A couple of conversations about Libertarian Paternalism came up on the iTunes this week, centered around Thaler and Sunstein’s book, Nudge: Improving Decisions About Health, Wealth, and Happiness.

The most enjoyable being the EconTalk with Richard Thaler, where Thaler does an amazing job of challenging Roberts. Not there’s enough of that on EconTalk. 😉

I found the Glenn & Helen Show with Sunstein annoyingly preachy. The conversation felt like a bad episode of The View, more interested in arguing at the surface rather than finding common ground by going in-depth.

In both, the primary challenges against Libertarian Paternalism seemed to be:
Because governments offering services vs. private firms competing in the market is an either/or proposition, governments shouldn’t be offering services, let alone deciding things for it’s citizen.

In addition to not represent reality (keep reading), this perspective just encourages bad, inefficient government. Since government exists, shouldn’t we make it the most effective, efficient, institution for providing the services it provides thereby requiring fewer resources?¹

I jotted down my frustration with this perspective over at Twitter:

“garrickvanburen doesn’t understand the perspective of preventing the govt as one of many vendors in any given market (healthcare, retirement, etc)”

Privately, I received an email asking me to consider if the reverse was also true (“private firms as one of many vendors in any given govt market”)

In fact, I agree with both statements. I’m not sure what makes govt so special that they get a monopoly in some sectors and not in others – same with any private firm. If a private firm brings a competitive service to govt-dominated market – awesome. I’m also not sure why govt can’t enter some markets and not others – ‘we’ rarely tell private firms (Wal-Mart, GE, come to mind immediately) which markets they can’t enter. Feels the same.

My instincts tell me that govt should focus on the infrastructures to support; commerce, trade, security, and encourage highly-speculative new ventures that build markets (space, internet, highways, biofuels, etc). From that perspective, it’s less about what ‘business’ is and more about what belongs in the infrastructure. I’m thinking of Minneapolis’ city-wide-wifi. It was decided that internet should be part of the city’s infrastructure, and they brought a fair offering to market. It’s not the only offering, nor should it be. It’s an option and more options are better than fewer. Nor are they requiring people to sign-up for their offering, that would be anti-competitive.

To the private firms in govt markets statement, the first example that comes to mind is mail. US Postal Service is one vendor that delivers messages, FedEx, UPS, DHL are private options. Each with their own costs and benefits. And this leaves out other ways to deliver messages – email, fax, telephone, bike courier. None of which are govt offerings.

1. Mental exercise: What if taxes were the most effective way to outsource?

Elsewhere:

“Rather, opposition to these increases grows from the correct perception that a legally protected monopolist such as the United States Postal Service can keep prices higher, and service inferior, to what these would be under competition.” – Don Boudreaux

UPDATE 11 June 2008:
This perspective is why I’m all for public mass transit, national passenger rail, ubiquitous high-speed internet service, and state-level (or federal) universal health care.