Behavioral economics as neoliberalism: Producing and governing homo economicus

Abstract

The research program of behavioral economics is gaining increasing influence in academic economics and in interest from policymakers. This article analyzes behavioral economics from the dual perspective of Foucault’s genealogical investigation of neoliberal governmentality and contemporary critical theorizations of neoliberalism. I argue that behavioral economics should be understood as a political economic apparatus of neoliberal governmentality with the objective of using the state to manage and subjectivize individuals – by attempting to correct their deviations from rational, self-interested, utility-maximizing cognition and behavior – such that they more effectively and efficiently conform to market logics and processes. In this analysis, I contend that behavioral economics enacts three components of neoliberal governmentality: positioning the market as a site of truth and veridiction for the individual and the state; regulating what constitutes the objects of political economy and governmental intervention; and producing homo economicus (economic human) and diffusing this mode of economic subjectivity across the social terrain. In doing so, behavioral economics and its rationalities transform and introduce new technologies of power into neoliberal governmentality. I illustrate this argument with an analysis of recent changes to retirement savings policy in the United States, heavily influenced by behavioral economics thinking, that entrench neoliberal formations.

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Notes

  1. 1.

    For Foucault’s account of these movements from non-territorial, non-sovereign Christian pastoral power to a reflexive raison d’état focused on the maintenance and preservation of the state through the management of everyday life and of populations, see Foucault, 2007, Chapters 5, 9; Foucault, 2008, pp. 1–10). Foucault’s account of the historical development of governmentality is limited to Europe. Others have attempted to utilize the analysis of governmentality in non-Western histories; Chatterjee, 2004, 2011, for example, theorizes the junctures and disjunctures of colonialism, governmentality and politics in India both historically and in the present.

  2. 2.

    Foucault’s genealogy of German neoliberalism (or ordoliberalism) occupies a series of five lectures (Chapters 4 through 8 in Foucault, 2008), and his account of American neoliberalism three chapters (Chapters 9 through 11). Although differences do exist, Foucault discusses their shared projects, techniques and discourses as well as the mechanisms and course of the diffusion of German neoliberalism to the United States at multiple points (Foucault, 2008, pp. 68–70; 75–79; 117–119; 160–161; 177–179; 192–193). For the purposes of this article, I draw on Foucault’s analysis of both forms of neoliberalism, suggesting later that behavioral economics suggests a need to understand them as more closely linked in light of contemporary neoliberal formations.

  3. 3.

    It is important to note that homo economicus, while presented as a neutral subject, is in fact thoroughly gendered. While functioning as ‘the universal subject of the neoclassical economic model’, he is, upon analysis, a ‘white, heterosexual, elite, and male’ subject; thus, it ‘becomes apparent once homo economicus emerges in all of his positionality that economic rationales are often merely a way to preserve the patriarchal status quo’ (Fineman and Dougherty, 2005, p. 58). Furthermore, the liberal philosophical and theoretical heritages of the neoclassical economic subject are themselves gendered, for example, in John Locke’s account of private property ownership (Mayes, 2005). On the gender dynamics of economic theory, see also Pujol, 1992, Nelson, 1993 and Nelson, 1995. Future research into behavioral economics should examine its own gendered processes, assumptions and proposals, especially in relationship to neoliberalism and the gendered forces of neoliberalism.

  4. 4.

    Sent (2004) provides a different periodization, arguing that ‘old’ behavioral economics represented a strong challenge to develop alternative models, while ‘new’ behavioral economics has sought to begin from the benchmark of rationality, formalizing alternate theories to explain anomalies (pp. 740–748).

  5. 5.

    There are other ways to classify the findings of the field of behavioral economics that provide a slight variation on DellaVigna’s account. For example, Mullainathan and Thaler (2000) view the field as having studied three ‘bounds’ – bounded rationality (encompassing overconfidence, optimism, anchoring, extrapolation and availability), bounded will-power and bounded self-interest.

  6. 6.

    Camerer (2005) contends ‘behavioral economics is not a distinct subfield of economics. It is a style of modeling, or a school of thought which is meant to apply to a wide range of economic questions’ (p. 3).

  7. 7.

    For example, Cass Sunstein was Administrator of the Office of Information and Regulatory Affairs from 2009 to 2012. In November 2013, Daniel Kahneman, one of the founding scholars of the field of behavioral economics, received the Presidential Medal of Freedom (Obama, 2013).

  8. 8.

    This ‘Behavioral Economics as Neoliberalism’ section engages most directly with Camerer (and often his co-authors), and with Thaler and Sunstein (2008), as they are some of the more prominent behavioral economics, and because Thaler and Sunstein’s work is one the most explicit and most publicly circulating attempts to connect behavioral economics and public policy. Per the previous section, their work should be considered to be characteristic of the dominant themes, methodologies and kinds of knowledges produced by behavioral economics. Similar analyses could be carried out in relation to any of the behavioral economists discussed in the preceding section, and this section does indeed discuss some of this work as well.

  9. 9.

    Liberal governmentality operates as a ‘consumer of freedom’ that can only function if the freedom it consumes actually exist: if the government must consume freedom, it must produce freedom; if it must produce freedom, it must organize and manage freedom. Freedom is not a given but must be constantly manufactured (Foucault, 2008, pp. 62–65).

  10. 10.

    He also argues that ordoliberalism’s elite, undemocratic and technocratic political philosophy is returning; given my earlier claim that behavioral economics further entrenches neoliberalism’s depoliticizing tendencies, I would concur.

  11. 11.

    Madra and Adaman (2013) provide a detailed problematization of Foucault’s classificatory schema and attempt to rethink a genealogy of neoliberalism as interaction and contestation between Austrian, Chicago and post-Walrasian approaches.

  12. 12.

    Further critical Foucaultian inquiry into behavioral economics could also productively use Foucault’s (2006) writing on psychiatric power and Foucaultian accounts of the infusion of psychological trends into liberal and neoliberal rationalities (for example, Rose, 1999) in order to analyze behavioral economics, which is itself a particular nexus of psychological research and microeconomics. Although the current article focuses on neoliberal power effects of behavioral economics as such, genealogical inquiry into power knowledge processes involved in the emergence of behavioral economics would be a fruitful project. Related to this kind of inquiry are contemporary critiques of psychological aspects of policy applications of behavioral economics in the United Kingdom, such as Cromby and Willis (2013) and Whitehead et al. (2011).

  13. 13.

    Lind (2014) of the New America Foundation describes the ever-increasing emphasis on individual retirement accounts to be perceived as the ‘reasonable, responsible’ policy position in opposition to abolishing Social Security and to increasing Social Security benefits.

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Acknowledgements

I would like to thank Rosalind Petchesky, Leonard Feldman, Joanna Tice and Rachel Brown for insightful commentary on earlier drafts; thanks to George DeMartino and William Seitz for their assistance in orienting me within behavioral economists. This article benefited immensely from the thoughtful criticism of two anonymous reviewers. An earlier iteration of this article was presented at the Northeastern Political Science Association Annual Meeting, where I received helpful feedback from the ‘Critiquing the State, Critiquing Modern Institutions’ panel and audience.

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McMahon, J. Behavioral economics as neoliberalism: Producing and governing homo economicus. Contemp Polit Theory 14, 137–158 (2015). https://doi.org/10.1057/cpt.2014.14

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Keywords

  • behavioral economics
  • neoliberalism
  • governmentality
  • Foucault
  • homo economicus
  • subjectivization