On Becoming a Libertarian Paternalist: Designing Better Policies for the Society (Part 2)

In my post dated 26 August 2009, we have discussed the basic concepts of Libertarian Paternalism, introduction to better policy making, and examples of human errors with respect to daily economic activities. Today, we will discuss some useful guidelines in making better policies and how to implement such guidelines in actual life. The Six Guidelines of Better Policy Making According to Thaler and Sunstein, there are 6 basic guidelines for better policy making: Expect Error; Defaults; Understand Mappings; Give Feedback; Structure Complex Choices; and Incentives. Each will be further discussed below: 1. Expect Error I guess this is the first guideline to be considered by policy makers. Since most men make mistakes, a good policy will consider such fact and will ensure that the mistakes can be fixed in the easiest way. What is the actual implication of this guideline? While governments or private institutions can try their best to design a good policy, they must be