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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

    (University of East Anglia)

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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File URL: http://www.uea.ac.uk/documents/166500/0/CBESS-12-05/97cfce66-88f7-48f0-a4d1-7fc22d71ad03
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Bibliographic Info

Paper provided by School of Economics, University of East Anglia, Norwich, UK. in its series Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) with number 12-05.

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Date of creation: Jun 2012
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Handle: RePEc:uea:wcbess:12-05

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Keywords: welfare economics; behavioural economics; social planner; contractarianism; soft paternalism;

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  1. 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..
  2. Douglas Bernheim & Antonio Rangel, 2007. "Beyond Revealed Preference Choice Theoretic Foundations for Behavioral Welfare Economics," Discussion Papers 07-031, Stanford Institute for Economic Policy Research.
  3. Sugden, Robert, 2010. "Opportunity As Mutual Advantage," Economics and Philosophy, Cambridge University Press, vol. 26(01), pages 47-68, March.
  4. Robert Sugden, 2008. "Why incoherent preferences do not justify paternalism," Constitutional Political Economy, Springer, vol. 19(3), pages 226-248, September.
  5. Smith, Adam, 1759. "The Theory of Moral Sentiments," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number smith1759.
  6. 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.
  7. 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.
  8. Richard Thaler, 1985. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 4(3), pages 199-214.
  9. James M. Buchanan, 1954. "Individual Choice in Voting and the Market," Journal of Political Economy, University of Chicago Press, vol. 62, pages 334.
  10. 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.
  11. 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.
  12. 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.
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