Abstract
Economic analysis, and economic analysis of law in particular, ordinarily assumes that paternalism and efficiency are incompatible bases for analyzing and evaluating rules and actions. Most economists reject paternalism as inefficient. By appealing to the theoretical foundations of normative economics, this article demonstrates, however, that efficiency and paternalism are perfectly compatible, and that efficiency analysis may in fact justify paternalism. The article then proposes a simple model to explain and evaluate the efficiency of existing or suggested paternalistic legal rules. Drawing on psychological studies of bounded rationality, the article illustrates how paternalistic rules enhance efficiency.
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