Behavioral Decisions and Policy
CentER Discussion Paper Series No. 2010-125
28 Pages Posted: 10 Jan 2011 Last revised: 24 Jun 2013
Date Written: November 1, 2010
We study the public policy implications of a model in which agents do not fully internalize all the conscequences of their actions. Such a model unifies seemingly disconected models with behavioral agents. We evaluate the scope of paternalistic and libertarian-parternalistic policies in the light of our model, and propose an alternative type of approach, called soft-libertarian, which guides the decision makers in the internalization of all the conscequences of their actions. Psychotherapy is one example of a soft-libertarian policy. Moreover, we show that in our behavioral framework, policies that increase the set of opportunities or provide more information to the agent may not longer be individual welfare improving.
Keywords: Behavioral Decisions, Revealed Preferences, Normative Preferences, Paternalism, Soft-Libertarian, Autonomy, Psychotherapy
JEL Classification: D03, D60, I30
Suggested Citation: Suggested Citation