Paternalism vs. Libertarianism PDF

https://www.youtube.com/watch?v=DzEVu27bQkc Paternalism vs Libertariansim We've been talking about how the government can intervene with public policy when there's a market failure. But we haven't asked the question yet - should the government intervene with policy? And so in this video, I want to...

https://www.youtube.com/watch?v=DzEVu27bQkc Paternalism vs Libertariansim We've been talking about how the government can intervene with public policy when there's a market failure. But we haven't asked the question yet - should the government intervene with policy? And so in this video, I want to talk about two different views paternalism and libertarianism of thinking about the answer to this question. So paternalism is sometimes kind of pejoratively referred to as having a nanny state. But what it is basically saying - in certain situations the government might know best, it might know better than citizens, what's good for the citizens. So just to give you an example - so for the government to require that you wear a seat belt when you drive a car. So where I live, I'm required to wear a seat belt if I'm driving a car, and if I'm not wearing a seat belt then I can get a fine, I can get a ticket and have to pay money to the government as punishment for not obeying the rule that I'm supposed to be wearing a seat belt. Now not wearing a seat belt dramatically increases the chances that I would die if there's an accident, right. So, this, this is in a sense this is a good thing for me - that the government is requiring that I wear the seat belt, right. So there's good intentions and so forth, so you might just think - hey obviously this makes sense and this should be a rule and there should be a fine. But there's a few issues with that. And and so one of the issues is what if when the government enacts its policy, that policy doesn't actually work. And and so you might be thinking, hey how could this be a problem with requiring people to wear seatbelts - how could that possibly be an issue? But there's a couple of things that you want to think through with the policy whenever the government enacts a policy it might change the way people behave. For example, if people wear seatbelts, research suggests that they actually drive faster. So people drive faster when they're wearing a seatbelt. Why - because they're less afraid of the risk of, of what would happen to them if there is an accident. It's a there's actually a whole literature on this it's called risk compensation. So because they now have a seatbelt, they feel a little more safe, and so they feel comfortable driving faster. You see the same thing with anti-lock brakes. So if you have an anti-lock brakes that helps you stop your car faster, so if you have ABS brakes, people will actually tailgate more - they'll be more likely to tailgate and drive closer to the bumper of the person in front of them. if they have anti-lock brakes. This isn't to say of course that just because people drive faster when they're wearing a seatbelt that we shouldn't require seatbelts or anything like that. I'm not taking a position here, I just want you to understand that sometimes when you implement a government policy you might have some unintended consequences. And so also we need to think, if the government is going to be intervening in the economy or doing things, then the government can open itself up to be influenced by special interest groups right. So people with a lot of money or with it can come in, and basically you know buy politicians, and you know, get influenced, get access They can do all kinds of things and then change the policy that ends up getting enacted. So then it's not so much the government is doing something because it knows best for the people but it's actually enacting something because these special interest groups have paid bribes, or campaign contributions, or so forth. So once policy, once you open the door of a policy, you also open the door to special interest potentially. But another thing to think about is, it's just kind of philosophically, is that government policy, when the government comes in and says - look you need to wear a seat belt otherwise, you will be forced to pay a fine to the government You could think about that is that the government is subverting or kind of undermining people's individual freedoms right. On some level, we should be able to be free, and, and do what we want with our lives, provided we're not doing harm to other people. By the same token you could absolutely see the intentions of requiring people to wear seatbelts and so forth. But this idea of individual freedoms leads into another way of thinking about it. Instead of, kind of, the paternalistic view of thinking, that hey -the government in some cases knows better than we know how to live our lives, you can also think of libertarianism. Where basically with libertarianism, the government is, should stay out of people's lives, is the logic, and it should respect their freedom. And so the idea is that we're our free moral agents, and, and our freedom is paramount. And even if the government thinks it knows best, or what ,at the end of the day we are free and should be able to choose how to live our own lives, free of government interference. And so that's just kind of a brief sketch of what libertarianism is. But if you think about that there's an issue with that And so the issue is what if your exercise of freedom affects somebody else? Now we might not think about this so much with with, like the seatbelt example, so with the seatbelt example, we could just say - look if I don't feel like wearing a seatbelt, let's say there's some guy named Tommy, and Tommy doesn't feel like wearing a seatbelt, and so then Tommy gets into an accident, and Tommy dies because he wasn't wearing a seatbelt. Let's just say - that happens well you could say - hey that's Tommy's problem right. Tommy made that decision. Tommy had the freedom to do that and so forth right. So we get into things like, is Tommy allowed to drink a soft drink? right Some, some cities they propose - hey we're gonna ban that : you can't have an extra large soft drink or something like that right. And so all those things you might say, hey that just affects Tommy. But what if what if Tommy's decision and his exercise of freedom, actually affects somebody else? Right so let's just say that Tommy, let's pretend that Tommy lives, Tommy lives in a house and there's a river, there's a river behind Tommy's house. And so Tommy, when Tommy does his oil changes on his car, Tommy says well - I've got this oil now, I'm just going to pour it, pour the used motor oil into the river. I don't use the river, it's just convenient for me, it's too far for me to drive into town, and so Tommy just says I'm just going to pour the motor oil directly into the river. And so let's just say, that there's another house, there's another house near the river, and there's just like a whole neighborhood of people who live around, around Tommy, And let's say that some of their children play in that River. And then their children get sick, because they're playing in a river that has motor oil. Now if Tommy, Tommy owns all this property, and and so forth, and let's just say he is the waterfront rights here and so forth. So Tommy is exercising his freedom. But what about the freedom of this child to be able to play in the river, and, and not get sick and so forth. And actually what we call this is we call this an externality, this is actually a negative externality. Now I'll have another video on negative externalities and they could be positive too. But in this case, what it is, is Tommy, Tommy's exercising his freedom, but he's imposing costs, he's imposing costs, on somebody else, right. So, and he's not reimbursing that person for that cost. Now this isn't to say that libertarianism is garbage, and we got to throw out the whole idea, and let the government get involved. There's different ways of dealing with this. One way is a government policy of something called a Pigouvian tax. The Pigouvian tax, I'll be talking about in another video, but what you basically tax, the, the activity that's generally generating the externality. But there's another way, without government policy. This, this guy named Coase, came up with this idea of Coase Bargaining. Where basically, if both parties to a transit, if both part if this family, and then Tommy's family, assuming that each have clearly defined property rights, that, that, and that there's low transaction costs, those assumptions, that basically they could work out an agreement. Maybe this family says - hey look, we, we really don't like you dumping the oil in here, there's a problem, ad Tommy says look I'm sorry about that I'll pay you $25 if when you go into town you could take the oil and just dispose of it for me. So so there are ways to respect people's freedom and still be able to reach a socially efficient outcome. But it's just bear in mind, that there's no clear-cut decision When we're thinking about the government, government intervention, with public policy, just need to bear in mind that there's several different ways to look. On the one hand we want to respect people's individual freedoms, but on the other hand sometimes there can be problems when we ignore things like externalities, or the existence of public goods and free-rider problems, some things that we'll talk about and videos to come.