy that it would not be able or willing to defend publicly to its own citizens”.6 Under the publicity principle, nudges may neither be a source of embarrassment nor violation of the respect for people. The latter is particularly important because “if it adopts policies that it could not defend in public, it fails to manifest...

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