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Definitely worth the read, this is good!!! 

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"We the Rats, We the Children

By Max Borders : 15 Sep 2009
Source TCS Daily

"We aren't rats. Nor are we children. But Congress and the Obama Administration seem to think so. From Cash-for-Clunkers to the idea that all Americans should be forced to buy health insurance, our leaders are moving away from stewardship of the Constitution to a rewards-and-punishments government. "Stimulus and response" meets "hope and change". It's for your own good. But the idea that they can subsidize and tax their way to utopia has its roots in a discredited theory from early 20th Century—the psychology of B. F. Skinner.

The Skinnerian approach to government is actually based on an economic truth: people respond to incentives. If you tax some activity, you'll get less of it. If you subsidize some activity, you'll get more of it. "The rest is just commentary," adds economist Steven Landsburg. So, what's so bad about prods and prizes by the state? It's a question of the activity you're rewarding and with whose money. Maybe more importantly, though, three troubling issues emerge: 1) Government officials are starting to view the American as an automaton to be manipulated with his own tax dollars; 2) Perverse effects follow any incentive scheme; and 3) Our government has a laundry list of legal activities it has determined to be good or bad—all within their framework of utopia.

Cass Sunstein, President Obama's regulation commissar-in-waiting is known among wonks for his "libertarian paternalism." The idea is that if people could understand what is good for them, they would choose it. Because they are biased by old ways of doing things -- or otherwise in the grip of irrationality - they often don't choose what's best. What they need, according to Sunstein, is a "nudge" from an enlightened state bureaucrat.

"Libertarian paternalists," writes Sunstein, "should attempt to steer people's choices in welfare-promoting directions without eliminating freedom of choice." Now that Sunstein is poised to be a czar, think he'll get to do some nudging? Food pellet, anyone? How about $4,500 for your Cutlass Supreme? Needless to say, real libertarians think libertarian paternalism is an oxymoron. I don't know about you, but I'd rather be free than to be considered "rational" by someone else's standards.

What is paternalism, exactly? Some people think of themselves as being like parents and others as being like children. The word paternalism comes from the Latin pater—father. The following captures it: Most people are just not smart enough to make good choices for themselves. But a certain few are capable of making decisions for everyone. These elites are ordained. They possess the wisdom to implement controls that will protect us in our health, safety and longevity. To any paternalist, I say: 'I'll take the counsel, but not the coercion.' And that's just the problem with Sunstein's approach and Obama's Administration overall. When it comes down to it, it's still about coercing people—even if a spoonful of sugar helps the coercion go down.

What about unintended consequences? Whether it's propping up zombie industries like wind-power or devastating the third-world poor with agricultural subsidies, serious perverse effects follow paternalist policies. High taxes on cigarettes result in dangerous interstate smuggling rings. Government's "nudging" banks to give people easy mortgages resulted in a housing boom and bust followed by recession. Will Cash-for-Clunkers result in people getting into car loans they didn't need or couldn't afford? We'll see. But the list of paternalism's unwanted effects could fill the Library of Congress.

What gets to count as "welfare promoting?" As far as I can tell the answer is a moving target. Ethanol interests say slowing global warming through taxes will promote our welfare (though an army of economists would disagree). Elites in the Northeast think a single-payer health care system will be good for our welfare, despite people waiting in pain across their Northern border. The "libertarian paternalist" alternative to single-payer healthcare is to nudge our way to socialized medicine via the public option.

The problem with the Skinnerian outlook is not that incentives don't work. They do. The problem is that in a pluralistic society, we'll never agree about what "welfare" people ought to be nudged towards. We have different ideas about what the good society is and that's what makes us human. When elites start thinking of us as being like rats or children to be prodded toward this social goal or that, it's the beginning of the end of our Republic. Smart people will turn away from entrepreneurship and start investing in getting elite status. The rest of us will have eventually to stand by in our cages, pressing a bar in hopes that a morsel pops out. That's an America beyond freedom and dignity."

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