Free to choose? A symposium on behavioral law and economics

Posts from a recent symposium on behavioral law and economics held by truthonthemarket.com.

The topic of the symposium is necessarily broad. Behavioral economics itself has made a significant contribution to increasing our understanding of when individual decision-making deviates from the rationality assumption at the heart of the conventional microeconomic theory. Behavioral law and economics now reaches all corners of the law. The rise of behavioral economics raises interesting sets of questions both within the domain of economics itself: what are the costs and benefits of the intersection of psychology and economics? What explains the remarkable success of behavioral economics in the behavioral law and economics literature? Will the phenomenon have staying power? Is it in fact the case that behavioral law and economics is gaining traction in the current regulatory landscape? We do have the Consumer Financial Protection Bureau. But what else? On the specifics, what are the sorts of behavioral law and economic policy prescriptions in other areas of the law such as antitrust, consumer protection, and intellectual property? Would such interventions be successful? Will there be long-term costs of approaches built on the concept that one can rely on the the government to correct decision-making errors? And further, has the implementation of regulatory proposals by the behavioral law and economics camp in practice remained faithful to the insights produced by the behavioral economics literature in theory, laboratory experiments and the field? Or have proposed “nudges” merely take the form of default rules which map onto the policy preferences of the academic advocate?

Richard Thaler responds to the many posts and comments. An excerpt:

The idea that behavioral economists want to create some sort of new nanny state is preposterous. Many leading behavioral economists, including me, have strong libertarian leanings. Some are actually card-carrying libertarians. Still, much of the criticism of the field comes from conservative, free-market economists who just “know” somehow that, no matter what we say, behavioral economists are part of some left-wing, probably communist, and certainly socialist conspiracy. I am not sure how to convince anyone that this is not true. But here is what I really think. The philosophy of libertarian paternalism that Cass and I advocate in Nudge, could accurately titled Free to Choose, 2.0. If people would read with care what we have written, they will see that this is accurate. We do not advocate a larger role for government, just a more efficient, smarter way of achieving a government’s goals, whatever the democratic process determines that they should be. Does anyone advocate dumber and costlier instead? Tom Brown made this point very nicely with his excellent illustrations of effective and ineffective communications efforts.

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