Government Policy with Time Inconsistent Voters
31 Pages Posted: 31 Jul 2012
Date Written: September 27, 2011
Behavioral economics presents a "paternalistic" rationale for government intervention. Current literature focuses on benevolent government. This paper introduces politicians who may indulge/exploit these behavioral biases. We present an analysis of the novel features that arise when the political process is populated by voters who may be time inconsistent, a' la Phelps and Polak (1968) and Laibson (1997). Time inconsistent voters exhibit demand for commitment. We show that electorally accountable politicians may choose policies that interfere with individuals' desire to commit, and that government may not be very effective in satisfying the demand for commitment.
Keywords: time inconsistency, behavioral political economy, nudge, public debt
JEL Classification: D02, D03, D72, H4, H6
Suggested Citation: Suggested Citation