A Chequer-Board of Nights and Days

Will Wilkinson takes on Cass Sunstein and Richard Thaler. The whole thing is worth reading but the following is a good sampler:

Begin with the influential Chicago school of free market economics and its Nobel-winning notables, such as Milton Friedman and Gary Becker. Suppose you assume that the best (or only) argument for something approaching social and economic laissez faire is the Chicago school argument, an argument that rests on the traditional Homo economicus model in which people are purely rational calculators. Now suppose you discover that Homo economicus is little more than a character in a math nerd's fairy tale. You might well conclude that the case for laissez faire is doomed. That is indeed what many behavioral economists conclude, despite the fact that neither Adam Smith nor Friedrich Hayek relied on the existence of a hyper-rational economic calculator to make their cases for laissez faire. The behavioralists have now spent almost three decades enthusiastically enumerating the foibles of the hapless human mind in the service of the idea that we are, as Thaler and Sunstein put it, more Homer Simpson than Mr. Spock.

The great hope among many left-leaning behavioralists is that wider recognition of our earthbound limitations and self-defeating tendencies will loosen the grip of Chicago-style laissez-faire dogma in social and economic policy, clearing a little intellectual and political space for benign, welfare-promoting government regulation. The fear-shared by libertarians, liberals, and some of the behavioral economists themselves-is that exposing humans as "irrational" perpetrators of cognitive "anomalies" invites invasive control by paternalistic elites. Thaler and Sunstein's libertarian paternalism is best understood as an attempt to hasten the hope-the death of laissez faire-while assuaging fears that our would-be rulers have been handed a dangerous intellectual weapon. "Emerging developments should strengthen, at once, the principled commitment to freedom of choice and the case for the gentle nudge," they write. The "gentle nudge," they assure us, is to be welcomed, not feared.

Most of the book goes something like this: First, tell a story about the lovably crazy things we "Humans" do-not at all like the choices made by those coolly calculating "Econs" of economics lore. Second, describe a clever reform in life strategy, business practice, or public policy that takes this foible into account in a way that encourages more optimal choices. Repeat.

I wrote this over three years ago. I see no reason to retract a word of it.