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The behavioral economics of dynamically inconsistent behavior: a critical assessment

Author

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  • Sebastian Krügel

    (Technische Hochschule Ingolstadt
    Technical University of Munich)

  • Matthias Uhl

    (Technische Hochschule Ingolstadt)

Abstract

Preferences often change—even in short time intervals—due to either the mere passage of time (present-biased preferences) or changes in visceral or environmental conditions (state-dependent preferences). On the basis of empirical findings concerning state-dependent preferences, we critically discuss the “Aristotelian” view of unitary decision makers in economics. We illustrate that the conceptualization of preferences as “present-biased” as opposed to “state-dependent” has very different normative implications for which preferences should be considered “rational.” Empirically, however, the two concepts are very difficult to distinguish. The economist can justify any paternalistic intervention if she can conceptualize changing preferences so flexibly, and she can easily become a benevolent despot. We therefore urge for a more careful “Heraclitean” view of decision-making that accepts that a person may consist of multiple selves.

Suggested Citation

  • Sebastian Krügel & Matthias Uhl, 2023. "The behavioral economics of dynamically inconsistent behavior: a critical assessment," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 61(4), pages 817-833, November.
  • Handle: RePEc:spr:sochwe:v:61:y:2023:i:4:d:10.1007_s00355-023-01471-5
    DOI: 10.1007/s00355-023-01471-5
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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