Thaler argues that asking 'what should government do?' is legitimate because libertarian paternalism is non-coercive and there is no alternative to it except 'inept neglect'—choosing rules at random or in ways that make people worse off—so given that government must set rules anyway, it should think systematically about which rules make society better off.

The Medicare prescription drug program was a design disaster because it maximized choice—40 to 60 options per state varying by state—and assigned people who failed to choose to a plan randomly rather than via sensible guided defaults, offering no help to seniors trying to identify the best plan.

The Swedish Social Security privatization (year 2000) was a pro-choice, free-market design—a 2.5% payroll tax directed into individual accounts, any fund meeting fiduciary standards allowed in, funds free to charge and advertise—and grew to 456 (later 600+) funds, demonstrating an extreme version of choice that a free-market advocate would approve.

Switching the 401k default from opt-in to automatic enrollment (opt-out) produces large increases in participation—sometimes as much as a 40% increase—contradicting standard economic predictions that the trivial cost of filling out a form would make the default irrelevant and that companies would already have adopted the better arrangement.

Half of our term is libertarian: the goal is not government making decisions for people but helping unsophisticated people make better decisions without restricting the freedom of those who are informed (or mistakenly believe they are informed) to choose for themselves.

The Swedish default fund was well-designed: low fees of only 16 basis points, well diversified, roughly 90%+ equity (an intentional policy choice because the larger defined-benefit portion served as fixed income), invested via index funds with small hedge fund and venture capital exposure—a fund Thaler personally would have been happy to invest in.

Any policymaker or choice architect who sets rules and operating procedures must choose some arrangement; there is no neutral or choice-free option, so the cafeteria director who arranges food cannot avoid influencing what people eat.

Libertarian paternalism is not an oxymoron: paternalism means attempting to make people better off as judged by themselves, and libertarian means a policy that does not restrict anyone's freedom to choose, so a non-coercive policy aimed at people's own welfare combines both.

There are economies of scale in financial decision-making: most workers know almost nothing about investing—many believe their own company's stock is safer than a mutual fund when virtually every economist regards concentrating in your employer's stock as the worst choice—so a more sophisticated party can offer sensible advice and a well-chosen default fund benefits unsophisticated investors.

Because most people never rebalance and rarely change their plan, a small initial time investment in a financial decision can lock in choices with profound effects—hundreds of thousands of dollars in cost—so the amount of attention at the initial decision point matters more than later attention.

A good pension plan should have a default investment fund chosen to approximate what employees would pick if they were sophisticated (had a PhD in finance), helping the unsophisticated; whether this is called paternalism or self-interest is merely arguing about words since both aim at the same outcome.

A survey of Cornell faculty found the typical person spent less than half an hour choosing their asset allocation for a pension plan worth hundreds of thousands of dollars, and the most frequently consulted adviser was the clerk receiving the enrollment forms—evidence that despite incentives, people do not seek expert financial advice.

The heterogeneity objection is not fatal because smart defaults can be segmented: target-date funds keyed to age and lifestyle funds keyed to risk preference (low/medium/high) capture about as much insight as 90-95% of participants have about their own preferences.

When Swedes chose funds on their own rather than taking the default, their portfolios had much higher fees, were more poorly diversified, exhibited home bias (half invested in Swedish stocks despite Sweden being ~1% of world product) and heavy tech concentration chasing past performance, and the average self-directing investor lost 40% in the first three years.

Thaler's only real complaint about the Swedish design is that the government ran a large advertising campaign discouraging people from electing the default ('it's your Swedish duty to choose for yourself'); had it instead gently recommended the default, far better outcomes would have resulted, as shown by newer young workers—over 90% of whom now elect the default after the campaign stopped.

More investment options cause harm: research shows the more options a plan offers, the longer people take to sign up (paralysis) and the more likely they are to put all their money into a money market account because they are flustered—so the private sector is now retrenching toward fewer options and better defaults.

A provision in the new pension bill provides 'safe harbor' protecting companies from lawsuits if they default employees into investments that subsequently lose value, removing the legal disincentive that had previously made firms afraid to offer strong default options.

For organ donation Thaler favors 'required choice'—forcing each person to check one of two boxes when getting a driver's license—over opt-out, because the issue is emotionally charged and required choice would be more politically acceptable while still protecting everyone's rights and likely producing more organs.

Opt-out (presumed consent) organ donation systems in many European countries produce dramatically higher donor consent—over 90%—than the U.S. opt-in system, and this difference is institutional rather than cultural, with Spain being especially effective at harvesting organs.

It is hard to find anyone outside an economics department willing to call themselves libertarian, and there is no greater crime than calling yourself a paternalist, making both terms particularly unpopular.