Abstract
With decades of behavioral economic research now achieving prominence, the last decade has seen the advent of behavioral policymaking. These efforts have been widely seen as successful in that they achieve policy goals without inducing backlash on the part of policy targets. Behavioral policies create a unique challenge to welfare analysis that has not been sufficiently addressed in the literature. The existence of behavioral effects creates a paradox, at once justifying the use of paternalistic policies and undermining the empirical foundations of welfare analysis. In this paper I explore the behavioral welfare paradox and its implications for economic policy prescription.
Highlights
With decades of behavioral economic research achieving prominence, the last decade has seen the advent of behavioral policymaking
A comprehensive list of such interventions would be difficult to compile and would distract from the main points of this article. Many of these efforts have been summarized in the annual report of the Social and Behavioral Sciences Team (SBST) (2016), and the publications section of the Behavioural Insights Team website (BIT, 2017)
The primary purpose of welfare economics is to evaluate the overall impact of economic policy on the wellbeing of the affected individuals
Summary
With decades of behavioral economic research achieving prominence, the last decade has seen the advent of behavioral policymaking. The United States followed suit, creating the White House Social and Behavioral Sciences Team (SBST), which was established by executive order in 2015.2 The mission of each of these groups is to make government efforts more efficient by using behavioral nudges. Such nudges should not change the structure or function of government programs or policies, but make the programs function at a lower cost or higher yield through the use of behavioral interventions.
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