Report to ‘The Avuncular State’
Soft paternalism designs policies that gently lead people to make better decisions as opposed to outright bans on certain behaviors while leave people the option to opt out. It is a political philosophy that believes the state can help you make the choices you would make for yourself—if only you had the strength of will as well as the sharpness of mind. But unlike 'hard' paternalists, who ban some things and mandate others, the softer kind aims only to skew your decisions, without infringing greatly on your freedom of choice.
In my view, this approach does help people make better decision to some extent. It aimed to help people to make the right decision which will be better for them as well as the society. The softer tried to lead people to do things that are for people’s own sake. And sometimes soft paternalism is inevitable in any sort of organized society.
One example stated, in Missouri, 10,000 compulsive gamblers have banned themselves from riverboat casinos; if they succumb to their habit and are caught, they face tough punishments. They are not force to do it but freely choose their own exclusion. We can see that this involves setting up systems for sinners to reform themselves.
Another example mentioned in this article is soft paternalist want to make enrolling in the pension schemes the default option while leave people the right to opt out. It will increase the enrolment rate and do help some people to save more today so that they can avoid suffering in the future.
The ‘Sin Licenses’ proposed by soft paternalists suggested government could make the sales of cigarettes illegal to anyone who did not buy a smokers ‘ID’ which is costly. They aimed to help people quit smoking. I also believe they would be of great help to people who plan not to smoke.
Under these circumstances, soft paternalism does help people to make better decisions for them. Even though sometimes people cannot easily renege on later after the choice, softer enlarge people’s freedom compare to hard paternalism. In most cases, soft paternalism gives people a choice, but skewing the choice towards the one their better selves would like to make.
These approaches provided those who want to change with a chance to control themselves, and at the same time leave freedom to the rest. But what is good for one person may not be good for another. So how soft is the paternalism and to what degree the government interferes will be quite important.
The article tells us the potential product design and marketing in financial industry will try helping people to correct problems of self-control. If people don't fully consider the costs their choices impose on their own future selves, those choices impose within-person externalities. This approach provides an argument in favor of paternalistic government policies such as sin taxes, marketing restrictions, mandatory savings plans, and so on.
For example, the interest benefit on saving and penalty interest charged on debt overdraft or late repayment of credit cards. It intended to help people save more today while at the same time, prevent people from over using savings and somehow stop people consuming more than they can actually afford. In addition, some banks may require customer to remain certain amount of money in their saving account to waive the annual fee. This also helps people change saving habit to a better direction.
The car insurance premium is another format of soft paternalism. The worse driver with high frequent accidents will pay higher premium for insurance. The premium charged protects insurance company and at the same time warn people to be a safe driver. Studies proved that this do improve people’s driving habit and reduce numbers of car accidents.
Potential products in financial industry will be designed to help people make right financial decision while at the same time leave people the option to quit if they don't like it. For example, maybe the bank will automatically set a limit for each stock account so that investors may have control on their investment, and you can always change if the investor thinks he can control himself.