Policymakers, behavioral economists succumb to own “predictable irrationality”

In The Rise of the New Paternalism, Glen Whitman warns of the insidious nature of “new paternalism” policies spawned by behavioral economics studies (Predictably Irrational, Nudge). He points out the flaws, biases and arbitrariness in the “nudge” policy proposals, and cleverly uses the findings of behavioral economics themselves for his analysis.

In short:
Overall, the proposed “soft-paternalism” policies constitute a slippery slope towards hard-paternalism.
Policies derived from behavioral economics are presented to take advantage of the identified weaknesses and “irrationality” of people and policymakers (framing effects, extremeness aversion, small-change tolerance)
If people display inconsistent preferences in different situations, which is the “true” or “rational” preference? This line of thinking invites arbitrary selection to please the tastes of policymakers and lobbyists.
Finally, policymakers themselves suffer from irrationality, from temptation, short-term thinking and influence. There is no indication that they are more “rational”.

Update: the debate goes on, with Fear of Falling and The Dangers of Letting Someone Else Decide.


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