Behavior, Paternalism, and Policy: Evaluating Consumer Financial Protection
Adam Christopher Smith
Johnson & Wales University
Todd J. Zywicki
George Mason University School of Law; PERC - Property and Environment Research Center
March 12, 2014
George Mason Law & Economics Research Paper No. 14-05
Mercatus Center Working Paper No. 14-06
This paper examines the relationship between behavioral law and economics (BLE) as a policy prescription platform and its influence on the regulations emerging from the Consumer Financial Protection Bureau (CFPB). We show how these regulations are inconsistent with the intent and purpose of improving consumer choices. We further demonstrate that the selective modeling of behavioral bias in the BLE framework causes an overestimation of the ability of regulators, who in actuality use inefficient, heavy-handed rules based on little if any real empirical findings of “consumer irrationality.” Accordingly, the broader lesson on the misapplication of behavioral economics goes beyond the ill-considered policies emerging from the CFPB.
Number of Pages in PDF File: 46
Keywords: behavioral economics, law and economics, nudge, Consumer Financial Protection Bureau, public choice, regulation
JEL Classification: K23, H11, A12
Date posted: March 12, 2014
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