Richard H Thaler - Misbehaving- The Making of Behavioral Economics (epub)

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Going Public
When I next saw Cass, I told him about my new term, “libertarian
paternalism.” The phrase was not beautiful, but he had to admit it was more
constructive than his term, “anti-anti-paternalism,” and he was intrigued.
The notion of paternalism was very much on the minds of behavioral
economists at the time. Colin Camerer, George Loewenstein, and Matthew
Rabin had collaborated with Ted O’Donoghue and law professor Sam Issacaroff
on a paper with a similar idea and an equally forbidding title: “Asymmetric
Paternalism.” They defined their concept this way: “A regulation is
asymmetrically paternalistic if it creates large benefits for those who make
errors, while imposing little or no harm on those who are fully rational.” Rabin
and O’Donoghue had earlier coined the phrase “cautious paternalism” but then
raised their ambitions to “optimal paternalism.” We were all trying to dig into
the question that had been the elephant in the room for decades: if people make
systematic mistakes, how should that affect government policy, if at all?
Peter Diamond happened to be serving as president-elect of the American
Economic Association in 2002 and was in charge of organizing the annual
meeting, to be held in January of 2003. Peter was an early fan of and contributor
to behavioral economics, and he took the opportunity to organize a few sessions
at the meeting on behavioral topics and invited a session on paternalism. Cass
and I wrote a short paper that introduced the idea of libertarian paternalism. With
the five published pages we were allotted, Cass was barely getting warmed up,
so he took that piece and developed it into a proper law review article, over forty
pages. We called it “Libertarian Paternalism Is Not an Oxymoron.”
When I printed a draft of the law review version of the paper it looked quite
long to me. One day I asked Cass whether he thought there might be a book in it.
It would be an understatement to say that Cass loved the idea. There is nothing