Date Added: Nov 2009
The authors develop a theoretical model to study the effects of libertarian paternalism on knowledge acquisition and social learning. Individuals in the model are permitted to appreciate and use the information content in the default options set by the government. They show that in some settings libertarian paternalism may decrease welfare because default options slow information aggregation in the economy. An extension of the model shows that partial information disclosures by the government can increase the agents' incentives for information gathering and sharing, but that this does not affect the set of circumstances in which the absence of default options is optimal.