Chris Berg and I put in our 2c.
Libertarian paternalists have to guess at consumer preferences and opportunity costs and then make a value judgement as to desirability of those preferences and perhaps substitute different preferences. In doing so, they make two fundamental economic methodological errors in their argumentation. First the Demsetzian nirvana fallacy which specifies three specific problems planners make; they assume a free lunch, they assume the grass will be greener on the other side, and they assume people could be different. Second, libertarian paternalists assume they can observe the choice set that consumers face, and the subsequent opportunity costs of their decision making. Buchanan (1969), however, has argued that the choice set and opportunity costs of choice cannot be observed ex post.
To be fair, libertarian paternalists are not the only agents to imagine they can correctly resolve all these assumptions and arrive at the correct decision. Socialist planners attempting to direct entire economies thought they could allocate resources better than private decision makers. Economists resolving externality problems thought they could correctly specify the correcting subsidy or tax. Nudging is simply the latest theory to provide some intellectual credibility to second guessing private decisions. In contrast to the Marxian objective of changing the world, we argue that nudging theory falls foul of Hayek’s (1988) view –“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design”.