Evolving hierarchical preferences and behavioral economic policies

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.

This is a preview of subscription content, log in to check access.

Notes

  1. 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. 2.

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

  3. 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. 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. 5.

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

  6. 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. 7.

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

  8. 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. 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. 10.

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

  11. 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. 12.

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

  13. 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.

References

  1. Akerlof, G. A., & Kranton, R. E. (2000). Economics and identity. Quarterly Journal of Economics, 115, 715–753.

    Article  Google Scholar 

  2. Arad, A., & Rubinstein, A. (2017). The people’s perspective on libertarian-paternalist policies. Working Paper. Tel Aviv: Tel Aviv University.

  3. Benabou, R., & Pycia, M. (2002). Dynamic inconsistency and self-control: A planner-doer intepretation. Economics Letters, 77, 419–424.

    Article  Google Scholar 

  4. Bennan, G., & Lomasky, L. (1993). Democracy and decision: The pure theory of electoral politics. Cambridge: Cambridge University Press.

    Google Scholar 

  5. Bhagarva, S., & Loewenstein, G. (2015). Behavioral economics and public policy 102: Beyond nudging. American Economic Review P&P, 105, 396–401.

    Article  Google Scholar 

  6. Bovens, L. (2009). The ethics of nudge. In T. Grüne-Yanoff & S. Hansson (Eds.), Preference change. Approaches from philosophy, economics and psychology (pp. 207–219). New York: Springer.

    Google Scholar 

  7. Brennan, G. (2012). Politics-as-exchange and the calculus of consent. Public Choice, 152, 351–358.

    Article  Google Scholar 

  8. Brennan, G., & Lomasky, L. (1983). Institutional aspects of “merit goods” analysis. Finanzarchiv, 41, 183–206.

    Google Scholar 

  9. Buchanan, J. M. (1999). The foundations for normative individualism. In J. M. Buchanan (Ed.), The logical foundations of constitutional liberty. Collected works (Vol. 1, pp. 282–291). Indianapolis: The Liberty Fund.

    Google Scholar 

  10. Chetty, R. (2015). Behavioral economics and public policy: A pragmatic perspective. American Economic Review P&P, 105, 1–33.

    Article  Google Scholar 

  11. Deci, E. L., & Ryan, R. M. (2000). The “what” and “why” of goal pursuits: Human needs and the self-determination of behavior. Psychological Inquiry, 11, 227–268.

    Article  Google Scholar 

  12. Deci, E. L., & Ryan, R. M. (2012). Motivation, personality and development within embedded social contexts: An overview of self-determination theory. In R. M. Ryan (Ed.), Oxford handbook of human motivation (pp. 85–107). Oxford: Oxford University Press.

    Google Scholar 

  13. Dworkin, G. (1988). The theory and practice of autonomy. Cambridge: Cambridge University Press.

    Google Scholar 

  14. Earl, P. E., & Potts, J. (2004). The market for preferences. Cambridge Journal of Economics, 28, 619–633.

    Article  Google Scholar 

  15. Falk, A., Becker, A., Dohmen, T., Enke, B., Huffman, D., & Sunde, U. (2018). Global evidence on economic preferences. Discussion paper series of the collaborative research center Transregio 224. Bonn: University of Bonn.

  16. Frankfurt, H. G. (1971). Freedom of the will and the concept of a person. Journal of Philosophy, 68, 5–20.

    Article  Google Scholar 

  17. Frey, B. S. (2008). Happiness: A revolution in economics. Cambridge (Mass.): MIT Press.

    Google Scholar 

  18. Frey, B. S., Benz, M., & Stutzer, A. (2004). Introducing procedural utility. Journal of Institutional and Theoretical Economics, 160, 377–401.

    Article  Google Scholar 

  19. Gigerenzer, G. (2008). Rationality for mortals. How people cope with uncertainty. Oxford: Oxford University Press.

    Google Scholar 

  20. Gul, F., & Pesendorfer, W. (2001). Temptation and self-control. Econometrica, 69, 1404–1435.

    Google Scholar 

  21. Hagman, W., Andersson, A., Västfjäll, D., & Tinghög, G. (2015). Public views on policies involving nudges. Review of Philosophy and Psychology, 6, 439–453.

    Article  Google Scholar 

  22. Hamlin, A., & Jennings, C. (2011). Expressive political behaviour: Foundations, scope and implications. British Journal of Political Science, 41, 645–670.

