The Irrationality Defense of Paternalism

Abstract

In this paper, we investigate the challenges associated with the competing approaches of utility theory and behavioural economics. It has been become commonplace to argue that humans act irrationally. This fallacious argument provides the foundation for paternalism. The fallacy of course is the error in determining objective value and absolute measures of rationality. Everyone is subjective in their utility valuations and consumer behaviour varies over time and place even for individuals. There is no challenge to regulatory design. The problem is not the addition of regulations designed to objectively maximise selected outcomes but rather the introduction of subjective decisions imposed from above paternalistically.

Keywords: Utility Theory, Paternalism, Rational Choice, Economics, Psychology