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Choice theoretic foundation for libertarian paternalism: Reconciling the behavioral and libertarian approaches to welfare

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  • Barokas, Guy

Abstract

In this paper, we generalize the standard revealed preference theory in line with the idea of libertarian paternalism; roughly, x is said to be welfare superior to y (denoted x≿ℓPy) if x is chosen when y is available, and x is more normative than y according to a possibly endogenous normative criterion (i.e. a criterion that depends on a positive model). We find testable conditions on choice behavior that are equivalent to ≿ℓP being an order. The resulting framework is applicable to many positive models of bounded rationality, with intuitive welfare implications, while maintaining a natural libertarian principle. In addition, our framework can reconcile the often-conflicting libertarian and behavioral approaches to welfare.

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  • Barokas, Guy, 2019. "Choice theoretic foundation for libertarian paternalism: Reconciling the behavioral and libertarian approaches to welfare," Journal of Mathematical Economics, Elsevier, vol. 81(C), pages 62-73.
    • Handle: RePEc:eee:mateco:v:81:y:2019:i:c:p:62-73
    DOI: 10.1016/j.jmateco.2019.01.002
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