The Economist blog weighs in with this:
behavioural economics can point to many interesting irregularities in behaviour, but it cannot dictate political beliefs such as the level of government intrusion into the economy. If we put the government in charge of deciding what we should want, who will be in charge of manipulating government preferences?
It’s a common misuinderstanding of behavioural economics, and libertarian paternalism in particular, that it advocates Government intervention as a standard. I think this is wrong. The optimal scenario would be on in which private firms compete amongst each other to offer, for example, a range of default savings plans (as in the Swedish plan), rather than have a no contribution default.
However, the research often shows that private sector firms are often slow to engage in the market, i.e. $20 bills remain on the ground. Where this is the case, and where Government has chosen or is mandated to provide, for example, social security or Medicare then shouldn’t we want the Government to act in what they judge to be our self interest?
Let me be clear here. I would prefer the Government NOT to be in the business of saving at all, but given that the incentives for private firms to provide ’sensible’ options in line with actual behaviour appear lacking (unless specifically designed as in Sweden) then I think it only makes sense to ensure the Government does the best it can.
I’m not advoating a general policy of Government intervention in our choices. But if market failure does occur in instances where without some assistance we clearly act sub-optimally, then I would rather urge that sole provider (whoever it happens to be) to do the best they can.
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