    Article  Google Scholar 

  23. Hertwig, R., & Grüne-Yanoff, T. (2017). Nudging and boosting: Steering or empowering good decisions. Perspectives on Psychological Science, 12, 973–986.

    Article  Google Scholar 

  24. Hillman, A. (2010). Expressive behavior in economics and politics. European Journal of Political Economy, 26, 403–418.

    Article  Google Scholar 

  25. Hirschman, A. O. (1984). Against parsimony: Three easy ways of complicating some categories of economic discourse. American Economic Review, 74, 89–96.

    Google Scholar 

  26. Infante, G., Lecouteux, G., & Sugden, R. (2017). Preference purification and the inner rational agent: A critique of the conventional wisdom of behavioural welfare economics. Journal of Economic Methodology, 23, 1–24.

    Article  Google Scholar 

  27. Johansson, P., Hall, L., & Chater, N. (2011). Preference change through choice. In R. Dolan & T. Sharot (Eds.), Neuroscience of preference and choice (pp. 121–141). Cambridge (Mass.): Elsevier Academic Press.

    Google Scholar 

  28. Jung, J. Y., & Mellers, B. A. (2016). American attitudes toward nudges. Judgment and Decision Making, 11, 62–74.

    Google Scholar 

  29. Kahneman, D. (2003). Maps of bounded rationality. Psychology for behavioral economics. American Economic Review, 93, 1449–1475.

    Article  Google Scholar 

  30. Kahneman, D. (2011). Thinking, fast and slow. New York: Farrar, Straus and Giroux.

    Google Scholar 

  31. Kamenica, E., & Egan Brad, L. (2014). Voters, dictators, and peons: Expressive voting and pivotality. Public Choice, 159, 159–176.

    Article  Google Scholar 

  32. Kirchgässner, G. (1992). Towards a theory of low-cost decisions. European Journal of Political Economy, 8, 305–320.

    Article  Google Scholar 

  33. Kirchgässner, G. (2010). On minimal morals. European Journal of Political Economy, 26, 330–339.

    Article  Google Scholar 

  34. Kirchgässner, G. (2017). Soft paternalism, merit goods and normative individualism. European Journal of Law and Economics, 43, 125–152.

    Article  Google Scholar 

  35. Kliemt, H. (1986). The veil of insignificance. European Journal of Political Economy, 2, 333–344.

    Article  Google Scholar 

  36. Korsgaard, C. M. (2009). Self-constitution. Agency, identity, and integrity. Oxford: Oxford University Press.

    Google Scholar 

  37. Kragh Pedersen, S., Koch, A. K., & Nafziger, J. (2014). Who wants paternalism? Economics Bulletin, 66, S147–S166.

    Article  Google Scholar 

  38. Laibson, D. (1997). Golden eggs and hyperbolic discounting. Quarterly Journal of Economics, 112, 443–478.

    Article  Google Scholar 

  39. Loewenstein, G., & Chater, N. (2017). Putting nudges in perspective. Behavioural Public Policy, 1, 26–53.

    Article  Google Scholar 

  40. Lucas, G. M, Jr., & Tasic, S. (2015). Behavioral public choice and the law. West Virginia Law Review, 118, 199–266.

    Google Scholar 

  41. Lusk, J. L., Marette, S., & Norwood, F. B. (2014). The paternalist meets his match. Applied Economic Perspectives and Policy, 36, 61–108.

    Article  Google Scholar 

  42. Ryan, R. M., & Deci, E. L. (2006). Self-regulation and the problem of human autonomy: Does psychology need choice, self-determination, and will? Journal of Personality, 74, 1557–1586.

    Article  Google Scholar 

  43. Ryan, R. M., Deci, E. L., & Vansteenkiste, M. (2016). Autonomy and autonomy-disturbances in self-development and psychopathology: Research on motivation, attachment, and clinical process. In D. Cicchetti (Ed.), Developmental psychopathology: Theory and method (pp. 385–438). Hoboken: Wiley.

    Google Scholar 

  44. Schnellenbach, J. (2012). Nudges and norms. On the political economy of soft paternalism. European Journal of Political Economy, 28, 266–277.

    Article  Google Scholar 

  45. Schnellenbach, J. (2016). A constitutional economics perspective on soft paternalism. Kyklos, 69, 135–156.

    Article  Google Scholar 

  46. Schnellenbach, J., & Schubert, C. (2015). Behavioral political economy: A survey. European Journal of Political Economy, 40, 395–417.

