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The behavioural economist and the social planner: to whom should behavioural welfare economics be addressed?

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  • Robert Sugden

Abstract

This paper compares two alternative answers to the question ‘Who is the addressee of welfare economics?' These answers correspond with different understandings of the status of the normative conclusions of welfare economics, and have different implications for how welfare economics should be adapted in the light of the findings of behavioural economics. The conventional welfarist answer is that welfare economics is addressed to a ‘social planner' whose objective is to maximise the overall well-being of society; the planner is imagined as a benevolent despot, receptive to the economist's advice. The alternative contractarian answer is that welfare economics is addressed to individuals who are seeking mutually beneficial agreements; a contractarian recommendation has the form ‘It is in the interests of each of you separately that all of you together agree to do x'. Each of these answers should be understood as a literary convention which uses a highly-simplified model of politics. I defend the contractarian approach and show that it is less supportive of ‘soft paternalism' than is the welfarist approach.

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Paper provided by Max Planck Institute of Economics, Evolutionary Economics Group in its series Papers on Economics and Evolution with number 2011-21.

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Length: 50 pages
Date of creation: 22 Dec 2011
Date of revision:
Handle: RePEc:esi:evopap:2011-21

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  1. John C. Harsanyi, 1955. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparisons of Utility," Journal of Political Economy, University of Chicago Press, vol. 63, pages 309.
  2. James M. Buchanan, 1954. "Individual Choice in Voting and the Market," Journal of Political Economy, University of Chicago Press, vol. 62, pages 334.
  3. Simon, Herbert A, 1978. "Rationality as Process and as Product of Thought," American Economic Review, American Economic Association, vol. 68(2), pages 1-16, May.
  4. Thomas Leonard, 2008. "Richard H. Thaler, Cass R. Sunstein, Nudge: Improving decisions about health, wealth, and happiness," Constitutional Political Economy, Springer, vol. 19(4), pages 356-360, December.
  5. B. Douglas Bernheim & Antonio Rangel, 2008. "Beyond Revealed Preference: Choice Theoretic Foundations for Behavioral Welfare Economics," NBER Working Papers 13737, National Bureau of Economic Research, Inc.
  6. Robert Sugden, 2008. "Why incoherent preferences do not justify paternalism," Constitutional Political Economy, Springer, vol. 19(3), pages 226-248, September.
  7. Ben McQuillin & Robert Sugden, 2011. "How the market responds to dynamically inconsistent preferences," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 11-04, School of Economics, University of East Anglia, Norwich, UK..
  8. Loewenstein, George & Ubel, Peter A., 2008. "Hedonic adaptation and the role of decision and experience utility in public policy," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1795-1810, August.
  9. Richard Thaler, 1985. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 4(3), pages 199-214.
  10. Smith, Adam, 1759. "The Theory of Moral Sentiments," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number smith1759.
  11. Sugden, Robert, 2010. "Opportunity As Mutual Advantage," Economics and Philosophy, Cambridge University Press, vol. 26(01), pages 47-68, March.
  12. Robert Sugden, 2004. "The Opportunity Criterion: Consumer Sovereignty Without the Assumption of Coherent Preferences," American Economic Review, American Economic Association, vol. 94(4), pages 1014-1033, September.
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