Choices are a part of everyday life. Most of the time they are not life changing; but often they can still come with stress. For instance, I remember going into The Cheesecake Factory and nearly sweating from the stress of choosing a meal from the daunting twenty-some page menu. However, I can easily choose what kind of meal I want from a place like Chipotle. The difference between these two menus are the amount of options I can choose from.
The amount of choices people can make are often regulated by a restaurant, one’s employers, government officials, and any other authority. This can be described as libertarian paternalism, or the idea that institutions can affect human behavior while still respecting free will. During class this week, we read an article and discussed how libertarian paternalism is used and if it is good for society as a whole.
In some instances, libertarian paternalism can be used to better society. For example, Henderson talks about the Pension Act “which gives employers a small incentive to choose automatic enrollment option for 401-k or 403-b” (Henderson 2). By including a small incentive for automatic enrollment, the government persuades employers to choose automatic enrollment; but the option to abstain is still allowed. If the government were to create a law that made automatic enrollment in these programs mandatory for all employers, it can be assumed there would be a lot of backlash and disgruntlement. This libertarian paternalistic law allows for employers to have a choice while making the preferred choice more favorable through an incentive.
I have even seen libertarian paternalism while working in customer service at Victoria’s Secret. Whenever a customer came up to the register with a large purchase, I would ring up their purchase and, before asking for payment, explain to them what they would save if they signed up for a store credit card. This allowed the customer to see the benefits of having a store credit card while still giving them the option to decline.
However, I have also been a customer who opened up a credit card at a department store while making a large purchase, only to discover that the interest on the card was astronomical for a college student. This experience was a more negative way at looking at libertarian paternalism. I had the option of paying the minimum balance on the credit card; but I would end up paying more for my purchase than if I had not opened up the credit card. This realization made me more likely to pay off my credit card balance completely instead of a minimum balance.
The interest on the card also made me more aware of the money I was spending when I went to the store again. If I knew I didn’t have the money to fully pay off the credit card each month, I was less likely to put unnecessary or more expensive items into my cart. This behavior was beneficial to me because I was spending less money while still receiving the perks of the credit card. On the other hand, it was not beneficial to the company because they were losing the opportunity for more profit since I was not overspending. If they decreased the interest on their store credit card, there would be more incentive for a customer like me to overspend and pay the credit card off more gradually.
Overall, libertarian paternalism can be beneficial to society in certain instances, especially when trying to replace paternalistic laws and regulations. However, is libertarian paternalism actually giving people a fair choice or just using persuasion to lead individuals to the choice that government and other authorities favor? This question is something everyone should think of the next time they choose the employer they wish to work for or credit card they want to open.
Resources:
Henderson, D.R. (2014). Libertarian paternalism: Leviathan in sheep's clothing? Sociology, 51, 268-273.
