Tom Ginsburg, Jonathan Masur, and Richard McAdams, "Temporary Law: The Case of Smoking Bans"
Libertarians often assert that regulation is unnecessary because the market will meet any existing consumer demand. The issue of smoking in bars is a paradigmatic context in which this argument arises. Libertarians argue that bar patrons (and employees) are free to patronize or work in whichever bars they choose. Accordingly, if workers or patrons want smoke-free bars, the market will provide smoke-free bars. For the libertarian, the fact that nearly every bar in every city allowed smoking prior to the enactment of smoking bans is proof that this is what employees and patrons really want. The market equilibrium is the efficient equilibrium.
Our work calls this conclusion into question. We suggest that in many contexts there are many possible equilibria, not just one equilibrium. The fact that we live in one equilibrium rather than another might be merely a product of path dependence. For instance, the vast majority of bars might allow smoking (absent smoking bans) simply because behavior has evolved from a time when smoking was always allowed and not even viewed as harmful. If smoking had been banned until recently, and then the ban were repealed, a very different equilibrium might have emerged.
If this is the case, then what follows? The recent wave of behavioral economics has led some theorists to advocate the possibility of "libertarian paternalism," where regulators designing institutions permit significant individual choice but nonetheless use default rules to "nudge" individuals toward informed or salutary choices. Here, we propose a type of libertarian paternalist intervention aimed directly at the question of multiple equilibria: temporary law. If an equilibrium exists only because of path dependence, there is no need for a permanent restriction on liberty. A state or city could simply pas