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Toward a “constitution” for behavioral policy-making

Author

Listed:
  • Marco Fabbri

    () (University of Amsterdam)

  • Michael Faure

    (University of Maastricht
    Erasmus University Rotterdam)

Abstract

Behavioral policy interventions aimed at redirecting individuals’ behavior toward optimal choices are characterized by an important issue which is often overlooked: the lack of an instrument to define what “optimal” means. If agents are subject to behavioral biases leading them to make “wrong” choices, the policy-maker can no longer rely on the revealed preferences approach (e.g., what people choose is what people prefer) for defining a welfare criterion. In this article, we reiterate the argument put forward by some scholars that choosing a suitable welfare criterion once the link between observed choices and individuals’ preferences is broken becomes a problematic task. We review the state of the art in the literature and the possible approaches proposed to overcome the problem, concluding that a solution has not yet been reached. Moreover, we argue that the lack of an established welfare criterion characterizing behavioral policy-making could pave the way to government wanting to restrict individual freedom. In the absence of any legislative constraint for the executive, stating that what individuals choose is not what they prefer in principle justifies any freedom-reducing government intervention, since choices can be arbitrarily labeled “sub-optimal” or “welfare-reducing.” To avoid this risk without turning down the potential of behavioral policy-making, we propose that an independent committee establishes ex ante procedural rules and domains where behavioral policy-making can be implemented. The article suggests some possible examples of normative provisions characterizing this constitution-type document, such as the selective identification of the only sectors where behavioral policies could be effectively applied, the periodic evaluation of policy effects, and the use of sunset clauses.

Suggested Citation

  • Marco Fabbri & Michael Faure, 2018. "Toward a “constitution” for behavioral policy-making," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 65(3), pages 241-270, September.
  • Handle: RePEc:spr:inrvec:v:65:y:2018:i:3:d:10.1007_s12232-018-0296-9
    DOI: 10.1007/s12232-018-0296-9
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    More about this item

    Keywords

    Law and economics; Nudging; Public policy; Revealed preferences;
    All these keywords.

    JEL classification:

    • K30 - Law and Economics - - Other Substantive Areas of Law - - - General
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General

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