Nudging To Prohibition? A Reassessment of Irving Firsher’s Economics of Prohibition in Light of Modern Behavioral Economics

In this paper we argue that Irving Fisher (1867-1947) is an unacknowledged pioneer of modern behavioral economics. Fisher’s behavioralist orientation is evident in his writings on alcohol prohibition. In these works, Fisher argued that behavioral anomalies prevent individuals from making rational choices regarding alcohol consumption. Fisher thought these anomalies arose from three sources: 1) incomplete information; 2) limited cognitive abilities; and 3) lack of will power. These are essentially the same barriers to rational choice identified by modern day New Paternalists. Therefore, we argue that Fisher’s work on Prohibition was a pioneering academic achievement that anticipated recent developments in economics, and not an unscientific diatribe, as previous commentators have presumed. Unlike modern day ‘New Paternalists,’ however, Fisher rejected minor alterations to the choice architecture and advocated outright prohibition instead. This helps to illustrate a potential slippery slope problem with modern new paternalist arguments that should be addressed.