Chapter

The “New” Paternalism

Gordon L. Clark, Kendra Strauss and Janelle Knox-Hayes

in Saving for Retirement

Published in print January 2012 | ISBN: 9780199600854
Published online May 2012 | e-ISBN: 9780191738104 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199600854.003.0008
The “New” Paternalism

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In Chapter 8 we ask who would exercise control over the management of their pension plans. This is an important issue and is a prelude to the final chapter of the book, which deals with the design of pension systems. The Chicago school of libertarian paternalism exemplified by Thaler and Sunstein (2003) believes that pension providers ought to take advantage of the lack of interest of people in pension planning. They would deliberately frame the options available to participants so as to dampen the effects of cognitive biases on participants’ decision-making and management of their pension savings. We find that those plan participants who would claim control over crucial decisions taken with respect to their pension welfare have many of the same characteristics as long-term savers noted above, including their reliance on partners for planning effectiveness. Libertarian paternalism comes close to coercion when the design of decision-making options so channels participants’ behavior as to deny their initiative. This may be justified by reference to those willing to accede to the power of the benevolent “planner.” But the point here is that paternalism can coerce even if coercion is deemed in the best interests of most people.

Keywords: paternalism; choice; participant initiative

Chapter.  7450 words.  Illustrated.

Subjects: Pensions

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