Behavior, Paternalism, and Policy: Evaluating Consumer Financial Protection

George Mason Law & Economics Research Paper No. 14-05

Mercatus Center Working Paper No. 14-06

46 Pages Posted: 12 Mar 2014  

Adam Christopher Smith

Johnson & Wales University

Todd J. Zywicki

George Mason University - Antonin Scalia Law School, Faculty; PERC - Property and Environment Research Center

Date Written: March 12, 2014

Abstract

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.

Keywords: behavioral economics, law and economics, nudge, Consumer Financial Protection Bureau, public choice, regulation

JEL Classification: K23, H11, A12

Suggested Citation

Smith, Adam Christopher and Zywicki, Todd J., Behavior, Paternalism, and Policy: Evaluating Consumer Financial Protection (March 12, 2014). George Mason Law & Economics Research Paper No. 14-05. Available at SSRN: https://ssrn.com/abstract=2408083 or http://dx.doi.org/10.2139/ssrn.2408083

Adam Christopher Smith

Johnson & Wales University ( email )

United States

HOME PAGE: http://adamc-smith.com/index.html

Todd J. Zywicki (Contact Author)

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-8091 (Phone)
703-993-8088 (Fax)

PERC - Property and Environment Research Center

2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

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