The Precarious Case of the True Preferences
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Empirical demonstrations that people’s behavior often deviates from predictions of models based on the assumption of coherent preferences highlight the possibility that people’s choices systematically misrepresent what they genuinely want. Thus, the concept of welfare as preference satisfaction becomes more questionable than ever. The essay addresses the alternative to neoclassical welfare economics proposed by the libertarian paternalists. It shows the centrality of the idea of ‘true preferences’ for the libertarian paternalist program. However, the existing proposals on how to uncover true preferences are found lacking. This effectively undercuts the idea that the government could intervene in a transparent, non-arbitrary fashion to correct ‘behavioral market failures.’ The essay concludes with a plea to the benevolent policy-makers to retain a humble, skeptical attitude towards the use of tools of psychological manipulation which is legitimized by vague welfare criteria.
KeywordsBehavioral market failure Libertarian paternalism Revealed preference theory True preferences Welfare economics
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