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"How Does Behavioral Economics Change Policies?" (in Japanese)

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  • Yasushi Iwamoto

    (Faculty of Economics, University of Tokyo)

Abstract

This paper discusses how behavioral mistakes, focused by behavioral economics, alter normative economics that presumes rational individuals. Behavioral mistakes do not necessarily call for paternalistic policies. Insights of behavioral economics have more significant impact on paternalism than on libertarianism, which has already recognized the limit of individual's rationality and admired liberty. Behavioral economics rather provides the theoretical foundations of the limited ability of government. Researchers have proved, only in few areas, the behavior of others as irrational. Policy is motivated not from the irrational behavior of individuals but from its impacts on the economy. The claim that the irrational behavior leads to undesirable outcome for the society is a joint hypothesis of the individual behavior and its effects on the economy. Traditional analytical tools in economics remain to play an important role in examining the latter hypothesis. The above qualifications do not imply the irrelevance of behavioral economics to policy making. The application of behavioral economics with noticing these qualifications may help to improve policies. The idea of "soft paternalism" elaborated by behavioral economics can refine the conventional idea about paternalism in economics.

Suggested Citation

  • Yasushi Iwamoto, 2009. ""How Does Behavioral Economics Change Policies?" (in Japanese)," CIRJE J-Series CIRJE-J-211, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:jseres:2009cj211
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2009/2009cj211.pdf
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