The paternalistic turn in behavioral law and economics: A critique

Mario J. Rizzo

    Research output: Contribution to journalArticlepeer-review

    Abstract

    The application of behavioral economics to law and economics has taken a paternalistic turn. Behavioralists believe that the fundamental assumptions regarding individual behavior in standard theory do not reflect reality. If individuals are not "rational"in the standard economic sense, then there will be decisionmaking failures: people cannot be relied upon to make individually optimal decisions and thus to maximize welfare as they see it. This Article is organized as follows. Part One is a prelude and gives context. Part Two discusses the fundamental normative standard in behavioral public policy: true preferences. I then proceed to outline the causes of the divergence between true preferences and actual observed preferences. Part Three analyzes some of the knowledge problems is ascertaining the presence of cognitive and behavioral biases. Part Four presents a case study of the difficulties of behavioral policy analysis in the area of consumer credit. Part Five concludes.

    Original languageEnglish (US)
    Pages (from-to)253-280
    JournalReview of Law and Economics
    Volume17
    Issue number2
    DOIs
    StatePublished - Jul 1 2021

    Keywords

    • knowledge problem
    • paternalism
    • shrouding
    • true preferences

    ASJC Scopus subject areas

    • Economics, Econometrics and Finance(all)
    • Law

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