Behavioural Welfare Economics: Does 'Behavioural Optimality' Matter?

Abstract

This editorial article argues that the development of behavioural economics gives rise to a wide re-interpretation of the field of welfare economics. More specifically, social efficiency criteria under quasi-rationality might well diverge from that of full rationality. This arguably has at least two effects. First, public policy evaluation, especially standard cost–benefit analysis, ought to be reinterpreted accommodating such ‘behavioural optimality’ restrictions. Second, the acceptance of ‘behavioural market failures’ alongside of ‘behavioural political failures’ can give rise to new reasons for public sector intervention. The papers of this special issue can be seen as paradigmatic examples of the former and/or the latter, and more generally suggest that ‘behavioural optimality’ cannot be disregarded.