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Behavioral Economist: Heal Thyself

Bryan Caplan has a great post over at Econlog on the inconsistency of behavioral economists:

Nudging” is a great idea. We should start by ending existing hard paternalism in favor of gentle (or even subliminal) persuasion.  Instead of prohibiting drugs, we should allow anyone who wants to use currently illegal drugs to go to a government website to request an Authorized Narcotics User Card.  Instead of requiring everyone to pay Social Security taxes to provide for their retirement, we should allow people to opt out of the system if they write a one-page essay explaining why they prefer to handle their retirement on their own.

Why then do almost all real-world nudge proposals involve tacking new soft paternalism onto existing hard paternalism? The endowment effect – humans’ tendency to value our stuff because it’s our stuff.  How so?  Behavioral economists, like most people, think of existing hard paternalism as “their policies.”  We own these policies, they’re ours, and we’re not going to casually toss them aside just because we’ve found a cheaper, more humane alternative like nudging.  Behavioral economists’ sense of policy ownership is so strong that the thought of replacing existing paternalism scarcely comes to mind.

This is yet again another way that behavioral economics succumbs to bias.  Prior examples involve the failure to apply its teachings to government actors and to the effects of welfare on the recipients.

While behavioral economics is often thought to be an anti-libertarian theory, it is the biased application of the theory that is the main problem for liberty.

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