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The Paternalistic Turn in Behavioral Law and Economics: A Critique

Author

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  • Rizzo Mario J.

    (Economics, New York University, 19 West 4th Street, 10012-1126, New York, USA)

Abstract

The application of behavioral economics to law and economics has taken a paternalistic turn. Behavioralists believe that the fundamental assumptions regarding individual behavior in standard theory do not reflect reality. If individuals are not “rational” in the standard economic sense, then there will be decisionmaking failures: people cannot be relied upon to make individually optimal decisions and thus to maximize welfare as they see it. This Article is organized as follows. Part One is a prelude and gives context. Part Two discusses the fundamental normative standard in behavioral public policy: true preferences. I then proceed to outline the causes of the divergence between true preferences and actual observed preferences. Part Three analyzes some of the knowledge problems is ascertaining the presence of cognitive and behavioral biases. Part Four presents a case study of the difficulties of behavioral policy analysis in the area of consumer credit. Part Five concludes.

Suggested Citation

  • Rizzo Mario J., 2021. "The Paternalistic Turn in Behavioral Law and Economics: A Critique," Review of Law & Economics, De Gruyter, vol. 17(2), pages 253-280, July.
    • Handle: RePEc:bpj:rlecon:v:17:y:2021:i:2:p:253-280:n:8
    DOI: 10.1515/rle-2021-0056
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    More about this item

    Keywords

    paternalism; knowledge problem; shrouding; true preferences; P48; D6; B53;
    All these keywords.

    JEL classification:

    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • D6 - Microeconomics - - Welfare Economics
    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian

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