From welfare to preferences, do decision flaws matter? The case of tuition fees

We investigate the relation between welfare and preference satisfaction in economics, and show that the extension of the scope of economic analysis through the 20th century forces economists to question the validity of the preference satisfaction criterion as a normative criterion for evaluating public policies. We then argue that welfare economists should clarify the normative content of this criterion in order to properly design public policies. We illustrate our point with the case of the selection at the entry of university, and show that, according to the normative criterion used by the social planner, the optimal policy radically changes. In particular, we argue that -- if we adopt a paternalistic conception of welfare -- it becomes necessary to establish a clear distinction between preference and welfare, and to integrate the different social and psychological biases that can influence the decision of the individuals in the design of public policies.