When does libertarian paternalism work?

Not always.  Here is the abstract from a new paper:

We develop a theoretical model to study the effects of libertarian
paternalism on knowledge acquisition and social learning. Individuals
in our model are permitted to appreciate and use the information
content in the default options set by the government. We show that in
some settings libertarian paternalism may decrease welfare because
default options slow information aggregation in the market. We also
analyze what happens when the government acquires imprecise information
about individuals, and characterize its incentives to avoid full
disclosure of its information to the market, even when it has perfect
information. Finally, we consider a market in which individuals can
sell their information to others and show that the presence of default
options causes the quality of advice to decrease, which may lower
social welfare.

I do not yet see an ungated version.  Of course anyone interested in this topic should also pursue the papers of Mario Rizzo, Glen Whitman, and Daniel Klein.

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