We all procrastinate. We delay tasks to a later period even though it might not be the utility-maximising choice. Students are no exception to this kind of behaviour. Whether it is a course essay that has to be written or an exam that has to be studied for, the commencement of the task is delayed repeatedly. This results in a higher workload for the time remaining until the deadline. It is not immediately clear why people would choose to procrastinate. Is procrastination irrational, or could it be that it is actually the rational response of a utility-maximising individual?
Whether the behaviour is rational or not, it has important practical implications. People delay the start of various activities, including saving for retirement, going on a diet, or quitting smoking. Since failure to make adequate provision for one’s retirement carries significant costs, one would expect that people would attempt to avoid this behaviour. Yet, we do not observe this.
Whatever the particular reason for people’s failure of adequately providing for their retirement, the fact that they do raises important normative policy issues. Specifically, how should the government react to this kind of behaviour, if at all? Cass Sunstein and Richard Thaler have coined the paradoxical term ‘libertarian paternalism’, claiming that since people sometimes make choices that are not in their best interest, the government must guide individuals into making the choice that would be ‘best’ for them. In the present example, this amounts to inducing people to save for their retirement. The paternalistic part is the government that steers you in the ‘right’ direction; the libertarian part is the fact that you are not strictly speaking forced to perform any action. Sunstein & Thaler (2003) claim that, since people’s preferences are situation-specific, and a particular decision therefore depends on how it is framed, a pension-plan should be designed in such a way that people’s welfare would be higher, but without restricting freedom too much. Broadly, they propose that instead of giving people the choice of participating in a specific pension plan, everybody is automatically included in the plan with the option of opting out at any time. But would this be a good idea, even if it improves people’s welfare? Indeed, if people want to harm themselves, should they not be allowed to do so, provided that they do not injure anybody else? Libertarians would argue in the affirmative, since libertarianism “involves a commitment to individual liberty regardless of whether individuals use their liberty wisely, and requires that individuals bear the consequences of their mistakes as the price paid for the freedom to make such mistakes” (Mitchell 2005: 1260). Furthermore, a ‘libertarian paternalistic’ policy might redistribute resources from rational to irrational individuals. Another objection to this kind of policy is that procrastination might well be the rational choice of a utility-maximising individual.
References
MITCHELL, G., 2005. Libertarian paternalism is an oxymoron. Northwestern University Law Review 99(3): 1245 – 1277.
SUNSTEIN, C.R., and THALER, R.H., 2003. Libertarian paternalism is not an oxymoron. The University of Chicago Law Review 70(4): 1159 – 1202.
