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Evolving hierarchical preferences and behavioral economic policies

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Abstract

This paper critically discusses the standard concept of hierarchical preferences, which presupposes that a stable system of higher- and lower-order preferences exists, wherein the former contains an individual’s fundamental purposes and values, while the latter guides everyday choices. It is argued that systems of hierarchical preferences suffer from problems similar to those of standard preferences, in terms of rationality, that they also are potentially unstable and can change, for example, in response to individual experiences. It is furthermore argued that higher-order preferences may not be coherent internally, because their different parts result from different kinds of reasoning. Finally, it is argued that behavioral economic policies, such as soft paternalism, easily can endanger the autonomy and integrity of an individual as a person.

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Notes

  1. This line of thought was taken up later by Dworkin (1988), who also argues that critical reflection about one’s own goals is what makes somebody an autonomous person.

  2. See, e.g., Varian (2012) for a recent demonstration of an application of revealed preference theory.

  3. Benabou and Pycia (2002) have shown that this multiple-self approach is analytically very similar to the self-control and temptation approach by Gul and Pesendorfer (2001), which is therefore not discussed separately here.

  4. The claim is criticized in particular by Gigerenzer (2008), who argues on empirical grounds that heuristics frequently help humans in making good decisions.

  5. The first application of this line of thought in political economics probably was introduced by Tullock (1971).

  6. See, e.g., Brennan and Lomasky (1983, 1993), Hillman (2010), and an excellent survey by Hamlin and Jennings (2011) as well as Schnellenbach and Schubert (2015).

  7. See, in particular, Hillman (2010), who relates expressive behavior to questions of identity.

  8. However, and relatedly, individuals can in some instances also be driven so strongly by identity-based (and similar to expressive) motives, that they incur substantial costs in order to support their identity, once they have chosen it; see, e.g., Akerlof and Kranton (2000).

  9. Of course, the mere act of expressive voting also is associated with opportunity cost, e.g., of time and transport to the voting booth. This point has been made by an anonymous referee.

  10. White (2013) was to my knowledge the first scholar to introduce this argument into the discussion of behavioral economic policies.

  11. This is akin to Stigler and Becker (1977), where individuals do have stable preferences for some basic commodities, but change their preferences for consumption goods if they learn about their effectiveness in producing basic commodities.

  12. Witt (2011) makes a smiliar argument in a framework of reinforcement learning.

  13. See also Earl and Potts (2004) for a theory on acquiring preferences from other individuals whom one trusts and whose choices (or even lifestyle) one imitates.

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Acknowledgements

I am grateful to participants at the Bremen conference of the German Economic Association (Committee on Evolutionary Economics), the Freiburg conference of the European Public Choice Society, the Manchester conference of the European Association for Evolutionary Political Economy, the research seminar at the University of Leipzig for comments and, in particular, to Stefan Okruch and Roger Congleton for in-depth discussions of earlier versions of this paper. To an even greater extent, I am indebted to the late Gebhard Kirchgässner, who disagreed with some of the arguments presented herein, but whose criticism always has been challenging and constructive. Finally, I am also grateful to three anonymous referees and the Editor of this journal for very constructive comments. All remaining errors are entirely my own responsibility.

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  1. Institute for Economics, Chair for Microeconomics, BTU Cottbus-Senftenberg, Erich-Weinert-Str. 1, 03046, Cottbus, Germany

    Jan Schnellenbach

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Schnellenbach, J. Evolving hierarchical preferences and behavioral economic policies. Public Choice 178, 31–52 (2019). https://doi.org/10.1007/s11127-018-0607-4

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