One of the great academic debates of our time revolves around how people make choices. On the one side, neoclassical theory assumes that individuals generally act in sensible ways in order to advance their individual self-interest. They are motivated to control aggression and monopoly, and to let private parties in competitive markets strike what bargains they like. In recent years, this neoclassical approach has come under attack from the field of behavioral economics. Its proponents argue that the neoclassical model of behavior, premised on the fact that human beings are rational decision-makers, does not sufficiently account for the many false heuristics and biases that lead people astray as they make decisions.

The two most prominent leaders in this movement are Richard Thaler of the University of Chicago, winner of the 2017 Nobel Prize in economics, and the Harvard Law Professor Cass Sunstein, who have advanced—most notably in their book Nudge–what they problematically call Libertarian Paternalism. This involves using both public and private institutions to “nudge” people to improve their lives without forcing them to do so, supposedly preserving their personal liberty. Resting on the foundational scholarship of Daniel Kahneman and the late Amos Tversky, Thaler and Sunstein deny that individuals are as rational as neoclassical theory holds: People often operate under the influence of systematic cognitive biases that prevent them from making sound decisions. In order to nudge people in the right direction, Thaler and Sunstein propose that the legal system set its “default” rules to induce them, without coercion, to act in ways that better advance their own welfare. In some cases, the switch is as simple as a move from “opting in” to “opting out.” People are permitted to reverse the default position if they prefer, so that their freedom of choice is thereby preserved.