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Behavioral Welfare Economics

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  • B. Douglas Bernheim

Abstract

This paper discusses several competing proposals for general normative frameworks that would encompass non-standard models of choice. Most existing proposals equate welfare with well-being. Some assume that well-being flows from the achievement of well-defined objectives, and that those objectives also guide choices; the trick is to formulate a framework in which less-than-completely coherent choice patterns reveal the unobserved objectives. Others are predicated on the contention that well-being, and hence welfare, is directly measurable. Both of those approaches encounter serious conceptual difficulties. An alternative approach, developed by Bernheim and Rangel [2009], defines welfare directly in terms of choice. It entails a generalized welfare criterion that respects choice directly, without requiring any rationalization involving potentially unverifiable assumptions concerning underlying objectives and their relationships to choice. Because useful behavioral theories generally envision a substantial degree of underlying coherence in behavior, that criterion leads to a rich and tractable normative framework.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14622.

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Date of creation: Dec 2008
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Publication status: published as B. Douglas Bernheim, 2009. "Behavioral Welfare Economics," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 267-319, 04-05.
Handle: RePEc:nbr:nberwo:14622

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  3. 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.
  4. O'Donoghue, Ted & Rabin, Matthew, 1997. "Doing It Now or Later," Department of Economics, Working Paper Series qt7t44m5b0, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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  20. Asheim, Geir B., 2007. "Procrastination, partial naivete, and behavioral welfare analysis," Memorandum 02/2007, Oslo University, Department of Economics.
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  27. B. Douglas Bernheim & Antonio Rangel, 2004. "Addiction and Cue-Triggered Decision Processes," American Economic Review, American Economic Association, vol. 94(5), pages 1558-1590, December.
  28. B. Douglas Bernheim & Antonio Rangel, 2009. "Beyond Revealed Preference: Choice-Theoretic Foundations for Behavioral Welfare Economics-super-," The Quarterly Journal of Economics, MIT Press, vol. 124(1), pages 51-104, February.
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  1. JEEA - New Issue
    by Liam Delaney in Geary Behaviour Centre on 2009-05-22 14:49:00
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Cited by:
  1. Dalton, Patricio & Ghosal, Sayantan, 2008. "Behavioural Decisions and Welfare," The Warwick Economics Research Paper Series (TWERPS) 834, University of Warwick, Department of Economics.
  2. Dalton, Patricio; Ghosal, Sayantan;, 2010. "Decisions with Endogenous Frames," CAGE Online Working Paper Series 30, Competitive Advantage in the Global Economy (CAGE).
  3. Agee, Mark D. & Crocker, Thomas D., 2013. "Operationalizing the capability approach to assessing well-being," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 46(C), pages 80-86.
  4. FLEURBAEY, Marc & SCHOKKAERT, Erik, 2011. "Behavioral fair social choice," CORE Discussion Papers 2011043, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Fabrizio Adriani & Silvia Sonderegger, . "Evolution of similarity judgements in intertemporal choice," Discussion Papers 2014-06, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  6. Cameron Hepburn & Stephen Duncan & Antonis Papachristodoulou, 2010. "Behavioural Economics, Hyperbolic Discounting and Environmental Policy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 46(2), pages 189-206, June.

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