    Article  Google Scholar 

  47. Schubert, C. (2014). Evolutionary economics and the case for a constitutional libertarian paternalism. Journal of Evolutionary Economics, 24, 1107–1113.

    Article  Google Scholar 

  48. Schubert, C. (2015). Opportunity and preference learning. Economics & Philosophy, 31, 275–295.

    Article  Google Scholar 

  49. Schubert, C. (2017). Exploring the (behavioral) political economy of nudging. Journal of Institutional Economics, 13, 499–522.

    Article  Google Scholar 

  50. Shayo, M., & Harel, A. (2012). Non-consequentialist voting. Journal of Economic Behavior and Organization, 81, 299–313.

    Article  Google Scholar 

  51. Smith, A. (1759/1984). The theory of moral sentiments. Indianapolis: The Liberty Fund.

  52. Stigler, G. J., & Becker, G. S. (1977). De gustibus non est disputandum. American Economic Review, 67, 76–90.

    Google Scholar 

  53. Sugden, R. (2008). Why incoherent preferences do not justify paternalism. Constitutional Political Economy, 19, 226–248.

    Article  Google Scholar 

  54. Sugden, R. (2010). Opportunity as mutual advantage. Economics & Philosophy, 26, 47–68.

    Article  Google Scholar 

  55. Sugden, R. (2015). Opportunity and preference learning: A reply to Christian Schubert. Economics & Philosophy, 31, 297–303.

    Article  Google Scholar 

  56. Sunstein, C. R. (2013). Behavioral economics and paternalism. Yale Law Journal, 122, 1826–1899.

    Google Scholar 

  57. Sunstein, C. R., & Thaler, R. H. (2003). Libertarian paternalism is not an oxymoron. University of Chicago Law Review, 70, 1159–1202.

    Article  Google Scholar 

  58. Tannenbaum, D., Fox, C. R., & Rogers, T. (2017). On the misplaced politics of behavioral policy interventions. Nature Human Behaviour, 1, 0130.

    Article  Google Scholar 

  59. Thaler, R. H. (2016). Behavioral economics: Past, present and future. American Economic Review, 106, 1577–1600.

    Article  Google Scholar 

  60. Thaler, R. H., & Benartzi, S. (2004). Save more tomorrow: Using behavioral economics to increase employee saving. Journal of Political Economy, 112, S164–S187.

    Article  Google Scholar 

  61. Thaler, R. H., & Shefrin, H. M. (1981). An economic theory of self-control. Journal of Political Economy, 89, 392–406.

    Article  Google Scholar 

  62. Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving decisions about health, wealth and happiness. London: Penguin.

    Google Scholar 

  63. Tullock, G. (1971). The charity of the uncharitable. Western Economic Journal, 9, 379–392.

    Google Scholar 

  64. Vanberg, V. J. (2005). Market and state: The perspective of constitutional political economy. Journal of Institutional Economics, 1, 23–49.

    Article  Google Scholar 

  65. Varian, H. R. (2012). Revealed preference and Its applications. Economic Journal, 122, 332–338.

    Article  Google Scholar 

  66. Viscusi, W. K., & Gayer, T. (2015). Behavioral public choice: The behavioral paradox of government policy. Harvard Journal of Law and Public Policy, 38, 973–1007.

    Google Scholar 

  67. Weizsäcker, C. C. V. (2014). Freedom, wealth and adaptive preferences. Bonn: Mimeo., MPI for Research on Collective Goods.

    Google Scholar 

  68. White, M. D. (2013). The manipulation of choice. Ethics and libertarian paternalism. Basingstoke: Palgrave Macmillan.

    Google Scholar 

  69. Whitman, D. G., & Rizzo, M. J. (2015). The problematic welfare standards of behavioral paternalism. Review of Psychology and Philosophy, 6, 409–425.

    Article  Google Scholar 

  70. Witt, U. (2001). Learning to consume. A theory of wants and the growth of demand. Journal of Evolutionary Economics, 11, 23–36.

    Article  Google Scholar 

  71. Witt, U. (2011). Economic behavior. Evolutionary versus behavioral perspectives. Biological Theory, 6, 388–398.

    Article  Google Scholar 

Download references

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.

Author information

Affiliations

Authors

Corresponding author

Correspondence to Jan Schnellenbach.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

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

Download citation

Keywords

  • Hierarchical preferences
  • Multiple selves
  • Internalities
  • Behavioral policies
  • Paternalism
  • Nudge

JEL Classification

  • D11
  • D18
  • D63
  • D83
  • H11
  • Z18