“Complexity and Paternalism”

The aim of the paper is to discuss paternalistic economic policy in relation to complexity. It attempts to do so by examining how complexity affects economic inquiry as a whole. The point of departure is a number of papers written by David Colander, where he contends that progress in mathematics and computational technology provides a new outlook on economic policy, making it reasonable to advocate “libertarian paternalism”. Colander focuses on complexity in economic dynamics. I argue, however, that he neglects a range of issues associated to complexity in cognition. My contention is that both individuals and policy makers do not only need to make choices; they also need to choose how to choose. The discretionary nature of these choices reasserts the value-laden nature not only of economic policy but of the economic inquiry that underlies it. When these issues are taken into account, Colander’s view of public policy and paternalism turns out to be too simple and a different notion of paternalism is required. The paper is structured as follows. Following a brief outline of Colander’s views I discuss a few features of cognitive complexity in order to point to the shortcomings of libertarian paternalism. I then introduce the notion of a knowledge context and argue that it can be affected by the purposive action of vested interests. Finally I outline the characteristics of two possible forms of paternalistic policy.