Why Kant Was Smarter Than Behavioral Economists

by Mario Rizzo  

Behavioral economists who like to indulge in normative pronouncements have decided that quasi-hyperbolic discounting violates rationality. In other words, suppose a person decides today that he will give up the hamburgers he loves beginning in 2010 (because of the high fat content). But then when 2010 arrives he reverses his decision and continues to eat them.  To stress the point, let’s suppose that he repeats this preference-reversal one or two more times during 2010.  

The poor fellow is, in addition to all his other troubles, violating standard economic rationality. Continue reading

New Paternalism on the Slippery Slopes, Part 5: Deference to Authority

by Glen Whitman

Another problem with the new paternalism is that it necessarily involves greater deference to the authority of experts. Here is the basic logic (p. 710):

Substantial deference to authority is inherent in the application of new paternalist ideas to public policy. This is because the complexities, vagueness, and indeterminism of their analysis (previously discussed) raise the costs of decision-making on the part of voters, politicians, and bureaucrats. The locus of effective decision-making will then quite reasonably shift to experts (“authorities”) or to simplifiers of technical ideas who may have agendas of their own. As Eugene Volokh puts it, “The more complicated a question seems, the more likely it is that voters will assume that they can’t figure it out themselves and should therefore defer to the expert judgment of authoritative institutions . . . .” There will thus be a tendency for policy to slide away from the values of the targeted agents themselves toward those of outsiders regarded as authorities. This happens in at least two ways. First, experts simplify their own theories to make them applicable in a policy context. Second, people seeking to advance their own interests will further simplify the theory and distort the facts to suit their purposes. Continue reading

New Paternalism on the Slippery Slopes, Part 3: Hyperbolic Discounting

by Glen Whitman

New paternalists often rely on the phenomenon of “hyperbolic discounting” to justify their policies. Hyperbolic discounting is difficult to define in a non-mathematical way. It is sometimes summarized as excessive impatience, but that’s an over-simplification. A person with a high-but-consistent rate of time discounting would not be a hyperbolic discounter. What hyperbolic discounting really means is having inconsistent rates of time-discounting. One consequence is that a hyperbolic discounter may exhibit “time inconsistency,” a tendency to make choices and then reverse them. After explaining hyperbolic discounting (in more technical terms that I have here), Mario and I explain how paternalists have made unjustified leaps in their use of the concept (pp. 699-700):

In short, hyperbolic discounting means that people at first make long-term plans for saving or dieting but then, when the time comes to implement these plans, they succumb to the desire for short-term gratification. For the new paternalists, this type of behavior suggests an opening for paternalist intervention or correction. Examples include the previously mentioned proposal to automatically enroll people in savings plans, and to impose a sin tax (on unhealthy foods, cigarettes, and so forth) to provide additional incentive for impatient people to resist their temptations. Continue reading